1. What will be the tax depreciation each year? Note: the total deprecation of tax purposes will still be $350 million if your calculations are correct.
2. Create an after-tax cash flow timeline similar to the one you did in Project 4.
3. Calculate the new NPV and IRR. Should the Project be accepted? The CFO thinks that the likely NPV and IRR will be close to the numbers that you calculated in Project 4.
The following questions will be used to estimate risk. Please use Table 3 to calculate cash flow.
4. The controller is worried about tax increases and estimates that the tax rate with be raised to 50% (federal and Maryland state) in year 4. Also there is a concern that expenses are understated. He asks, “What would happen to the NPV calculation if the cash tax expenses come in 2% higher than estimated and the tax rate increases to 50% in year 4?” This will allow a subjective evaluation of the project risk. Calculate a new cash flow time line with cash expenses 10% higher than those in Table 2 and with a 50% tax rate. Use Table 3
5. What would be the net present value, NPV in this “worst case” cash flow? What will be the IRR?
6. Should the project be accepted? Discuss the risk and the reward to McCormick.
At Solution Essays, we are determined to deliver high-quality papers to our clients at a fair price. To ensure this happens effectively, we have developed 5 beneficial guarantees. This guarantees will ensure you enjoy using our website which is secure and easy to use.
Most companies do not offer a money-back guarantee but with Solution Essays, it’s either a quality paper or your money back. Our customers are assured of high-quality papers and thus there are very rare cases of refund requests due to quality concern.Read more
All our papers are written from scratch and according to your specific paper instructions. This minimizes any chance of plagiarism. The papers are also passed through a plagiarism-detecting software thus ruling out any chance of plagiarism.Read more
We offer free revisions in all orders delivered as long as there is no alteration in the initial order instruction. We will revise your paper until you are fully satisfied with the order delivered to you.Read more
All data on our website is stored as per international data protection rules. This ensures that any personal data you share with us is stored safely. We never share your personal data with third parties without your consent.Read more