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# \$1.00Summer Tyme, Inc., is considering a new

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• Due on Jul. 05, 2012
• Asked on Jul 01, 2012 at 12:38:54PM

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Summer Tyme, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of \$1.404 million. The fixed asset will be depreciated straight-line to zero over 3 years, after which time it will be worthless and hauled away for an after-tax cash flow of \$0. Each year, the project is estimated to generate \$1,248,000 in annual sales, with annual costs of \$499,200. If the tax rate is 32 percent, the OCF for this project in each year is expected to be \$. Recall that the operating cash flow in each year can be found as net income plus depreciation, so find depreciation, find net income, and add the two together to get OCF. (Do not include the dollar sign (\$). Round your answer to the nearest whole dollar amount. (e.g., 32)) Consider an asset that costs \$255,200 and is depreciated straight-line to zero over 14 years. The asset is to be used in a 7-year project; at the end of the project, the asset can be sold for \$31,900. If the relevant tax rate is 31 percent, the aftertax cash flow from the sale of this asset is \$. (Do not include the dollar sign (\$). Round your answer to 2 decimal places. (e.g., 32.16)) In year 1, a proposed new investment has projected sales of \$429,000. Variable costs would be 60 percent of sales, and fixed costs would be \$104,280; depreciation would be \$49,500. Prepare an income statement for year 1 of the project assuming a tax rate of 31 percent. The expected net income for year 1 is \$ Winnebagel Corp. currently sells 24,000 motor homes per year at \$36,000 each, and 9,600 luxury motor coaches per year at \$68,000 each. The company wants to introduce a new portable camper to fill out its product line; it hopes to sell 16,800 of these campers per year at \$9,600 each. An independent consultant has determined that if Winnebagel introduces the new campers, it should boost the sales of its existing motor homes by 4,000 units per year, and reduce the sales of its motor coaches by 1,040 units per year. The amount to use as the annual sales figure when evaluating this project is \$. Recall that the annual sales figure to use for a project in project analysis is the sales that are relevant for that project, which are the incremental sales, which means that side effects from other parts of the firm are relevant, not total sales from those parts of the firm. E-Eyes.com Bank just issued some stock. Once dividends begin, they will be annual and continue forever at \$9 per year. The first annual dividend is expected to be paid in 11 years from now. If the expected return on the stock is 10 percent, the price of a share is \$ today. Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next 10 years because the firm needs to plow back its earnings to fuel growth. The company will pay a \$7 per share dividend in 11 years and will increase the dividend by 5 percent per year thereafter. If the expected return on this stock is 13 percent, the current share price is \$

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