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our company is evaluating new equipment that will cost $2,000,000. The equipment is in the

Offered Price: $ 80.00 Posted By: spqr Updated on: 09/22/2019 06:01 AM Due on: 09/22/2019
Question # 00738742 Subject Architecture Topic Architectural Visualization Tutorials:
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Please see 3 questions below.  All answers must be submitted in Excel format.

 

Question 2.  (15 points)   Your company is evaluating new equipment that will cost $2,000,000. The equipment is in the MACRS 3-year class and will be sold after 3 years for $150,000.  Use of the equipment will increase net working capital by 200,000.    The equipment will save $850,000 in operating costs each year for 3 years. The company's tax rate is 25 percent and its cost of capital is 12%.

           

Part a. Calculate the cash flow in Year 0.

           
             
           

 

           

 

           

 

             

Part b. Calculate the incremental operational cash flows  .

           
           

 

Reference:

MACRS Depreciation Percentages for three-year class life assets:

     

3

 
 

0.3333

0.4445

       
             
             
             
         
             
       
     

0.1481

0.0741

   
             
             
             
   

 

   

 

 

c.  Calculate the non-operating terminal year cash flow.

 

 

 

 

 

 

       

 

     

 

 

 

 

 

       

 

Part d. Calculate the project's payback period.

     

 

         

 

       

 

       

 

             

Part e. Calculate the project's NPV.

           
           

 

   

 

   

 

       

 

       

 

       

 

 

           

 

Part f. Calculate the project's IRR.

         
           

 

           

 

         

 

 

   

 

     

 

 

Part g. Calculate the project's MIRR.

           
           

 

 

 

       

 

           

 

           

 

                                                                   

 

Part h. Investment Decision:  Should the project be accepted or rejected? Why or why not?

           

 

 

 

Question 5.  (15 points  Marcus Company, is a successful start up business, but needs additional funding of  $500,000 to fund continued growth.  Currently the company is worth $1,500,000.   An angel investor is willing to invest the full $1,500,000.  The owner of the company currently owns all 100,000 shares in her business

 

a.       Calculate the fair price per share

 

a.       How many additional shares must be sold to the angel investor?

b.) how many additional shares must be sold to the angel investor

 

 

b.      How many additional shares must be sold to the angel investor?

 

c.       What proportion of the company will the angel investor own?

 

d.  What are 3 reasons that explain why the owner of the company wants to raise new equity capital?

e.  What are 3 reasons that explain why the owner might consider raising new capital through debt rather than equity?

 

         
           
             
     

 

 

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Question 6.  (15 points) Harris Corporation is evaluating whether to lease or purchase equipment.  Its tax rate is 25 percent.  The purchase price is $2.4 million, required modifications to the equipment will cost $100,000.  The company would depreciate the equipment over 4 years, using straight-line depreciation.  A 4-year lease calls for a payment of $750,000 at the beginning of each year.   If the equipment is purchased, the company will  borrow from its bank at an interest rate of 10 percent. 

a.  Calculate the cost of purchasing the equipment.

b.  Calculate the cost of leasing the equipment.

c.  Calculate the net advantage to leasing.  Should the company purchase or lease the equipment?

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