# Need business and finance help with 5 graduate level corporate finance homework questions

**Question description**

**1.** Briarcrest Condiments is a spice-making firm. Recently, it developed a new
process for producing spices. The process requires new machinery that would
cost $1,968,450. have a
life of five years, and would produce the cash flows shown in the following
table.__year __ Cash Flow

1 $512,496

2 -242,637

3 814,558

4 887,225

5 712,642

What
is the NPV if the discount rate is 15.9
percent? *(Enter
negative amounts using negative sign e.g. -45.25. Round answer to 2 decimal
places, e.g. 15.25.) *

**2**. 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 $12.00 million. This investment will consist of $2.00
million for land and $10.00 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 $5.00 million, $2.00 million above
book value. The farm is expected to produce revenue of $2.00 million
each year, and annual cash flow from operations equals $1.80 million.
The marginal tax rate is 35 percent, and the appropriate discount rate
is 10 percent. Calculate the NPV of this investment. *(Round intermediate calculations and final answer to 2 decimal places, e.g. 15.25.)*

NPV?

should the project be accepted or rejected?

**3.** 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 Mountain’s opportunity cost of capital is
10 percent, and the costs and values of investments made at different
times in the future are as follows:

Year Cost Value of Future Savings

0 $5,000 $7,000

1 4,500 7,000

2 4,000 7,000

3 3,600 7,000

4 3,300 7,000

5 3,100 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:

NPV_{0}= $

NPV_{1} = $

NPV_{2} = $

NPV_{3} = $

NPV_{4} = $

_{5}= $

Suggest when should Bell Mountain buy the new accounting system? what year?

**4.** Chip’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 90
percent as high if the price is raised 10
percent. Chip’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 firm’s FCF for the year? *(Round
answers to nearest whole dollar, e.g. 5,275.)*

At $20 per bottle the Chip’s FCF is $______ and at the new price Chip’s FCF is $___________

**5.** Capital Co. has a capital structure, based on current
market values, that consists of 50
percent debt, 10
percent preferred stock, and 40
percent common stock. If the returns required by investors are 8
percent, 10
percent, and 15
percent for the debt, preferred stock, and common stock, respectively, what is
Capital’s after-tax WACC? Assume that the firm’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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