Consider the following information:Initial cost of equipment$108,000Sales tax and delivery costs$7,000Estimated life7 yearsSalvage value$11,000Annual cash inflows$31,000Estimated cost of capital10%Without considering the effect of income taxes, the net present value of the equipment is:O $48,566.$41,566.$39,921.$42,921.

Now, let's calculate the present value of each annual net cash flow using the discount rate of…

Answered: Consider the following information:…

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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Consider the following facts and do not consider the effect of income taxes: Initial cost of equipment Estimated life Salvage value Annual cash inflows Estimated cost of capital $45,000 5 years $5,000 $63,300. O $14,890. $59,895. O $18,319. $15,000 The net present value of the equipment is: 8%
What is the annual after-tax operating cash flow? Table 3 Initial Equipment Project Life Sales Variable Costs Fixed Costs Tax rate Cost of Capital Ending Book Value Sales Price at Year 3 Net Working Capital $24,700 O $13,300 $32,250 $19,300 $55,000 3 Years $50,000 $20,000 $10,000 35% 10% $1,000 $20,000 $10,000
Below are two potential investment alternatives: Initial capital investment 180,000 Estimated useful life 3 years Estimated annual cash inflow each year 80,000 Desired rate of return 10% Assume straight-line depreciation in all computations, and ignore income taxes. The net-present value in this investment is _____. 18,948 (123,652) 75,000 186,518
1) $400,000 20,000 80,000 Machinery cost Working capital required Annual net cash receipts Required rate of return Life of the project 6 years Using net present value, would you make this investment? 10% Net Present Value ($60,320)
The following are the cash flows of two projects: Project Project A B $(370) $(370) 200 270 270 270 Year 0 1 2 3 4 200 200 200 If the opportunity cost of capital is 10%, what is the profitability index for each project? (Do not round intermediate calculations. Round your answers to 4 decimal places.) Answer is complete but not entirely correct. Profitability Index Project A B 1.7134 1.4000
The Post Company is considering investing in two alternative projects: Investment Useful life (years) Estimated annual net cash inflows for useful life Residual value Depreciation method Required rate of return What is the accounting rate of return for Project 1? OA. 52.5% B. 20% OC. 30% OD. 7.5% Project 1 $200,000 4 $60,000 $20,000 Straight-line 15% Project 2 $260,000 8 $45,000 $16,000 Straight-line 10%
calculate the net present value; Initial capital investment 180,000 Estimated useful life 3 years Estimated annual cash inflow each year 80,000 Desired rate of return 10% Assume straight-line depreciation in all computations, and ignore income taxes.
A project has annual depreciation of $17,100, costs of $89,300, and sales of $129,500. The applicable tax rate is 40 percent. What is the operating cash flow? Multiple Choice $22,920 $30,960 $84,540 $34,380 $24,120
Spiritlight Ventures is considering the following investment: Investment $140,000 Annual revenues $ 96,000 Annual variable costs $ 32,000 Annual fixed out-of-pocket costs $ 20,000 Salvage value $ 12,000 Discount rate 12% Expected life of project 8 years Ignore income taxes. The present value of the annual cash flow (rounded) is a.$152,538. b.$136,822. c.$204,884. d.$218,592.
1. Textron is considering a NEW project. The financial projections are as follows: Year 0 Year 1 24,000 7,000 Year 2 24,000 Year 3 Sales 24,000 Total Costs 7,000 7,000 Depreciation Capital Investment (or Cost of Equipment) Working Capital (Requirements/Levels) 10,000 10,000 10,000 40,000 2000 2500 1000 The Equipment will be sold at the end of Year 3 for 11,000. The relevant tax rate is 35%. Compute the cash flows for the project. Please select file(s) Select file(s)
Consider a project with the following information: Year 1 2 3 4 5 6 Initial outlay= $950,000 Compute the NPV if the company's discount rate is 10%. 1) $268,244 2) $201,650 3) $213,050 $129 After-tax cash flows $300,000 $400,000 $400,000 $200,000 $150,000 $150,000
METHODS THAT CONSIDER TIME VALUE OF MONEY Two investment proposals have been made and the following data thereon are given: Project ALPHA Project BETA Investment P123,417 P155,934 Depreciable assets included in the investment figure 60,000 72,000 Economic life 8 years 12 years Annual sales revenue P65,000 P78,000 Annual out-of-pocket operating cost 36,000 42,500 Income tax rate 35% Cost of capital 10% Determine which proposal is the better one based on: a. Internal rate of return b. Net present value c. Profitability index d. Discounted payback period

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