Quick Computing finance homework

Quick Computing finance homework Student Help

1. Quick Computing currently sells 16 million computer chips each year at a price of $30 per chip. It is about to introduce a new chip, and it forecasts annual sales of 18 million of these improved chips at a price of $38 each. However, demand for the old chip will decrease, and sales of the old chip are expected to fall to 2 million per year. The old chip costs $15 each to manufacture, and the new ones will cost $18 each. What is the proper cash flow to use to evaluate the present value of the introduction of the new chip? (Enter your answer in millions.)

  Cash flow
$
 million

Don’t use plagiarized sources. Get Your Custom Essay on
Quick Computing finance homework
Just from $9/Page

Order Essay

 
 
2.

Tubby Toys estimates that its new line of rubber ducks will generate sales of $7.80 million, operating costs of $4.80 million, and a depreciation expense of $1.80 million. Assume the tax rate is 30%.

a.
Calculate the operating cash flow for the year by using all three methods: (a) adjusted accounting profits; (b) cash inflow/cash outflow analysis; and (c) the depreciation tax shield approach. (Enter your answers in millions rounded to 2 decimal places.)

Method
Cash Flow

  Adjusted accounting profits
$ million

  Cash inflow/cash outflow analysis
million

  Depreciation tax shield approach
million

b.
Are the above answers equal?

 
Yes

 
No

 
 
 
 
 
3.

The owner of a bicycle repair shop forecasts revenues of $164,000 a year. Variable costs will be $51,000, and rental costs for the shop are $31,000 a year. Depreciation on the repair tools will be $11,000. Prepare an income statement for the shop based on these estimates. The tax rate is 40%. (Input all amounts as positive values.)

INCOME STATEMENT

 
$

  Rental costs
 

 
$

 
 
4.

Laurel’s Lawn Care, Ltd., has a new mower line that can generate revenues of $168,000 per year. Direct production costs are $56,000, and the fixed costs of maintaining the lawn mower factory are $23,000 a year. The factory originally cost $1.4 million and is being depreciated for tax purposes over 25 years using straight-line depreciation. Calculate the operating cash flows of the project if the firm’s tax bracket is 40%. (Enter your answer in dollars not in millions.)

  Operating cash flows
$

 
 
 
 
 
 
5.

 
 
 
 
 
 
Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball for $180,000 and sell its old low-pressure glueball, which is fully depreciated, for $32,000. The new equipment has a 10-year useful life and will save $40,000 a year in expenses. The opportunity cost of capital is 8%, and the firm’s tax rate is 40%. What is the equivalent annual savings from the purchase if Gluon uses straight-line depreciation? Assume the new machine will have  no salvage value. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

  Equivalent annual savings
$

 
6.

Johnny’s Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $45,000 and will be depreciated according to the 3-year MACRS schedule. It will be sold for scrap metal after 3 years for $11,250. The grill will have no effect on revenues but will save Johnny’s $22,500 in energy expenses per year. The tax rate is 30%. Use the MACRS depreciation schedule .

a.
What are the operating cash flows in each year? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Year
Operating Cash Flows

1
$

2
 

3
 

b.
What are the total cash flows in each year? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.)

Continue to order
Get a quote

Post navigation
Assignment DescriptionMarginal Product of Labor