# Problem 10.14 Briarcrest Condiments is a spice-making firm. Recently, it developed a new process for producing spices. The process requires...

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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 \$2,111,359. have a life of five years, and would produce the cash flows shown in the following table. Year Cash Flow 1 \$602,952 2 -287,525 3 933,809 4 998,838 5 771,435 What is the NPV if the discount rate is 12.91 percent? (Enter negative amounts using negative sign e.g. -45.25. Round answer to 2 decimal places, e.g. 15.25.) NPV is \$ 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 \$11.80 million. This investment will consist of \$2.90 million for land and \$8.90 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 \$5.24 million, \$2.50 million above book value. The farm is expected to produce revenue of \$2.02 million each year, and annual cash flow from operations equals \$1.82 million. The marginal tax rate is 35 percent, and the appropriate discount rate is 9 percent. Calculate the NPV of this investment. (Round intermediate calculations and final answer to 2 decimal places, e.g. 15.25.) NPV \$ The project should be 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 Mountainâ€™s opportunity cost of capital is 13.0 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 4,450 7,000 2 3,900 7,000 3 3,350 7,000 4 2,800 7,000 5 2,250 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: NPV0 = \$ NPV1 = \$ NPV2 = \$ NPV3 = \$ NPV4 = \$ NPV5 = \$ Suggest when should Bell Mountain buy the new accounting system? Bell Mountain should purchase the system in . Problem 12.24 Chipâ€™s 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 84 percent as high if the price is raised 18 percent. Chipâ€™s 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 firmâ€™s FCF for the year? (Round answers to nearest whole dollar, e.g. 5,275.) At \$20 per bottle the Chipâ€™s FCF is \$ and at the new price Chipâ€™s FCF is \$ . Problem 13.11 Capital Co. has a capital structure, based on current market values, that consists of 42 percent debt, 12 percent preferred stock, and 46 percent common stock. If the returns required by investors are 9 percent, 11 percent, and 19 percent for the debt, preferred stock, and common stock, respectively, what is Capitalâ€™s after-tax WACC? Assume that the firmâ€™s 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%.) After tax WACC = %
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