FIN B280 - Assignment File 209 Assignment 2 Due date: 22 December 2020 Important note You must use word processing software (such as Microsoft Word) to prepare assignments, and submit them via the...

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FIN B280 - Assignment File 209 Assignment 2 Due date: 22 December 2020 Important note You must use word processing software (such as Microsoft Word) to prepare assignments, and submit them via the Online Learning Environment (OLE). All assignments must be uploaded to the OLE by the due date. Failure to upload an assignment to the OLE in the required format may result in the score for the assignment being adjusted to zero. According to the University’s policy, no extension of the due date will be allowed for the final assignment. This policy will be strictly enforced. Any late submission of the final assignment will result in the score for the assignment being adjusted to zero. Question 1 (50 marks) JCC Network (JCC) is a fast-growing Internet service provider that initially went public in 2010. Its revenue growth and profitability have steadily risen since the company’s inception in early 2000. JCC is considering a new project of extending its services to rural area. If the company carries out the project, it needs to purchase a new machine that costs $720,000. For tax purposes, the machine will be fully depreciated by the simplified straight-line method over a period of three years. It is estimated that the machine will be able to generate $580,000 in incremental sales and the annual cash expenses of the company will increase by $150,000. Besides, the company will need $180,000 in initial net working capital for the project. As the new machine requires more space, the company will make use of a warehouse, which is currently rented out for $60,000 per year. In addition, the average tax rate, the marginal tax rate, and the required rate of return for the company are 20%, 30% and 10% respectively. As a finance manager of the company, you are required to evaluate this project. Required: a. Discuss whether or not the following items are relevant cash flows for the project and should be included in the capital budgeting. i. (6 marks)the rental income of the warehouse ii. (6 marks)the initial net working capital of the project iii. (8 marks)the annual depreciation of the machine b. Determine the annual after-tax cash flows associated with this project for years (20 marks)0 through 3. You need to show your steps clearly in order to get full marks. c. Perform a capital budgeting analysis to determine whether the company should accept (10 marks)the project. You need to show your steps clearly in order to get full marks. Assignment File 9 Question 2 (50 marks) You own 2,000 shares of stock in JCC Corporation. You will receive a $7.36 per share dividend in one year. In two years, the company will pay a liquidating dividend of $65 per share. The required return on the company’s stock is 10 percent. Required: a. (6 marks)Determine the current price of your stock (ignoring taxes). b. If you would rather have equal dividends in each of the next two years, show how you (24 marks)can accomplish this by creating homemade dividends. c. (20 marks)Use this case to illustrate the irrelevance of dividend policy. 10 FIN B280 Introduction to Financial Management