NUBD Inc. is considering two average-risk alternative ways of producing its patented polo shirts. Process X has a cost of P8,000 and will produce net cash flows of P5,000 per year for 2 years. Process Y will cost P11,500 and will produce cash flows of P4,000 per year for 4 years. The company has a contract that requires it to produce the shirts for 4 years, but the patent will expire after 4 years, so the shirts will not be produced after 4 years. Inflation is expected to be zero during the next 4 years. If cash inflows occur at the end of each year, and if NUBD's cost of capital is 10 percent, by what amount will the better project increase NUBD's value? *
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- NUBD Inc. is considering two average-risk alternative ways of producing its patented polo shirts. Process X has a cost of P8,000 and will produce net cash flows of P5,000 per year for 2 years. Process Y will cost P11,500 and will produce cash flows of P4,000 per year for 4 years. The company has a contract that requires it to produce the shirts for 4 years, but the patent will expire after 4 years, so the shirts will not be produced after 4 years. Inflation is expected to be zero during the next 4 years. If cash inflows occur at the end of each year, and if NUBD’s cost of capital is 10 percent, by what amount will the better project increase NUBD’s value? A. P 677.69 B. P1,098.89 C. P1,179.46 D. P1,237.76 E. P1,312.31PIX company is considering licensing a water treatment system. The company can purchase a one-year option for P150,000 that will give it time to pilot test the process or the company can acquire the license now at a cost of P1.8M plus 25% of sales. If the company waits 1 year, the cost will increase to P1.9M plus 30% of sales. If PIx projects the sales to be P1M per year over the five-year license period. Determine the: PWnow and PWone-year. MARR is 15% per yearMoreTech Drilling may buy a patent with 14 years of life left. If MoreTech spends $ 1.5M to implement the technology, it expects net revenues of $650, 000 per year for the patent's life. If MoreTech's discount rate for money's time value is 10%, what is the maximum price that MoreTech can pay for the patent?
- NUBD Inc. is considering two average-risk alternative ways of producing its patented polo shirts. Process X has a cost of P8,000 and will produce net cash flows of P5,000 per year for 2 years. Process Y will cost P11,500 and will produce cash flows of P4,000 per year for 4 years. The company has a contract that requires it to produce the shirts for 4 years, but the patent will expire after 4 years, so the shirts will not be produced after 4 years. Inflation is expected to be zero during the next 4 years. If cash inflows occur at the end of each year, and if NUBD’s cost of capital is 10 percent, by what amount will the better project increase NUBD’s value? P 677.69 P1,098.89 P1,179.46 P1,237.76 P1,312.31Your company is trying to decide whether it should purchase a copier from Xerox or lease it. The copier has an expected life of 6 years, after which it has only marginal value (you can ignore any residual value). If you purchase it, the price is $145,000, payable now, and you would have to pay an annual service charge of $8,000. If you lease it, you would have an annual payment of $36,000 each year (for 6 years), which includes service. The lease payment and the annual service charge occur at the beginning of each year. The interest rate is 3.8%. Which option is least costly?Wary Corporation is considering the purchase of a machine that would cost $335,000 and would last for 5 years. At the end of 5 years, the machine would have a salvage value of $48,000. The machine would reduce labor and other costs by $101,000 per year. The company requires a minimum pretax return of 10% on all investment projects. (Ignore income taxes.) Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. Required: Determine the net present value of the project. Note: Round your intermediate calculations and final answer to the nearest whole dollar amount. Net present value
- Owens Mills Corp. is considering producing two mutually exclusive machine types. Machine A requires an up-front expenditure at t = 0 of $450,000, it has an expected life of 2 years, and it will generate positive after-tax cash flows of $350,000 per year (all cash flows are realized at the end of the year) for 2 years. At the end of 2 years, the machine will have zero salvage value, but every two years the company can purchase a replacement machine with the same cost and identical cash inflows.Alternatively, it can choose Machine B, which requires an expenditure of $1 million at t = 0, has an expected life of 4 years, and will generate positive after-tax cash flows of $360,000 per year (all cash flows are realized at year end). At the end of 4 years, Machine B will also have an after-tax salvage value of $190,000. The cost of capital is 10%. Which machine should the Owens Mills choose? Show your EAA (equivalent annual annuity) Excel calculations to support your choice on Machine A vs.…Hunt Inc. intends to invest in one of two competing types of computer-aided manufacturing equipment. CAM X and CAM Y. Both CAM X and CAM Y models have a project life of 10 years. The purchase price of the CAM X model is P3,600,000 and it has a net annual after-tax cash inflow of P900,000. The CAM Y model is more expensive, selling for P4,200,000, but it will produce a net annual after-tax cash inflow of P1,050,000. The cost of capital for the company is 10%. Required: 1. Calculate the NPV for each project. Which model would you recommend? 2. Calculate the IRR for each project. Which model would you recommend?A small manufacturing company is considering purchasing a maintenance contract for air conditioning systems . Since all of its systems are newthe company plans to begin the contract in year four and continue through year ten . The cost of the contract is $5000 per year and the npany^ prime s minimum attractive rate of return is 15% per year. The present worth of the contract is nearest to
- BRAC is considering investing $100000 in a new machine with an expected life of 5 years. The machine will have no scrap value at the end of the 5 years. It is expected that 20000 units will be sold each year at a selling prices of $6.00 per unit. Variable production costs are expected to $2.30 per unit, while incremental fixed costs, mainly the wages of a maintenance engineer, are expected to be $10000 per years. BRAC uses a discount rate of 11% for investment appraisal purposes and expects investment projects to recover their initial investment within two years. Required: (1) Explain why risk and uncertainty should be considered in the investment appraisal process. (2) Calculate and comment on the payback period of the project. (3) Evaluate the sensitivity of the projects net present value to a change in the following project variables: sales volume sales price variable cost and discuss the…XYZ is considering buying a new, high efficiency interception system. The new system would be purchased today for $47,700.00. It would be depreciated straight-line to SO over 2 years. In 2 years, the system would be sold for an after-tax cash flow of $14,600.00. Without the system, costs are expected to be $100,000.00 in 1 year and $100,000.00 in 2 years. With the system, costs are expected to be $79,000.00 in 1 year and $69,700.00 in 2 years. If the tax rate is 46.50% and the cost of capital is 8.40%, what is the net present value of the new interception system project? a. $11893.11 (plus or minus $50) b. $12724.27 (plus or minus $50) c. $8553.76 (plus or minus $50) d. $9953.14 (plus or minus $50) e. None of the above is within $50 of the correct answerJDAR Enterprises needs someone to supply it with 156000 cartons of machine screws per year to support its manufacturing needs over the next 4years, and you've decided to bid on the contract. It will cost you $1750000 to install the equipment necessary to start production; you'll depreciate this cost straight-line to zero over the project's life. You estimate that in five years this equipment can be salvaged for $220000. Your fixed production costs will be $281,000 per year, and your variable production costs should be $9 per carton. You also need an initial investment in net working capital of $146,000. If your tax rate is 0.32 percent and you require a return of 0.16 percent on your investment, what bid price per carton should you submit What is the initial investment 1896000 what is the terminal value? (hint, discounted) 163257.76 what is the discounted cash flow 4564795.86 what is the bid price 4.73 Finish review A