The management of Deitrich Inc., a civil engineering design company, isconsidering an investment in a high-quality blueprint printer with the followingcash flows:Year1234567890Investment Cash Inflow$2,000$3,000$6,000QUESTION 6$28,000$4,000$8,000$9,000$8,000$6,000$5,000$4,000$4,000IRequired:1. Determine the payback period of the investment.2. Would the payback period be affected if the cash inflow in the last yearwas several times larger? QUESTION 6Simple Rate of Return MethodThe management of Stillford Micro Brew is considering the purchase of anautomated bottling machine for $80,000. The machine would replace an oldpiece of equipment that costs $33,000 per year to operate. The new machinewould cost $10,000 per year to operate. The old machine currently in use couldbe sold now for a scrap value of $5,000. The new machine would have a usefullife of 10 years with no salvage value.Required:Compute the simple rate of return on the new automated bottling machine.

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Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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The management of Unter Corporation, an architectural design firm, is considering an investment with the following cash flows: Investment Cash Inflow Year 1234567899 10 $ 15,000 $ 1,000 $ 8,000 $ 2,000 $ 2,500 $ 4,000 $ 5,000 $ 6,000 $ 5,000 $ 4,000 $ 3,000 $ 2,000 Required: 1. Determine the payback period of the investment. 2. Would the payback period be affected if the cash inflow in the last year were several times as large? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Determine the payback period of the investment. (Round your answer to 1 decimal place.) Payback period 15.0 years
The management of Unter Corporation, an architectural design firm, is considering an investment with the following cash flows: Year Investment Cash Inflow 1234567899 10 $ 30,000 $ 1,000 $ 3,000 $ 2,000 $ 4,000 $ 5,000 $ 8,000 $ 6,000 $ 4,000 $ 2,000 $ 1,000 $ 1,000 Required: 1. Determine the payback period of the investment. 2. Would the payback period be affected if the cash inflow in the last year were several times as large? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Determine the payback period of the investment. (Round your answer to 1 decimal place.) Payback period years
The following information is provided by Doppler Systems: Project A Project B Project C Project D Initial investment $440,000 $202,000 $550,000 $506,000 PV of cash inflows $570,000 $394,000 $816,000 $406,000 Payback period (years) 3.6 3.2 4.0 20 NPV of project $130,000 $192,000 $266,000 $100,000 Calculate the profitability index for Project A. (Round your answer to two decimal places.) 1.09 1.67 0.85 1.30
1. Green Rose Inc. is considering these following investments for year 2022: Machine A Machine B Machine C Initial amount 450,000 375,000 425,000 Salvage Value 75,000 67,000 58,000 Cost savings 66,730 73,425 63,950 The following cost are associated to each of the machines: • Inspection cost 3,000 • Installation cost 3.500 • Warranties 2,700 • Testing cost 4,300 • Training 4,500 a) Determine the Net investment of each Machine. b) Determine the accounting rate of return. c) Which of these investments would Green Rose Inc. purse if the required rate of return is 18%?
5.The following information is provided by Pemberton Systems: Project A $434,000 $572,000 3.6 Project B $200,000 $396,000 Project C Project D Initial investment PV of cash inflows $568,000 $510,000 $808,000 $402,000 4.0 Payback period (years) NPV of project 3.2 2.0 $138,000 $196,000 $240,000 $108,000 Which project has the highest profitability index?
Vista Limited intends purchasing a new machine and has a choice between the following two machines:Equipment AEquipment BInitial costR220 000R240 000Expected useful life5 years5 yearsScrap valueNilNilExpected net cash inflows:RREnd of:Year 155 00070 000Year 260 00070 000Year 362 00070 000Year 460 00070 000Year 570 00070 000The company estimates that its cost of capital is 12%. Calculate the Internal Rate of Return of Equipment B.
Perit Industries has $155,000 to invest in one of the following two projects: Cost of equipment required Working capital investment required Annual cash inflows Salvage value of equipment in six years Life of the project Project A $ 155,000 $ 25,000 $ 8,600 6 1. Net present value project A 2. Net present value project B 3. Which investment alternative (if either) would you recommend that the company accept? X Answer is complete but not entirely correct. Project B $0 $ 155,000 $ 40,000 years The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries' discount rate is 14%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net present value of Project A. Note: Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount. 2. Compute the net present value of Project B. $(53,971) 70,527 X Project B $0…
Vista Limited intends purchasing a new machine and has a choice between the following two machines:Equipment AEquipment BInitial costR220 000R240 000Expected useful life5 years5 yearsScrap valueNilNilExpected net cash inflows:RREnd of:Year 155 00070 000Year 260 00070 000Year 362 00070 000Year 460 00070 000Year 570 00070 000The company estimates that its cost of capital is 12%. Required:2.1 Calculate the Payback Period of both equipment. (Answers must be expressed in years, months and days). 2.2 Calculate the Accounting Rate of Return (on initial investment) for both equipment A and B. (Answers must be expressed to 2 decimal places). 2.3 Calculate the Net Present Value of each equipment. (Round off amounts to the nearest Rand.) 2.4 Calculate the Internal Rate of Return of Equipment B.
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
NPV A clinic is considering the possibility of two new purchases: new MRI equipment and new biopsy equipment. Each project requires an investment of $437,200. The expected life for each is five years with no expected salvage value. The net cash inflows associated with the two independent projects are as follows: Year MRI Equipment Biopsy Equipment 1 $214,000 $60,000 2 90,000 42,000 3 173,000 94,000 4 109,000 199,000 5 46,000 271,000 The present value tables provided in Exhibit 19B.1 and Exhibit 19B.2 must be used to solve the following problems. Required: Compute the net present value of each project, assuming a required rate of 12 percent. If the NPV is negative, enter your answer as a negative value. NPV MRI equipment $fill in the blank 1 Biopsy equipment $fill in the blank 2
The company is considering three capital investment proposals. At this time the company only has funds available to pursue one of the three investments. Equipment A Equipment B Equipment CPresent value of net cash inflows $1,695,000 $1,960,000 $2,200,000Initial investment ($1,500,000) ($1,750,000) ($2,000,000)Net present value $195,000 $210,000 $200,000*initial investment is the amount invested A. Calculate the Present value index (or profitability index) for each project. B. Which investment should they choose and why?
Apply WACC in IRR. Leeward Sailboats is reviewing the following new boat line: Click on the Icon in order to copy its content into a spreadsheet. Category T₁ Investment Net working capital change Operating cash flow Salvage To - $10,244,762 - $569,000 $3,277,000 What is the IRR of the project? 10.5% (Round to two decimal places.) T2 $3,884,000 T3 $569,000 $4,570,000 $615,000 At what adjusted WACCS will the company accept this project? Hint: Find the IRR of the project, and use it as the maximum adjusted WACC for accepting the project.

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