Please answer them correctly. Here are 2 short problems. Please solve all 2 problems. I would...

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Finance

Please answer them correctly. Here are 2 short problems. Pleasesolve all 2 problems. I would really appreciate your effort.Thanks.

1). Given the soaring price of gasoline, Fordis considering introducing a new production line of gas-electrichybrid sedans. The expected annual unit sales of the hybrid cars is40,000; the price is $25,000 per car. Variable costs of productionare $14,000 per car. The fixed overhead including salary of topexecutives is $80 million per year. However, the introduction ofthe hybrid sedan will decrease Ford’s sales of regular sedans by6,000 cars per year; the regular sedans have a unit price of$20,000, a unit variable cost of $12,000, and fixed costs of$250,000 per year. Depreciation costs of the production plant are$52,000 per year. The marginal tax rate is 40 percent. What is theincremental annual cash flow from operations?

Incremental annual cash flow from operations $____________?

2). Crane Company is considering buying a newfarm that it plans to operate for 10 years. The farm will requirean initial investment of $11.80 million. This investment willconsist of $3.00 million for land and $8.80 million for trucks andother equipment. The land, all trucks, and all other equipment areexpected to be sold at the end of 10 years for a price of $5.20million, which is $2.15 million above book value. The farm isexpected to produce revenue of $2.00 million each year, and annualcash flow from operations equals $1.90 million. The marginal taxrate is 35 percent, and the appropriate discount rate is 10percent. Calculate the NPV of this investment. (Do notround factor values. Round final answer to 2 decimal places, e.g.15.25.)

NPV $________?

The project should be "Accepted orRejected?

Answer & Explanation Solved by verified expert
4.1 Ratings (635 Votes)
1incremental annual cash flow from operations cash flow fromhybrid cars cash flow lost on regular sedansDepreciation tax    See Answer
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