None Andronicus Corporation has the following jumbled information about an investment proposal:a. Revenues in each of years 1-4 = $36,000b. Year O initial investment = $56,000c. Inventory level = $18,000 in year 1, $20,100 in year 2, and $13,000 ind. Production costs = $11,800 in each of years 1-4e. Salvage value = $13,600 in year 4f. Depreciation = 100% immediate bonus depreciationg. Tax rate = 21%h. Customers pay with a 6-month lagyear3Draw up a set of cash flow forecasts as in Table 6.4. If the cost of capital is 10%, what is the project'sNPV? Assume that, if the project generates losses, those losses can be used to offset profitselsewhere in the business.Note: Do not round your intermediate calculations. Round your final answer to the nearest wholedollar amount.NPV

Andronicus Corporation Investment AnalysisCash Flow Forecast Table (Table 6.4 format):Year Cash…

Answered: Andronicus Corporation has the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Andronicus Corporation has the following jumbled information about an investment proposal: a. Revenues in each of years 1-4 = $38,000 b. Year O initial investment = $58,000 c. Inventory level = $19,000 in year 1, $21,300 in year 2, and $14,000 in year 3 d. Production costs $12,400 in each of years 1-4 e. Salvage value = $13,800 in year 4 f. Depreciation = 100% immediate bonus depreciation g. Tax rate 21% h. Customers pay with a 6-month lag Draw up a set of cash flow forecasts as in Table 6.4. If the cost of capital is 12%, what is the project's NPV? Assume that, if the project generates losses, those losses can be used to offset profits elsewhere in the business. Note: Do not round your intermediate calculations. Round your final answer to the nearest whole dollar amount. NPV
Andronicus Corporation (AC) has the following jumbled information about an investment proposal: Revenues in each of years 1–4 = $37,000 Year 0 initial investment = $57,000 Inventory level = $18,500 in year 1, $20,700 in year 2, and $13,500 in year 3 Production costs = $12,100 in each of years 1–4 Salvage value = $13,700 in year 4 Depreciation = 100% immediate bonus depreciation Tax rate = 21% There is an additional 6-month lag for all cash flows after year 0. For example, customers pay consistently with a 6-month lag, as AC does for production costs, taxes, etc. Draw up a set of cash flow forecasts as in Table 6.4. If the cost of capital is 10%, what is the project’s NPV? Assume that, if the project generates losses, those losses can be used to offset profits for tax purposes elsewhere in the business.
Andronicus Corporation has the following jumbled information about an investment proposal: Revenues in each of years 1–3 = $30,000 Year 0 initial investment = $50,000 Inventory level = $15,000 in year 1, $16,500 in year 2, and $10,000 in year 3 Production costs = $10,000 in each of years 1–3 Salvage value = $13,000 in year 4 Depreciation = 100% immediate bonus depreciation Tax rate = 21% Customers pay with a 6-month lag Draw up a set of cash flow forecasts as in Table 6.4. If the cost of capital is 8%, what is the project’s NPV? Assume that, if the project generates losses, those losses can be used to offset profits elsewhere in the business.
Andronicus Corporation has the following jumbled information about an investment proposal: Revenues in each of years 1-3 = $30,000 Year O initial investment = $50,000 Inventory level = $15,000 in year 1, $16,500 in year 2, and $10,000 in year 3 Production costs = $10,000 in each of years 1-3 Salvage value = $13,000 in year 4 Depreciation = 100% immediate bonus depreciation Tax rate=21% Customers pay with a 6-month lag Draw up a set of cash flow forecasts as in Table 6.4. If the cost of capital is 8%, what is the project's NPV? Assume that, if the project generates losses, those losses can be used to offset profits elsewhere in the business.
Harvard Manufacturing Company is considering the following investment proposal: Initial investment: Depreciable assets (straight-line) $48,000 Working capital 4,000 Operations (per year for 4 years): Cash receipts $30,000 Cash expenditures 17,000 Disinvestment: Salvage value of equipment $2,000 Recovery of working capital 4,000 The investment's accounting rate of return (rounded to two decimal points) on the original investment is: Select one: A. 3.85 percent B. 5.88 percent C. 10.71 percent D. 8.33 percent
Best production company is evaluating the project under profitability index. Initial investment is $400,000 and net present value is $1,100,000. Profitability index of the project is: а. 2.75 b. 0.36 c. 1 d. None of the above
You are given the following data for a project that is to be evaluated using the APV method. Year EBIT CAPEX 0 O $201.765 O $193,822 O $185,617 O $222,872 O $213,918 1 $127.000 $60,000 2 Depreciation Increase in NWC Year-end net debt $80,000 Cost of net debt = 8% Unlevered cost of capital = 11.8% Corporate tax rate = 30% Calculate the total value of the project at t = 0. using the APV method. $72,000 $50,000 $100,000 $133,000 $40,000 $80,000 $60,000 $140,000 3 $138.500 $10,000 $84,000 $30,000 $140,000
As assistant to the CFO of Boulder Inc., you must estimate the Year 1 cash flow for a project with the following data. What is the Year 1 cash flow? Do not round the intermediate calculations and round the final answer to the nearest whole number. Sales revenues$11,800Depreciation$4,000Other operating costs$6,000Tax rate35.0% a.$4,756 b.$5,170 c.$6,359 d.$5,377 e.$4,033
A company is planning to undertake an investment project. The following data have been calculated for two alternatives, A and B: A В Initial Investment outlay ($) 200,000 275,000 Freight charges 20,000 30,000 Set up charges 5,000 7,000 Economic Life (years) 10 10 Liquidation Value at end of economic life($) 12,000 17,000 Other fixed costs ($/yr) 4,000 20,000 Production and sales volume (units/year) 9,000 12,000 Sales Price ($/unit) 15 15 Variable costs ($/unit) 2.45 2.00 Rate of Interest (%/year) 6% 6% 1. Ascertain the preferred project using: a. The profit comparison method. . b. The average rate of return method. The static payback method C. Are the results of the Project selection process 2. Re-evaluate the projects using the Net Present Value. the same? If different, what reasons can you offer?
A company is planning to undertake an investment project. The following data have been calculated for two alternatives, A and B: A B Initial Investment outlay ($) 200,000 275,000 Freight charges 20,000 30,000 Set up charges 5,000 7,000 Economic Life (years) 10 10 Liquidation Value at end of economic life($) 12,000 17,000 Other fixed costs ($/yr) 4,000 20,000 Production and sales volume (units/year) 9,000 12,000 Sales Price ($/unit) 15 15 Variable costs ($/unit) 2.45 2.00 Rate of Interest (%/year) 6% 6% 1. Ascertain the preferred project using: a. The profit comparison method. b. The average rate of return method. C. The static payback method
Windsor Company is considering two capital expenditures. Relevant data for the projects are as follows: Project Initial investment Annual cash inflow Life of project Salvage value A $202,003 $41,080 6 years $0 B $306,910 $49,130 9 years $0 Windsor Company uses the straight-line method to depreciate its assets. Calculate the internal rate of return for each project. (For calculation purposes, use 5 decimal places as displayed in the facto provided, e.g. 1.25125. Round answers to O decimal places, e.g. 15%.)
Using the following two relationships: AW = CR + A of AOC CR = -P(A/P,i,n) + S(A/F,i,n) %3D Calculate the Annual Worth (AW) based on the data for the following project: Corporate MARR = 10% Initial Investment Cost $1,000,000 Anticipated Project Life = 10 years Salvage Value at the end of 10 years $100,000 Annual Cost of Operation %3D $50,000 10% Compound Interest Factors

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