Q1/ Ipswich Corporation is considering an investment opportunity with the expected net cash inflows of $300,000 for four years. The residual value of the investment, at the end of four years, would be $70,000. The company uses a discount rate of 14%, and the initial investment is $290,000. Calculate the NPV of the investment. Present value of an ordinary annuity of $1: 12% 13% | 14% | 15% 10.893 0.8850.877 0.87 2 1.69 1.668|1.647 1.626 32.402 2.361 2.3222.283 43.037 2.9742.914 2.855 3.605 3.517 3.4333.352 Present value of $1: 12% 13% 14% | 15% 0.893 0.885 0.877| 0.87 20.797 0.783|0.769|0.756 30.712 0.693|0.675 0.658 40.636 0.6130.592 0.572 50.567 0.543 0.519|0.497|

Q1/ Ipswich Corporation is considering an investment opportunity with the expected net cash inflows of $300,000 for four years. The residual value of the investment, at the end of four years, would be $70,000. The company uses a discount rate of 14%, and the initial investment is $290,000. Calculate the NPV of the investment. Present value of an ordinary annuity of $1: 12% 13% | 14% | 15% 10.893 0.8850.877 0.87 2 1.69 1.668|1.647 1.626 32.402 2.361 2.3222.283 43.037 2.9742.914 2.855 3.605 3.517 3.4333.352 Present value of $1: 12% 13% 14% | 15% 0.893 0.885 0.877| 0.87 20.797 0.783|0.769|0.756 30.712 0.693|0.675 0.658 40.636 0.6130.592 0.572 50.567 0.543 0.519|0.497|

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 19E

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Q1/ Ipswich Corporation is considering an investment opportunity with the expected net cash inflows of $300,000 for four years. The residual value of the investment, at the end of four years, would be $70,000. The company uses a discount rate of 14%, and the initial investment is $290,000. Calculate the NPV of the investment. Present value of an ordinary annuity of $1: 12% 13% 14% 15% 0.893 0.885 0.877 0.87 2 1.69 1.668 1.647 1.626 3 2.402 2.361 2.322 2.283 4 3.037 2.974 2.914 2.855 3.605 3.517 3.433 3.352 Present value of $1: 12% 13% 14% 15% 1 0.893 0.885 0.877 0.87 0.797 0.783 0.769 0.756 3 0.712 0.693 0.675 0.658 4 0.636 0.613 0.592 0.572 0.567 0.543 0.519 0.497 Q2/ A company is evaluating an investment. The company uses the straight-line method of depreciation. Use the following information to compute the accounting rate of return. Show your calculations and round to one decimal place. Project Investment SR875,000 Residual value Operating income: Year 1 120,000 Year 2 120,000 Year…
2/Gamma Corporation is considering an investment of $518,000 in a land development project. The investment will yield cash inflows of $220,000 per year for five years. The company uses a discount rate of 9%. What is the net present value of the investment? Present value of an ordinary annuity of $1: 8% 9% 10% 0.909 0.926 1.783 1 0.917 1.759 1.736 2.577 3.312 3.993 3 2.531 2.487 4 3.24 3.17 3.89 3.791
An investment pays you $30,000 at the end of this year, and $15,000 at the end of each of the four following years. What is the present value (PV) of this investment, given that the interest rate is 3% per year? A. $66,507 B. $83,259 OC. $41,630 OD. $99,911 Clear all Check answer
Compute the PV of a perpetuity with monthly payments of $1,000, given an annual discount rate of 4% and a constant annual growth rate in the payment stream of 2% ? Select one: a. $610,000 b $650,000 c. $640,000 d. $620,000 e. $600,000
Use the following table: Present Value of an Annuity of 1 Period 8% 9% 10% 1 .926 .917 .909 2 1.783 1.759 1.736 3 2.577 2.531 2.487 A company has a minimum required rate of return of 8%. It is considering investing in a project that costs $111,915 and is expected to generate cash inflows of $45,000 each year for three years. The approximate internal rate of return on this project is a)8% B)9% C)10% D)less than the required 8%.
Calculate the future value of an investment if the annual interest rate is 9%, number of payments is 30, and each payment of $1000 is made at the end of the year. A. $102,893 B. $136,308 C. $108,212 O D. $98,234
2) Consider the following timeline where the firm requires the annuity to provide a minimum return of 20%.: Project A End of Year -100,000 15,000 20,000 ? 30,000 Calculate Present Value (PV) (Write any number for year 3)
I Net Present Value A project has estimated annual net cash flows of $6,250 for two years and is estimated to cost $30,000. Assume a minimum acceptable rate of return of 12%. Use the Present Value of an Annuity of $1 at Compound Interest table below. Present Value of an Annuity of $1 at Compound Interest Year 6% 12% 15% 20% 1 0.943 2 3 4 5 6 7 8 9 1.833 2.673 3.465 4.212 4.917 5.582 6.210 6.802 10 10% 7.360 0.909 1.736 2.487 3.170 3.791 4.355 4.868 5.335 5.759 6.145 0.893 1.690 2.402 3.037 3.605 4.111 0.870 1.626 2.283 2.855 3.353 3.785 4.160 4.487 4.772 0.833 5.019 1.528 2.106 2.589 4.564 4.968 5.328 5.650 Determine (a) the net present value of the project and (b) the present value index. If required, use the minus sign to indicate a negative net present value. Net present value of the project (round to the nearest dollar) Present value index (rounded to two decimal places) 2.991 3.326 3.605 3.837 4.031 4.192
Net present value A project has estimated annual net cash flows of $5,000 for 1 years and is estimated to cost $32,500. Assume a minimum acceptabile rate of return of 10%. Use the Present Value of an Annuity of $1 at Compound Interest table below. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 0.909 0.893 0.870 1.736 1.690 1.626 2.487 2.402 2.283 3.170 3.037 2.855 3.791 3.605 3.353 2.991 4.355 4.111 3.785 3.326 4.868 4.564 4.160 3.605 5.335 4.968 4.487 3.837 9 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 Determine (a) the net present value of the project and (b) the present value index. If required, use the minus sign to indicate a negative net present value. Net present value of the project (round to the nearest dollar) Present value index (rounded to two decimal places) 1 2 3 4 5 6 7 8 0.943 1.833 2.673 3.465 4.212 4.917 5.582 6.210 6.802 0.833 1.528 2.106 2.589
Multiple choice: If for five years, the cash inflows are uniform at P120,000 which present value of annuity factor are you going to use to covert the inflows into the present value assuming that the cost of capital is 12%? • 0.56743• 1.56743• 3.60478• 2.40188
An investment will pay $600 at the end of each of the next 2 years, $700 at the end of Year 3, and $1,000 at the end of Year 4. What is its present value if other investments of equal risk earn 6 percent annually? a. $1,821.82 b. $1,913.83 c. $2,297.07 d. $2,479.86 e. $2,735.85
Q2: Find out the capitalized cost of a certain investment based on the following: 1. An initial deposit of $100,000 2. Recurring payments of $10,000 each 6 years starting by the end of the first year for infinity. 3. Annual uniform payments of $2,000 starting by the end of year 10 for infinity. Interest rate is 6%