Brutus Co. plans to launch a new type of indelible ink pen….
Brutus Co. plans to launch a new type of indelible ink pen. Advertising for the new product will be heavy and will cost the company $9 million, although the company expects general revenues of $280 million next year from sources other than sales of the new pen. If Brutus Co. has a corporate tax-rate of 35% on its pretax income, what effect will the advertising for the new pen have on its taxes?
Read DetailsBrewtus is considering adding a microbrewery onto one of its…
Brewtus is considering adding a microbrewery onto one of its existing restaurants. This will entail an increase in inventory of $8700, an increase in accounts payables of $2300, and an increase in property, plant, and equipment of $48,000. All other accounts will remain unchanged. The change in net working capital resulting from the addition of the microbrewery is ________.
Read DetailsInvestment A: Year: 0 1…
Investment A: Year: 0 1 2 3 4 5 Cash flow: -$14,000 $6000 $6000 $6000 $6000 $6000 Investment B: Year: 0 1 2 3 4 5 Cash flow: -$15,000 $7000 $7000 $7000 $7000 $7000 Investment C: Year: 0 1 2 3 4 5 Cash flow: -$18,000 $12,000 $2000 $2000 $2000 $2000 The cash flows for three projects are shown above. The cost of capital is 9.5%. Even though we know the payback period is an unreliable investment decision rule, suppose an investor decides to take projects with a payback period two years or less. Which of these projects would he take?
Read DetailsBrutus Corporation is considering adding a new factory to in…
Brutus Corporation is considering adding a new factory to increase its productive capabilities. The new factory will have an immediate capital expenditure of 100 million (time 0) and a delayed investment needed after two years, which is included in the FCF below. However, if Brutus decides to build the factory, the increase in production will create incremental FCF’s of 360 million in the first year (time 1), negative 431 million in the second year (time 2), and 171.6 million in the third year (time 3). Your brand-new analyst tells you that the IRR for this factory project is 20%. Assuming Brutus’s discount rate is 12%, should the firm pursue this new factory?
Read DetailsBrutus Co. is deciding whether to sponsor a racing team for…
Brutus Co. is deciding whether to sponsor a racing team for a cost of $1 million. The sponsorship would last for three years and is expected to increase cash flows by $430,000 per year. If the discount rate is 6.9%, what will be the change in the value of the company if Brutus Co. chooses to go ahead with the sponsorship?
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