Examlex

Solved

Sheridan Films Is Considering Some New Equipment Whose Data Are

question 6

Multiple Choice

Sheridan Films is considering some new equipment whose data are shown below.The equipment has a 3-year tax life and would be fully depreciated by the straight-line method over 3 years,but it would have a positive pre-tax salvage value at the end of Year 3,when the project would be closed down.Also,some new working capital would be required,but it would be recovered at the end of the project's life.Revenues and other operating costs are expected to be constant over the project's 3-year life.What is the project's NPV?  WACC 10.0% Net investment in fixed assets (depreciable basis)  $70,000 Required new working capital $10,000 Straight-line deprec. rate 33.333% Sales revenues, each year $75,000 Operating costs (excl. deprec.) , each year $30,000 Expected pretax salvage value $5,000 Tax rate 35.0%\begin{array} { l r } \text { WACC } & 10.0 \% \\\text { Net investment in fixed assets (depreciable basis) } & \$ 70,000 \\\text { Required new working capital } & \$ 10,000 \\\text { Straight-line deprec. rate } & 33.333 \% \\\text { Sales revenues, each year } & \$ 75,000 \\\text { Operating costs (excl. deprec.) , each year } & \$ 30,000 \\\text { Expected pretax salvage value } & \$ 5,000 \\\text { Tax rate } & 35.0 \%\end{array}


Definitions:

UCC

A comprehensive code addressing various aspects of commercial law, including sales, leases, and negotiable instruments, to streamline commerce across state lines.

Code

A code is a system of principles or rules, often used in contexts like legal codes (laws grouped by subject) or programming (instructions for computers).

Remedies

Remedies are the means by which a court enforces a right, imposes a penalty, or makes another court order to impose its will.

Breach

A violation or infringement of a legal obligation, contract, or duty.

Related Questions