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Q: Evaluating the project ( No Answer,   0 Comments )
Question  
Subject: Evaluating the project
Category: Business and Money > Finance
Asked by: onix-ga
List Price: $60.00
Posted: 18 Jun 2005 10:30 PDT
Expires: 22 Jun 2005 12:20 PDT
Question ID: 534573
I need to do some calculations using excel where it is necessary.
I am trying to do it for a couple of days and I definitely need some help.

The firm is planning a project, it will be 5 year project. THe company
bought some land 3 years ego for $6 million.The land was appraised
last week for $9.2 million. The company plans to built new plant on
this land, its cost $14 million to build.The project requires $900000
in initial working capital investment.Tax rate is 35%.
The firm has debt: 10000 of 8% coupon bonds outstanding, 15 years to
maturity, selling for 92% of par. The bonds hvae 1 $1000 par value
each and make semiannual payments.
Common stock: 250,000 shres outstanding selling for $70 per share, the beta is 1.4
Preferred stock: 10000 shares of 6% oustanding, selling for $95 per shares.
Market: 8%expected market premium, 5% risk-free rate.
Calculate:
1)Total value of the firm
2) Project's initial time 0 chash flow, takinf into account all side effects.
3) It is more riskier project than company usually does, so management
has told to use adjustment factor of + 2% to account for this risk.
Find discount rate to use when evaluate this poject.

4)The manufacturing plant has an eight-year tax life, and Acme uses
straight-line depreciation.  At the end of the project, the plant can
be scrapped for $5 million.  What is the after-tax salvage value of
this manufacturing plant?

5) The company will incur $350,000 in annual fixed costs.  The plan is
to manufacture 10,000 machines per year and sell them at $10,400 per
machine; the variable production costs are $8,500 per machine.  What
is the annual operating cash flow (OCF) from this project?
6) forget all calculations and find NPV of the project. Should firm
take this project?
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