# FIN 500 Chapter 14 Cash Flows Capital Budgeting Problems Assignment

User Generated

ennyf3

FIN 500

## Description

Cash Flows, Other Topics in Capital Budgeting, and International Business Finance

Complete the following problems:

• Problem 14-1: Calculating Free Cash Flows
• Problem 14-2: New Project Analysis 1
• Problem 14-3: New Project Analysis 2
• Problem 14-5: Spot Exchange Rates
• Problem 14-6: Purchasing Power Parity

### Unformatted Attachment Preview

Purchase answer to see full attachment
User generated content is uploaded by users for the purposes of learning and should be used following Studypool's honor code & terms of service.

Attached.

Module 14 CT Problems
CASH FLOWS, OTHER TOPICS IN CAPITAL BUDGETING, INTERNATIONAL BUSINESS FINANCE

CT 14 - 1
CALCULATING FREE CASH FLOWS
Mudarraj Computers is introducing a new product and has an expected cahnge in EBIT of SAR 522,000. The company has
a 30 percent marginal tax rate. The project will produce SAR 105,000 of depreciation per year. In addition, the project will
cause the following changes in year 1:
DATA
Change in EBIT
522.000
Tax rate
30%
Depreciation
105.000

Accounts Receivable
Inventory
Accounts Payable

Without
Project
62.400
69.000
79.000

With Project
Change
76.000
82.500
97.200

What is the project's free cash flow in year 1?
Calculating Free Cash Flows:
Change in EBIT
Less: Change in taxes
Plus: Change in depreciation
Less Change in net working capital
Less: Change in capital spending
Free cash Flows
CT 14 - 2
NEW PROJECT ANALYSIS

522.000
(156.600)
105.000
(8.900)
0
461.500

13.600
13.500
18.200

Talhah Manufacturing is considering the purchase of a new production machine for SAR 529,000. The purchase of this
machine will result in an increase in earnings before interest and taxes of SAR 91,000 per year. To operate this machine
properly, workers would have to go through a brief training session that would cost SAR 17,000 after taxes. It would cost
SAR 22,500 to install the machine properly. Also, because the machine is extremely efficient, its purchase would
necessitate an increase in inventory or SAR 23,000. This machine has an expected life of 10 years, after which it will have
no salvage value. Assume simplified straight-line depreciation and that this machine is being depreciated down to zero, a
35 percent marginal tax rate, and a required rate of return of 15 percent.
DATA
Change in EBIT
Purchase Price
Train...

### Review

Anonymous
Just the thing I needed, saved me a lot of time.

Studypool
4.7
Trustpilot
4.5
Sitejabber
4.4