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A firm with a 12.5 percent cost of capital is considering a project for this year’s capital budget.  The project’s expected after-tax cash flows are as follows: Year: 0 1 2 3 4 Cash flow: -$5,000 $2,300 $2,100 $2,400 $2,300 Calculate the project’s discounted payback period.

Danford Enterprises can invest in one of two mutually exclusive machines that will make a product it needs for the next 4 years.  Machine A costs $7 million but realizes after-tax inflows of $5.0 million per year for 2 years, after which it must be replaced.  Machine B costs $9 million and realizes after-tax inflows of $3.4 million per year for 4 years.  Based on the firm’s cost of capital of 8 percent, the NPV of Machine B is $2,261,231, with an equivalent annual annuity (EAA) of $682,713 per year.  Calculate the EAA of Machine A. Compare your result to that of Machine B and decide which to recommend.

The Schenk Company’s currently outstanding bonds have a 7.6 percent coupon and a 9.5 percent yield to maturity.  Schenk believes it could issue new bonds that would provide a similar yield to maturity.  If its marginal tax rate is 30 percent, what is Schenk’s after-tax cost of debt?

Spelling, punctuation, and accent mark count toward grading.  Misspelled, wrong tense, wrong form of verbal conjugation, article, or preposition (- full points worth). Missing accents from the words you have been exposed to during the chapter, and punctuation–periods, capital letters, upside-down exclamation or question marks–If needed (-1/4 points).   Accent Marks If you are not using the Alt Codes, follow these steps: Alt Codes work well with the number keypad. If you do not have a number keypad or you are struggling with the Alt Codes, then you will write me a short message, in parenthesis, next to the word that needs it, for instance: You need to write  ¡Mi mamá comprará el juguete mañana para Iván! You will write it like (upside-down exclamation mark) Mi mama (accent on the 2nd a) comprara (accent on the second a) el juguete manana (tilde over the 1st n) para Ivan (accent on a)! Notice that when there is more than one repeated vowel/consonant, I used more details on which vowel/consonant the accent mark was placed–mamá, mañana, Iván, etc.   Directions: You will be given an English prepositional phrase. Your task is to change the English prepositional phrase into a Spanish prepositional phrase as you have learned in Quizlet. To earn full credit, it would be best to use the matching preposition (location words), such as “in, on, at, etc” articles, such as “a,” “an” some,” etc.; and nouns/vocab when answering your task in Spanish.   The English prepositional phrase is “on top of”  1) [1]  2) [2]. (This is a two-word preposition in Spanish. You must use a Spanish preposition). Do not write the whole answer in a single blank. Use one blank for each answer.

Bergeron Foods is considering the following independent projects for the coming year: Project RequiredInvestment ExpectedRate of Return Risk X $6 million 14.5% High Y   6 million 10.5% Average Z   8 million 10.5% Low Bergeron’s WACC is 12 percent, but it adjusts for risk by adding 2 percent to the WACC for high-risk projects and subtracting 2 percent for low-risk projects.  Which project(s) should Bergeron accept assuming it faces no capital constraints?

Koerschen Corporation can invest in one of two mutually exclusive machines that will make a product it needs for the next 4 years.  Machine J costs $10 million but realizes after-tax inflows of $6.6 million per year for 2 years, after which it must be replaced.  Machine K costs $17 million and realizes after-tax inflows of $7.6 million per year for 4 years.  Based on the firm’s cost of capital of 7 percent, the NPV of Machine K is $8,742,806, with an equivalent annual annuity (EAA) of $2,581,122 per year.  Calculate the EAA of Machine J. Compare your result to that of Machine K and decide which to recommend.

Ritter Manufacturing can invest in one of two mutually exclusive machines that will make a product it needs for the next 8 years.  Machine A costs $15 million but realizes after-tax inflows of $4.7 million per year for 4 years, after which it must be replaced.  Machine B costs $22 million and realizes after-tax inflows of $4.6 million per year for 8 years.  Based on the firm’s cost of capital of 7 percent, the NPV of Machine B is $5,467,973, with an equivalent annual annuity (EAA) of $915,709 per year.  Calculate the EAA of Machine A. Compare your result to that of Machine B and decide which to recommend.

The Crabtree Company’s cost of common equity is 12 percent, its before-tax cost of debt is 7 percent, and its marginal tax rate is 25 percent.  Given Crabtree’s market value capital structure below, calculate its WACC. Long-term debt $14,000,000 Common equity   46,000,000 Total capital $60,000,000

A firm with a 13 percent cost of capital is evaluating two projects for this year’s capital budget.  The projects’ expected after-tax cash flows are as follows: Year: 0 1 2 3 Project X: -$7,000 $2,300 $3,900 $3,700 Project Y: -$11,000 $5,400 $5,100 $5,900 If Projects X and Y are mutually exclusive, which one(s) should the firm adopt?

A firm with a 9 percent cost of capital is considering a project for this year’s capital budget.  The project’s expected after-tax cash flows are as follows: Year: 0 1 2 3 4 Cash flow: -$8,000 $3,600 $3,300 $3,000 $2,900 Calculate the project’s internal rate of return (IRR).