Fin 571 week 6 Wiley assignment
1) Briarcrest Condiments is a spicemaking firm. Recently, it developed a new process for producing spices. The process requires new machinery that would cost $2,052,306. have a life of five years, and would produce the cash flows shown in the following table.
Year 
Cash Flow 
1 
$567,589 
2 
250,644 
3 
776,355 
4 
891,218 
5 
876,336 
What is the NPV if the discount rate is 15.77 percent? (Enter negative amounts using negative sign e.g. 45.25. Round answer to 2 decimal places, e.g. 15.25.)
NPV is 
$ 
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 $2.20 million for land and $9.80 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 $5.25 million, $2.03 million above book value. The farm is expected to produce revenue of $2.07 million each year, and annual cash flow from operations equals $1.87 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 
$[removed] 
The project should be 

. 
Accepted or rejected
Question 3 

Bell Mountain Vineyards is considering updating its current manual accounting system with a highend electronic system. While the new accounting system would save the company money, the cost of the system continues to decline. The Bell Mountainâ€™s opportunity cost of capital is 14.2 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 
4,200 
7,000 

2 
3,400 
7,000 

3 
2,600 
7,000 

4 
1,800 
7,000 

5 
1,000 
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} = $[removed]
NPV_{1} = $[removed]
NPV_{2} = $[removed]
NPV_{3} = $[removed]
NPV_{4} = $[removed]
NPV_{5} = $[removed]
Suggest when should Bell Mountain buy the new accounting system?
Bell Mountain should purchase the system in . 
What year? 

Question 4 

Chipâ€™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 89 percent as high if the price is raised 10 percent. Chipâ€™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 firmâ€™s FCF for the year? (Round answers to nearest whole dollar, e.g. 5,275.)
At $20 per bottle the Chipâ€™s FCF is $[removed] and at the new price Chipâ€™s FCF is $[removed]. 
Question 5 

Capital Co. has a capital structure, based on current market values, that consists of 26 percent debt, 12 percent preferred stock, and 62 percent common stock. If the returns required by investors are 8 percent, 10 percent, and 16 percent for the debt, preferred stock, and common stock, respectively, what is Capitalâ€™s aftertax WACC? Assume that the firmâ€™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 
= 
[removed] 
% 