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# Ethical Study Essay

Below is an essay on "Ethical Study" from Anti Essays, your source for research papers, essays, and term paper examples.

331 – Exam Cap Bud Take Home portion

NAME_

1. A new computer system will require an initial cash outlay of \$20,000 and will increase firm’s cash flows by \$5,000 per year for each of the next seven years.

A) Is the system worth installing if the WACC is 12%? Use the Net Present Value method to answer the question. (1/2 point)

Initial Cash outlay:   -20,000
\$5000 for 7 years

NPV= 2,818.78

2,818.78 > 0 so ACCEPT

B) From part A, compute IRR for the project? If cost of capital is 14% would you accept using the IRR method? Why or why not? (1/2 point)

• IRR= 16.33%,   Accept
• Cost of capital at 14%: Accept, 16.33% > 14%

2. Your firm purchased machinery for \$20 million. The IRS rules provide depreciation percentages below.   The project however will end after 5 years. The
equipment will be sold for \$9 million at the end of five years. Tax rate is 40%. What is the after-tax salvage cash flow from the sale of the machine? (1/2 point)

Year   1 2 3 4 5 6 7 8

Depreciation 14%     25% 17% 13% 9% 9% 9% 4%

ICF = Sales price - Taxes
Where taxes = (sales price - book value) X Tax Rate
and Book Value = Original cost - (Annual depreciation X #of years owned)

BOOK VALUE - original cost – (annual depreciation X # of years)

20,000,000 – (2,800,000 X 1 year) = 17,200,000
17,200,000 – (4,300,000 X 1 year) = 12,900,000
12,900,000 – (2,193,000 X 1 year) = 10,707,000
10,707,000 – (1,391,910 X 1 year) = 9,315,090
9,315,090 – (838358.1 X 1 year) = 8,476,731.9

TAXES (sales price-book value) X tax rate
(9 million- 8,476,731.9) X .40 = 209,307.24

ICF= Sales price- taxes
9,000,000 - 209,307.24 = 8,790,692.76

3.   The following table represents sales forecasts for Golden Gelt Giftware. The price is \$40 per unit and cost of production is \$25 per unit.

Year 0 1 2 3 4

Unit Sales...

• Submitted by: happymeal
• on February 19, 2012
• Length: 700 words
• Views: 715
• Popularity Rank: 153052
• 1 rating(s)

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"Ethical Study". Anti Essays. 19 Dec. 2018

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##### APA Citation

Ethical Study. Anti Essays. Retrieved December 19, 2018, from the World Wide Web: http://parimatch-stavka7.com/free-essays/Ethical-Study-169290.html

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