Tiger Towers, Inc. is considering an expansion of their existing business, student apartments. The new project...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Tiger Towers, Inc. is considering an expansion of their existing business, student apartments. The new project will be built on some vacant land that the firm has just contracted to buy. The land cost $1,000,000 and the payment is due today. Construction of a 20-unit office building will cost $3 million; this expense will be depreciated straight-line over 30 years to zero salvage value; the pretax value of the land and building in year 30 will be $18,000,000. The $3,000,000 construction cost is to be paid today. The project will not change the risk level of the firm. The firm will lease 20 office suites at $20,000 per suite per year, payment is due at the start of the year, occupancy will begin in one year. Variable cost is $3,500 per suite. Fixed costs, excluding depreciation, are $75,000 per year. The project will require a $10,000 investment in net working capital. = 3 debt = 10.0% WACC = 11.20% rasset 15.0% tax rate = 34% = requity = 24.9% free = 2% What is the unlevered after-tax incremental cash flow for year 30? Tiger Towers, Inc. is considering an expansion of their existing business, student apartments. The new project will be built on some vacant land that the firm has just contracted to buy. The land cost $1,000,000 and the payment is due today. Construction of a 20-unit office building will cost $3 million; this expense will be depreciated straight-line over 30 years to zero salvage value; the pretax value of the land and building in year 30 will be $18,000,000. The $3,000,000 construction cost is to be paid today. The project will not change the risk level of the firm. The firm will lease 20 office suites at $20,000 per suite per year, payment is due at the start of the year, occupancy will begin in one year. Variable cost is $3,500 per suite. Fixed costs, excluding depreciation, are $75,000 per year. The project will require a $10,000 investment in net working capital. = 3 debt = 10.0% WACC = 11.20% rasset 15.0% tax rate = 34% = requity = 24.9% free = 2% What is the unlevered after-tax incremental cash flow for year 30?
Expert Answer:
Answer rating: 100% (QA)
To calculate the unlevered aftertax incremental cash flow for year 30 we need to first ... View the full answer
Related Book For
Posted Date:
Students also viewed these finance questions
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
William Livingston has recently been hired as the CEO of Electrics, Inc. Previously he had been the marketing manager for a large manufacturing company and had established a reputation for...
-
You have been asked to manage a $3 million university endowment fund, which is used to fund the additional salary stipend for 5 endowed chair positions. The stipend for each chair is $30,000 (for a...
-
A 23'Tb (thorium) nucleus at rest decays to a 228Ra (radium) nucleus with the emission of an alpha particle. The total kinetic energy of the decay fragments is 6.54 X 10-13 J. An alpha particle has...
-
(a) Calculate the equilibrium constant for the following reaction at 25oC. The standard cell potential of the corresponding voltaic cell is 0.030 V. Ag+(aq) + Fe2+(aq) = Ag(s) + Fe3+(aq)
-
How does make determine whether a target needs to be rebuilt?
-
Lower-of-Cost-or-Market Remmers Company manufactures desks. Most of the company's desks are standard models and are sold on the basis of catalog prices. At December 31, 2010, the following finished...
-
Lab-created diamonds have become an alternative to traditionally mined diamonds. There are concerns, however, that these artificial diamonds may undermine diamond values and the reputation of natural...
-
Kaylee Holmes has an overdraft protection line. Assume that her October 2021 statement showed a latest (new) balance of $862. If the line had a minimum monthly payment requirement of 5 percent of the...
-
Which communication is better upward communication or downward communication in criminal justice?
-
How to revised this words Each method also provides "powerful" weight loss benefits especially the long period fasting methods?
-
in below article, choose two passages that are 30 - 50 words long and paraphrase them and include a signal phrase and a correct APA style in text citation this is the article below. this the example...
-
Why should you advise your buyers to purchase insurance coverage, even if they make a cash purchase?
-
What variables are critical to determine if they should increase or decrease their dividend payout ratio? (Hint be specific what variables do you need to know.)Year Return 1 20% 2 25% 3 5% 4 10%...
-
Run the following code and explain, using your own words, what is happening with each variable (w,x,y,z) and what is the difference between ++x and w++ (is there any influence on the result between...
-
As a bakery business continues to grow, cash flow has become more of a concern. The board of directors would like to maintain the market share price, so a discussion ensues about issuing a stock...
-
The MIT Sloan School of Management is one of the leading business schools in the U.S. The following table contains the tuition data for the masters program in the Sloan School of Management. a. Use...
-
At the date the parent acquires a controlling interest in a subsidiary, if the carrying amounts of the subsidiarys assets are not equal to fair value, explain why adjustments to these assets are...
-
What is the difference between the deferral method and the restricted fund method?
-
In December 2012, Kandlin made an offer to the shareholders of Delvco to acquire a controlling interest in the company. Kandlin was prepared to pay $1.50 cash per share, provided that 70% of the...
-
In an efficient market, the change in a companys share price is most likely the result of: A. Insiders private information. B. The previous days change in stock price. C. New information coming into...
-
Regulation that restricts some investors from participating in a market will most likely: A. Impede market efficiency. B. Not affect market efficiency. C. Contribute to market efficiency.
-
Which of the following regulations will most likely contribute to market efficiency? Regulatory restrictions on: A. Short selling. B. Foreign traders. C. Insiders trading with nonpublic information.
Study smarter with the SolutionInn App