Questions A Machine Purchased For 1 000 000 With A Life Of 10 Years Generates Annual Revenues Of 300 000 And Operatin 1 (46.4 KiB) Viewed 26 times
Questions A Machine Purchased For 1 000 000 With A Life Of 10 Years Generates Annual Revenues Of 300 000 And Operatin 2 (15.63 KiB) Viewed 26 times
Questions A machine purchased for $1,000,000 with a life of 10 years, generates annual revenues of $300,000 and operating expenses of $100,000. Assume that machine will be depreciated over 10 years using straight-line depreciation with zero balance at the end of the life. The corporate tax rate is 30%. a) Calculate annual net cash flow of the project b) Calculate project NPV. Guide: Annual net cash flow: (Revenue -operating cost-depreciation - Tax + Deprecation) Profit before tax = Revenue - operating cost - depreciation Profit after tax = Profit before tax-tax amount Amount of tax to be paid = profit before tax * tax rate Depreciation per year = Machine cost / number of year of project A 0 1 2 4 5 10 C Purchase cost (initial outlay: 10) Revenue Operating expenses Depreciation Profit before tax Tax Profit after tax Add depreciation Annual net cash flow PV of cash flow (10%) NPV Part B
Describe and discuss concept of "Diversification". Why the diversification is important for risk management? (1 page) Describe and discuss about the Saudi Stock Exchange in terms of investors participation, liquidity of the markets and investment opportunity (at least a page)
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