This factory will cost 500 million euros and will be depreciated to 0 over 20 years. After
Question:
This factory will cost 500 million euros and will be depreciated to 0 over 20 years. After 6 years it will be sold at its accounting value, plus 10%. During the 6 years of our project, it will allow a yearly production of 45,000 blocks of circuitry, to be sold at an average unit price of 6700€ (for the first year). The sales will then increase 3% each year for the rest of the project life. The fixed costs associated to this production are going to be of 100 million euros per year, variable costs will be 50% of the sales. The net working capital will be 1 month of sales. The corporate tax rate is 33%, and capital gain tax rate is 16.66%. Capital gain tax only applies to profits made on the selling of real assets.
Using NPV, Payback Period and IRR expose and explain your recommendation on this investment in clear, short and non-technical terms.
A bond is trading at 1038.3 € on the market, if its face value is 1000 and it pays a coupon of 22€ every year, what is the IRR of purchasing that bond, if it matures in exactly 8 years?
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill