{"id":7054,"date":"2021-10-12T07:12:20","date_gmt":"2021-10-12T07:12:20","guid":{"rendered":"https:\/\/assignmenttutors.net\/blog\/chapter-8-questions-problems-10-11-chapter-9-questions\/"},"modified":"2021-10-12T07:44:13","modified_gmt":"2021-10-12T07:44:13","slug":"chapter-8-questions-problems-10-11-chapter-9-questions","status":"publish","type":"post","link":"https:\/\/assignmenttutors.net\/blog\/chapter-8-questions-problems-10-11-chapter-9-questions\/","title":{"rendered":"Chapter 8 questions & problems: 10, 11 chapter 9 questions &"},"content":{"rendered":"
\n

\u00a0\u00a0<\/p>\n

Chapter 8:<\/strong><\/p>\n

10.<\/strong> NPV and IRR. A project that costs $3,000 to install will provide annual cash flows of $800 for<\/p>\n

each of the next 6 years. (LO8-1 and LO8-2)<\/p>\n

a. What is NPV if the discount rate is 10%?<\/p>\n

b. How high can the discount rate be before you would reject the project?<\/p>\n

11.<\/strong> NPV. A proposed nuclear power plant will cost $2.2 billion to build and then will produce cash<\/p>\n

flows of $300 million a year for 15 years. After that period (in year 15), it must be decommissioned<\/p>\n

at a cost of $900 million. (LO8-1 and LO8-2)<\/p>\n

a. What is project NPV if the discount rate is 5%?<\/p>\n

b. What if the discount rate is 18%?\u00a0<\/p>\n

Chapter 9:<\/strong><\/p>\n

1. Cash Flows. Quick Computing currently sells 10 million computer chips each year at a price of<\/p>\n

$20 per chip. It is about to introduce a new chip, and it forecasts annual sales of 12 million of<\/p>\n

these improved chips at a price of $25 each. However, demand for the old chip will decrease,<\/p>\n

and sales of the old chip are expected to fall to 3 million per year. The old chips cost $6 each to<\/p>\n

manufacture, and the new ones will cost $8 each. What is the proper cash flow to use to evaluate<\/p>\n

the present value of the introduction of the new chip? (LO9-1)<\/p>\n

2. Incremental Cash Flows. A corporation donates a valuable painting from its private collection<\/p>\n

to an art museum. Which of the following are incremental cash flows associated with the<\/p>\n

donation? (LO9-1)<\/p>\n

a. The price the firm paid for the painting<\/p>\n

b. The current market value of the painting<\/p>\n

c. The deduction from income that it declares for its charitable gift<\/p>\n

d. The reduction in taxes due to its declared tax deduction<\/p>\n

3<\/strong>. Cash Flows. Conference Services Inc. has leased a large office building for $4 million per<\/p>\n

year. The building is larger than the company needs; two of the building\u2019s eight stories are<\/p>\n

almost empty. A manager wants to expand one of her projects, but this will require using one<\/p>\n

of the empty floors. In calculating the net present value of the proposed expansion, senior<\/p>\n

management allocates one-eighth of $4 million of building rental costs (i.e., $.5 million)<\/p>\n

to the project expansion, reasoning that the project will use one-eighth of the building\u2019s<\/p>\n

capacity. (LO9-1)<\/p>\n

a. Is this a reasonable procedure for purposes of calculating NPV?<\/p>\n

b. Can you suggest a better way to assess a cost of the office space used by the project?<\/p>\n

5<\/strong>. Cash Flows. Tubby Toys estimates that its new line of rubber ducks will generate sales of<\/p>\n

$7 million, operating costs of $4 million, and a depreciation expense of $1 million. If the tax<\/p>\n

rate is 35%, what is the firm\u2019s operating cash flow? (LO9-2)<\/p>\n

7<\/strong>. Calculating Net Income. The owner of a bicycle repair shop forecasts revenues of $160,000 a<\/p>\n

year. Variable costs will be $50,000, and rental costs for the shop are $30,000 a year. Depreciation<\/p>\n

on the repair tools will be $10,000. Prepare an income statement for the shop based on<\/p>\n

these estimates. The tax rate is 35%. (LO9-2)<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

\u00a0\u00a0 Chapter 8: 10. NPV and IRR. A project that costs $3,000 to install will provide annual cash flows of $800 for each of the next 6 years. (LO8-1 and LO8-2) a. What is NPV if the discount rate is 10%? b. How high can the discount rate be before you would reject the project? […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[31],"tags":[],"class_list":["post-7054","post","type-post","status-publish","format-standard","hentry","category-homework-help"],"_links":{"self":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/posts\/7054","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/comments?post=7054"}],"version-history":[{"count":1,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/posts\/7054\/revisions"}],"predecessor-version":[{"id":7090,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/posts\/7054\/revisions\/7090"}],"wp:attachment":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/media?parent=7054"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/categories?post=7054"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/tags?post=7054"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}