3. (15 points) A project needs a $200,000 initial expenditure and anticipates generating $120,000 in annual cash flow before taxes for two years (cash flows will occur at t = 1 and t = 2). The rate of corporation taxation is 21%. Using the MACRS 3-year plan, the assets will depreciate as follows: (t = 1: 33%); (t = 2: 45%); (t = 3: 15%); (t = 4: 7%). The company's tax condition enables it to utilize all available tax shields. The opportunity cost of capital is 12 percent. Assume the asset can be sold for book value when the project is finished. Determine the project's NPV.

4. (10%) For her estate in Connecticut, Marsha Jones purchased a used Mercedes horse transporter. The price was $35,000.00. The goal is to reduce the cost of renting a horse transporter. For $200 per day plus $1 per mile, Marsha had been hiring a transporter every other week. The majority of the journeys are between 80 and 100 miles long. Joe Laminitis, the driver, often receives a $40 gratuity from Marsha. She will just need to pay for maintenance and diesel fuel with the new transporter, which costs around $0.45 per mile. The annual insurance premium for Marsha's transporter is $1,200. When Marsha's horse Spike is ready to retire in eight years, the transporter will most likely be worth $15,000 (in real terms). Is the transporter a positive-NPV investment? Assume a nominal discount rate of 9% and a 3% forecasted inflation rate. Marsha's transporter is a personal outlay, not a business or financial investment, so taxes can be ignored.

相關申論題

相關試卷