Q1. Lakeside Grapes is considering expanding its wine-making operations. They would need new equipment that costs $350,000 that would be depreciated on a straight-line basis to a zero balance over the 5-year life of the project. The estimated salvage value is $62,000. The project requires $35,000 initially for net working capital, all of which will be recouped at the end of the project. The project operating cash flow is $187,500 a year. What is the net present value of this project if the relevant discount rate is 15% and the tax rate is 35 percent?
Q2. A project has an operating cash flow of $24,000. Initially, this is 4-year project required $3,000 in net working capital, which is recoverable when the project ends. The firm also spent $8,000 on equipment to start the project. This equipment will have a book value of $250 at the end of year 4. What is the cash flow for year 4 of the project if the equipment can be sold for $1,500 and the tax rate is 34%?
Q3. Webster's words has a printing press which they are not using at the present time. In fact, they have not used this equipment for two years. The equipment has no market value because it has been customized to their particular operations. They could sell the machine as scrap metal for $1,500 maximum. The press is eight years old and cost $163,000 new. The current book value is $2100. The company is trying to decide if a new project would be a feasible means of utilizing this equipment. The value of the press that should be included in the project analysis is?