ECON 231 Lecture Notes - Tax Shield, Tax Rate, Net Present Value

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periwinklelion166

16 Oct 2011

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The movie is expected to cost million upfront and take a year to make. After that, it is expected to make million in the year it is released and million for the following four years. Assume that your cost of capital is 10%. a). Calculate the discounted payback period for this project. What is(are) the major aw(s) in this method? c). Calculate the net present value of this project. Will you make the movie based on the npv of this project? d). Write down the equation which you can use to solve for the irr for this project and then use spreadsheet for nd the irr. Will you make the movie based on the irr of this project? e). The cumulative cash ow is calculated in the following table: The payback period is 3 + point of 4 years. = 3. 5 years, which is less than the cuto .

Related Questions

You are considering a project with an initial cash outlay of $72,000 and expected cash flows of $22,320 at the end of each year for six year . The discount rate is 10.3 percent.

Part 1:

The payback period of the project is ___ years

If the discount rate for this project is 10.3% , the discounted payback period of the project is ___ years?

Part 2:

The projects NPV is $_____?

Part 3:

The projects PI is ____?

Part 4:

The projects IRR is ___%?

An investment project costs P. It is expected to have an annual net cash flow of 0.125p for 20 years.

(a) What is the project's payback period (conventional)?

(b) What is the discounted payback period at i=10%?

ochrewhale934

An investment alternative in a project requires a capital cost of $72 million completed at time zero. The investment will produce a stream of revenue of $50 million per year-end over a 6year period with operating costs of $20 million per yearend for the first 3 years and $25 million per yearend for the remaining 3 years. Use straight-line depreciation for the capital cost over the project period. The rate of taxation on income is 40%.

i). Construct the cash flow table, calculate the after-tax annual cash flows, and determine the payback period;

ii) Calculate the present worth and rate of return for this project.

azurebuffalo167

ECON 231 Lecture Notes - Tax Shield, Tax Rate, Net Present Value

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