Briarcrest Condiments is a spice-making firm. Recently, it developed a new process for producing spices. The process requires new machinery that would cost $2,046,204. have a life of five years, and would produce the cash flows shown in the following table. | |||||||||||||

Year Cash Flow | |||||||||||||

1 | 5,94,239 | ||||||||||||

2 | (2,44,384) | ||||||||||||

3 | 9,82,520 | ||||||||||||

4 | 9,69,559 | ||||||||||||

5 | 8,83,605 | ||||||||||||

What is the NPV if the discount rate is 16.35 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 $12.10 million. This investment will consist of $2.90 million for land and $9.20 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 $5.09 million, $2.08 million above book value. The farm is expected to produce revenue of $2.05 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 10 percent. Calculate the NPV of this investment. (Round intermediate calculations and final answer to 2 decimal places, e.g. 15.25.)

Year Cost Value of Future Savings (at time of purchase) year cost futiure 0 5,000 7,000 1 4,100 7,000 2 3,200 7,000 3 2,300 7,000 4 1,400 7,000 5 500 7,000 Discount rate 11.40% The NPV of each choice is: NPV0 = $

Capital Co. has a capital structure, based on current market values, that consists of 22 percent debt, 1 percent preferred stock, and 77 percent common stock. If the returns required by investors are 9 percent, 11 percent, and 18 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 = | ||||||||||||

% | ||||||||||||