Problem 12 Intro Consider a project with a 5-year life. The initial cost to set up the project is $100,000. This amount is to be linearly depreciated to zero over the life of the project and there is no salvage value. The required return is 12% and the tax rate is 34%. You've collected the following estimates: Base Pessimistic Optimistic case Unit sales per year (Q) 8,000 6,000 10,000 Price per unit (P) 50 40 60 Variable cost per unit 20 35 15 (VC) Fixed costs per year 30,000 50,000 20,000 (FC) Part 1 7 8 | Attempt 1/20 for 10 pts. What is the annual free cash flow in the base case? 0+ decima Submit Part 2 0 8 | Attempt 1/20 for 10 pts. What is the NPV in the base case? 0+ decima Submit Part 3 1 8 | Attempt 1/20 for 10 pts. What is the NPV in the pessimistic case? 0+ decima Submit Part 4 1 8 | Attempt 1/20 for 10 pts. What is the NPV in the optimistic case? 0+ decima SubmitProblem 4 44 Intro Time Weiner Inc. is now at the end of the final year of a project. The rm originally bought some project equipment for $75,000, which could now be sold for $45,000. 54% of the equipment cost has already been depreciated. The company's tax rate is 34%. Part 1 il E I' Attempt morons pts. What is the after-tax salvage value? if the equipment's nal market value is less than its book value, the rm will receive a tax credit as a result of the sale. Problem 5 Intro 8 years ago, a new machine cost $3,000,000 to purchase and an additional $500,000 for the installation. The machine was to be linearly depreciated to zero over 25 years. The company has just sold the machine for $1,800,000, and its marginal tax rate is 25%. Part 1 I' Attempt1f20for10pts. What is the annual depreciation? 140000 Correct I Initial book value: BVD = Purchase price + Cost of installation = 3,000,000 + 500,000 = 3,500,000 Annual depreciation: D = Eve. I N = 3.500.000 / 25 = 140,000 Part 2 il E I' Attempt1f20for10pts. What is the current book value? 2300000 Correct J Accumulated depreciation: AD = Number of years since purchase " Annual depreciation = a " 140,000 = 1,120,000 Remaining book value: 3V8 = BVO - AD = 3,500,000 - 1,120,000 = 2,380,000 Part 3 il E I' Attempt 5x20 for10 pts. What is the after-tax salvage value? Problem 6 KH Intro Southwest Airlines just bought a new jet for $36,000,000. The jet falls into the 7-year MACRS category, with the following depreciation rates (half-year convention): Year 1 2 3 4 5 6 7 8 Depr. 14.29% 24.49% 17.49% 12.49% 8.93% 8.92% 8.93% 4.46% rate The jet can be sold for $28,800,000 after 5 years. The company has a marginal tax rate of 34%. Part 1 7 8 Attempt 2/20 for 10 pts. What is the book value at the end of year 5? 6469900 Correct v Book value = Initial book value - Accumulated depreciation = 36,000,000 - (0.1429 + 0.2449 + 0.1749 + 0.1249 + 0.0893) * 36,000,000 = 8,031,600 Part 2 7 8 Attempt 4/20 for 10 pts. What is the after-tax salvage value at the end of year 5? p+ decima SubmitProblem 11 KH Intro Consider a project with a 5-year life. The initial cost to set up the project is $100,000. This amount is to be linearly depreciated to zero over the life of the project and there is no salvage value. The required return is 14% and the tax rate is 34%. The price per unit is $50, variable costs are $20 per unit and fixed costs are $30,000 per year. You've collected the following estimates for unit sales: Base case Pessimistic Optimistic Unit sales per year (Q) 4,000 2,000 6,000 Part 1 8 Attempt 1/20 for 10 pts. What is the NPV in the base case? 0+ decima Submit Part 2 1 8 | Attempt 1/20 for 10 pts. What is the NPV in the pessimistic case? 0+ decima Submit Part 3 7 8 | Attempt 1/20 for 10 pts. What is the NPV in the optimistic case? 0+ decima Submit