7.16 The cash flows associated with a public worksproject in Buffalo, New York, are shown. Use themodified B/C ratio at a discount rate of 5% peryear to determine the economic justification.First cost, $50,000,000AW of benefits, $/year7,500,000AW of disbenefits, $/year1,700,000M&O costs, $/year900,00030Life of project, years

To determine the economic justification of the public works project in Buffalo, New York, we will…

Answered: 7.16 The cash flows associated with a…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 16EB: Project Y cost $8,000 and will generate net cash inflows of $1,500 in year one, $2,000 in year two,...

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Project Y cost $8,000 and will generate net cash inflows of $1,500 in year one, $2,000 in year two, $2,500 in year three, $3,000 in year four and $2,000 in year five. What is the NPV using 8% as the discount rate?
What is the net present value of a project with the following cash flows if the discount rate is 15 percent? Year 0: Cash Flow 5-48,000, Year 1: Cash flow = $15,600, Year 2: Cash flow = $28,900, Year 3: Cash flow = 515, 200 Seleccione una: A. -$1,618.48 B. $1,035.24 C. S9.593.19 D $2,687.98 E. $1,044.16
he cash flows associated with a public works project in Buffalo, New York, are shown. Use the modified B/C ratio at a discount rate of 5% per year to determine the economic justification. First cost, $ 30,000,000 AW of benefits, $/year 7,700,000 AW of disbenefits, $/year 1,700,000 M&O costs, $/year 1,525,000 Life of project, years 30 The modified B/C ratio is . The project is economically (Click to select) justified not justified .
A company has a project available with the following cash flows: Year 0 2234O 1 Cash Flow -$36,470 12,510 14,740 19,520 10,880 If the required return for the project is 7.7 percent, what is the project's NPV?
3) Consider the following two projects: Net Cash Flow Each Period Initial Outlay 1 2 3 4 Project A $4,000,000 $2,003,000 $2,003,000 $2,003,000 $2,003,000 Project B $4,000,000 0 0 0 $11,000,000 Calculate the net present value of each of the above projects, assuming a 14 percent discount rate. What is the internal rate of return for each of the above projects? Compare and explain the conflicting rankings of the NPVs and IRRs obtained in parts a and b above. If 14 percent is the required rate of return, and these projects are independent, what decision should be made? If 14 percent is the required rate of return, and the projects are mutually exclusive, what decision should be made?
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) -$ 15,456 5,225 8,223 13,013 8,705 0 1 234 -$ 276,363 26,400 51,000 57,000 402,000 Whichever project you choose, if any, you require a 6 percent return on your investment. a. What is the payback period for Project A? Payback period b. What is the payback period for Project B? Payback period c. What is the discounted payback period for Project A? Discounted payback period
6. You are choosing between two projects. The cash flows for the projects are given in the following Data table ($ million): Project Year 0 Year 1 Year 2 Year 3 Year 4 A −$48 $27 $19 $22 $15 B −$100 $22 $39 $48 $62 The IRR for project A is __________________________%. (Round to one decimal place.) The IRR for project B is____________________________%.(Round to one decimal place.) If your discount rate is 5.4%, the NPV for project A is $_______________million.(Round to two decimal places.) If your discount rate is 5.4%, the NPV for project B is $______________ million.(Round to two decimal places.) NPV and IRR rank the two projects differently because they are measuring different things. ___________________is measuring value creation, while ___________________is measuring return on investment. Because returns do not scale with different levels of investment, the two measures may give different rankings when…
Francoeur Co. has identified an investment project with the following cash flows: Year 1 2 3 4 Cash Flow $830 $1,150 $1,410 $1,550 If the discount rate is 8 percent, what is the present value of these cash flows as of Year O? $4,013.06 $3,406.47 $3,679.59 $4,549.11 $4,271.21
A project is expected to produce cash inflows of $5,000 for seven years. What is the maximum amount that can be spent on costs to initiate this project and still consider the project as acceptable, given an 11% discount rate? Select one: Oa. $15,884.15 Ob. $23,340.13 Oc. $25,900.63 O d. $23,560.98 Oe. $26,984.02
Accounting Draw the cash flow diagram for the given project below and then calculate the project net profit. The following table shows the activities description, dependency, duration, and cost elements. Assume the followings: Project overhead 8%. Tax 3%. Bond 1.25%. Profit 6%. Interest rate 9% per year. Down payment 10% with a guarantee letter, which costs 0.25% per month paid to the bank at the project start date. A performance guarantee letter of 10% will be submitted from contractor at the project begin. Invoices are submitted every month and will be paid a month later. Retention 10% and will be paid at the last invoice. Subcontractors: retention 10% will be paid at the last invoice, down payment 20%. Labor: labor expenses to be paid bi-weekly. Equipment: equipment expenses
Annual cash inflows from two competing investment projects are given below: Investment A $ 4,000 5,000 6,000 7,000 $ 22,000 Year 1234 The discount rate is 10%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: Compute the present value of the cash inflows for each investment. Year 1 2 3 4 $ Investment B $ 7,000 6,000 5,000 4,000 $ 22,000 Present Value of Cash Flows Investment A 0 $ Investment B 0 M ...
Fuente, Incorporated, has identified an investment project with the following cash flows. Cash Flow $700 925 1,125 1,250 Year 1 2 3 4 a.lf the discount rate is 11 percent, what is the future value of these cash flows in year 4? Future value at 11% b.What is the future value at a discount rate of 18 percent? Future value at 18%

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