FIN 571 Week 6 WileyPLUS Assignment NEW

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FIN 571 Week 6 WileyPLUS Assignment NEW

Complete the following in WileyPLUS:

* Problem 10.14

Briarcrest Condiments is a spice-making firm. Recently, it developed a new process for producing spices. The
process requires new machinery that would cost $1,968,450. have a life of five years, and would produce the cash
flows shown in the following table.

Year Cash Flow

1 $512,496
2 -242,637
3 814,558
4 887,225
5 712,642

What is the NPV if the discount rate is 15.9 percent? (Enter negative amounts using negative sign e.g. -45.25.
Round answer to 2 decimal places, e.g. 15.25.)

* Problem 11.20

Archer Daniels Midland Company is considering buying a new farm that it plans to operate for 10 years. The farm
will require an initial investment of $12.00 million. This investment will consist of $2.00 million for land and
$10.00 million for trucks and other equipment. The land, all trucks, and all other equipment is expected to be
sold at the end of 10 years at a price of $5.00 million, $2.00 million above book value. The farm is expected to
produce revenue of $2.00 million each year, and annual cash flow from operations equals $1.80 million. The
marginal tax rate is 35 percent, and the appropriate discount rate is 10 percent. Calculate the NPV of this
investment. (Round intermediate calculations and final answer to 2 decimal places, e.g. 15.25.)

* Problem 11.24

Bell Mountain Vineyards is considering updating its current manual accounting system with a high-end
electronic system. While the new accounting system would save the company money, the cost of the system
continues to decline. The Bell Mountains opportunity cost of capital is 10 percent, and the costs and values of
investments made at different times in the future are as follows:
Year Cost Value of Future Savings
(at time of purchase)
0 $5,000 $7,000
1 4,500 7,000
2 4,000 7,000
3 3,600 7,000
4 3,300 7,000
5 3,100 7,000
Calculate the NPV of each choice. (Round answers to the nearest whole dollar, e.g. 5,275.)
The NPV of each choice is:

Suggest when should Bell Mountain buy the new accounting system?

* Problem 12.24

Chips Home Brew Whiskey management forecasts that if the firm sells each bottle of Snake-Bite for $20, then the
demand for the product will be 15,000 bottles per year, whereas sales will be 90 percent as high if the price is
raised 10 percent. Chips variable cost per bottle is $10, and the total fixed cash cost for the year is $100,000.
Depreciation and amortization charges are $20,000, and the firm has a 30 percent marginal tax rate.
Management anticipates an increased working capital need of $3,000 for the year. What will be the effect of the
price increase on the firms FCF for the year? (Round answers to nearest whole dollar, e.g. 5,275.)

* Problem 13.11

Capital Co. has a capital structure, based on current market values, that consists of 50 percent debt, 10 percent
preferred stock, and 40 percent common stock. If the returns required by investors are 8 percent, 10 percent,
and 15 percent for the debt, preferred stock, and common stock, respectively, what is Capitals after-tax WACC?
Assume that the firms marginal tax rate is 40 percent. (Round intermediate calculations to 4 decimal places, e.g.
1.2514 and final answer to 2 decimal places, e.g. 15.25%.)