5 Problems:
Problem 10.14 
Briarcrest Condiments is a spicemaking firm. Recently, it developed a new process for producing spices. The process requires new machinery that would cost $2,210,963. have a life of five years, and would produce the cash flows shown in the following table.
Year 
Cash Flow 
1 
$412,303 
2 
274,131 
3 
987,570 
4 
761,683 
5 
840,561 
What is the NPV if the discount rate is 16.57 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 $11.90 million. This investment will consist of $2.60 million for land and $9.30 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 $5.02 million, $2.30 million above book value. The farm is expected to produce revenue of $2.03 million each year, and annual cash flow from operations equals $1.86 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 12.24 
Chip’s Home Brew Whiskey management forecasts that if the firm sells each bottle of SnakeBite for $20, then the demand for the product will be 15,000 bottles per year, whereas sales will be 91 percent as high if the price is raised 14 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 $. 
Problem 13.11 
Capital Co. has a capital structure, based on current market values, that consists of 38 percent debt, 3 percent preferred stock, and 59 percent common stock. If the returns required by investors are 8 percent, 10 percent, and 14 percent for the debt, preferred stock, and common stock, respectively, what is Capital’s aftertax 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 
= 

% 
Subject  Business 
Due By (Pacific Time)  04/18/2014 01:00 pm 
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