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slavikrds [6]
3 years ago
15

The Dante Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated below. T

he corporate tax rate is 35 percent. Assume all sales revenue is received in cash, all operating costs and income taxes are paid in cash, and all cash flows occur at the end of the year. All net working capital is recovered at the end of the project.
Year 0 Year 1 Year 2 Year 3 Year 4
Investment $32,000
Sales revenue $16,500 $17,000 $17,500 $14,500
Operating costs 3,500 3,600 3,700 2,900
Depreciation 8,000 8,000 8,000 8,000
Net working capital spending 380 430 480 380 ?

Required:
a. Compute the incremental net income of the investment for each year.
b. Compute the incremental cash flows of the investment for each year.
c. Suppose the appropriate discount rate is 13 percent. What is the NPV of the project?
Business
1 answer:
evablogger [386]3 years ago
4 0

Answer:

a) incremental net income

net income year 1 = ($16,500 - $3,500 - $8,000) x 0.65 = $3,250

net income year 2 = ($17,000 - $3,600 - $8,000) x 0.65 = $3,510

net income year 3 = ($17,500 - $3,700 - $8,000) x 0.65 = $3,770

net income year 4 = ($14,500 - $2,900 - $8,000) x 0.65 =$1,340

b) incremental net cash flow

cash flow year 1 = [($16,500 - $3,500 - $8,000) x 0.65] + $8,000 - $430 = $10,820

cash flow year 2 = [($17,000 - $3,600 - $8,000) x 0.65] + $8,000 - $480 = $11,030

cash flow year 3 = [($17,500 - $3,700 - $8,000) x 0.65] + $8,000 - $380 = $11,390

cash flow year 4 = [($14,500 - $2,900 - $8,000) x 0.65] + $8,000 + $1,670 = $12,010

c) project's NPV

NPV = -$32,380 + $10,820/1.13 + $11,030/1.13² + $11,390/1.13³ + $12,010/1.13⁴ = $1,093.13

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Answer:  

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Price elasticity is the percentage change in the quantity demanded, divided by the percentage change in the price.

If the percentage in the change in the quantity demanded is bigger than the percentage in the change of the price we talk about elastic demand.

If the percentage in the change in the quantity demanded is smaller than the percentage in the change of the price we talk about inelastic demand.

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7 0
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6 0
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Answer:

Sales quantity for A = $17,977

Sales quantity for B = $18,539

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Explanation:

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Every Sandwich Profit

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