What is the internal rate of return (IRR) on an industrial building investment originally purchased for $3,500,000, seven years ago which has an annual net income of $250,000 each year and can be sold now for $4,000,000?
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- Mason, Inc., is considering the purchase of a patent that has a cost of $85000 and an estimated revenue producing lite of 4 years. Mason has a required rate of return that is 12% and a cost of capital of 11%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?Caduceus Company is considering the purchase of a new piece of factory equipment that will cost $565,000 and will generate $135,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return In Excel, see Appendix C.Given the initial investment in a factory processing equipment as Ghc500,037. Let the opportunity cost of capital for the industry be 10% p.a. Assuming that the equipment is capable of generating an after-tax returns of Ghc115,000 for the first 5 years and Ghc65000 for the 6th year and Ghc53400 for the 7th year. Find the Net Present Value (NPV) Determine the Internal Rate of Return Identify three ways in which the Net Present value is superior to the Internal Rate of return as investment criteria
- (a) New manufacturing equipment costs $225,000, salvage value is $25,000, and average annual earnings of $20,000 after taxes is expected. Find the average annual rate of return. If the earnings are doubled, then what is the rate?(b) Investment for new equipment is $100,000, and the salvage value is $10,000. Average yearly earnings from this equipment are $15,000 after taxes. What is the non-time-value-ofmoney return? When is the payback?You are looking at an investment which has an initial cost of $400,000 and a salvage value of zero after five years. What is the average accounting return for this investment given the following annual net incomes: year 1 $100,000, year 2 150,000, year 3 150,000, year 4 100,000 and year 5 50,000. a. 27.5%b. 52.5%c. 55.0%d. 137.5%Given the initial investment in a factory processing equipment as Ghc500,037. Let the opportunity cost of capital for the industry be 10% p.a. Assuming that the equipment is capable of generating an after-tax returns of Ghc115,000 for the first 5 years and Ghc65000 for the 6th year and Ghc53400 for the 7th year. a. Find the Net Present Value (NPV) b. Determine the Internal Rate of Return c. Identify three ways in which the Net Present value is superior to the Internal Rate of
- Given the initial investment in a factory processing equipment as Ghc500,037. Let the opportunity cost of capital for the industry be 10% p.a. Assuming that the equipment is capable of generating an after-tax returns of Ghc115,000 for the first 5 years and Ghc65000 for the 6 year and Ghe53400 for the 7th year. a. Find the Net Present Value (NPV) b. Detemine the Internal Rate of Return c. Identify three ways in which the Net Present value is superior to the Internal Rate of return as investment criteria• EXAMPLE: A new machine will be purchased for 150000 TL and sold for 30000 TL at the end of 5 years. An annual income of 75000 TL will be provided. Expected rate of return on investment • 40% Determine annual depreciation amount Analyze the pre-tax economics of the investment If • the income tax rate is 25%, analyze the after-tax economics of the investmentAssume the following expected annual cash flows from operating a office property investment: Year 1 = $225,000; Year 2= $236,500; Year 3 = $248,000; Year 4 = $259,500; Year 5 = $271,000. If the net proceeds from the sale in Year 5 are $4.9 million and the property can be purchased today for 4.25 million, what is the expected return on the investment? 8.38% 10.00% O 12.15% 9.14%
- An equipment which can be purchase for P700,000 is expected to generate a net cash flow of P200,000 annually for five years which is the estimated service life of the equipment. Its salvage value at the end of the service life is estimated to be 5% of its purchased cost. a. What is the rate of return of the initial investment? b. What is the simple pay-back period? c. If the company's minimum attractive rate of return(MARR) is set at 15%, using NPW is this investment acceptable? d. What is the internal rate of return(IRR) of this machine? e. What is the external rate of return(ERR) at the 15% MARR?The James Company is considering an investment with a cost today of $1,500,000 and which will produce the following net inflows: Year 1 600,000 Year 2 300,000 Year 3 200,000 Year 4 400,000 Year 5 500,000 What is the Payback Period for the investment?The expected profits from a $165,000 investment are $55,000 in Year 1, $80,000 in Year 2, and $120,000 in Year 3. What is the investment’s payback period?