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Explorer Company is considering the following investment proposal:
| Initial investment: | |
| Depreciable assets (straight-line) | $28,800 |
| Working capital | 3,200 |
| Operations (per year for 4 years): | |
| Cash receipts | $20,000 |
| Cash expenditures | 8,800 |
| Disinvestment: | |
| Salvage value of equipment | $2,400 |
| Recovery of working capital | 3,200 |
| Discount rate: | 10 percent |
Additional information for interest rate of 10 percent and four time periods:
| Present value of $1 | 0.68301 |
| Present value of an |
3.16987 |
What is the
Select one:
a. $14,658
b. $35,503
c. $3,825
d. $7,327
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- Gallant Sports s considering the purchase of a new rock-climbing facility. The company estimates that the construction will require an initial outlay of $350,000. Other cash flows are estimated as follows: Assuming the company limits its analysis to four years due to economic uncertainties, determine the net present value of the rock-climbing facility. Should the company develop the facility if the required rate of return is 6%?Garnette Corp is considering the purchase of a new machine that will cost $342,000 and provide the following cash flows over the next five years: $99,000, $88,000, $92,000. $87,000, and $72,000. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return in Excel. see Appendix C.Assume that a company Is consideringa capital Investment project with a four-year time horizon and the following cash flows: Cost of new equipment Working capital required Annual net cash inflows Maintenance and repairs in third year Salvage value of equipment in fourth year $ 210,000 $ 50,000 $ 100,000 $40,000 $ 35,000 Click here to vlew Exhlbit 14B-1 and Exhibit 14B-2, to determine the approprlate discount factor(s) using the tables provided. The working capital will be released at the end of the project and the company's required rate of return Is 17%. The net present value of the project Is closest to: Multiple Choice $34,830. $44.730. $(30,530). $60.730.
- Tiberius Manufacturing is considering two alternative investment proposals with the following data: Proposal X Investment $10,800,000 Useful life. Estimated annual net cash inflows for 5 years 5 years $2,160,000 Residual value $60,000 Depreciation method Straight-line Required rate of return 14% Calculate the accounting rate of return for Proposal Y. (Round any intermediate calculations and your final answer to two decimal places.) OA. 13.90% OB. 11.56% OC. 17.83% OD. 7.58% Proposal Y $440,000 5 years $99,000 $35,000 Straight-line 13%Given the following, calculate the project's cash flows, NPV, and IRR. Initial investment $325,000 Expected life is 5 years First Year Revenues: 145,000 First-Year Expenses: $65,000 • Growth for revenue and expenses: 4.5 percent per year Straight Line Depreciation over 5 years Salvage Value: $50,000 One-time net working capital investment of $10,000 is required at the start of the project and will be recovered at project end The tax rate is 34 percent The risk-free rate is 4 percent Beta is 1.1 • The expected market return is 8 percent Answer the following: ● ● ● ● ● ● ● ● ● What are the cash flows for each year? What is the NPV? What is the IRR?Consider the following financial data for an investment project:• Required capital investment at n = 0: $ 100,000• Project service life: 10 years• Salvage value at n = 10: $15,000• Annual revenue: $150.000• Annual O&M costs (not including depreciation): $50.000• Depreciation method for tax purpose: seven-year MACRS• In come tax rate: 40%.Determine the project cash flow at the end of year 10.(a) $69.000(b) $73.000(c) $66.000(d) $67.000
- Merrill Corp. has the following information available about a potential capital investment: Initial investment $ 2,400,000 Annual net income $ 170,000 Expected life 8 years Salvage value $ 180,000 Merrill’s cost of capital 8 % Assume straight line depreciation method is used. Required:1. Calculate the project’s net present value. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Do not round intermediate calculations. Round the final answer to nearest whole dollar.) 2. Without making any calculations, determine whether the internal rate of return (IRR) is more or less than 8 percent. multiple choice 1 Greater than 8 Percent Less than 8 Percent 3. Calculate the net present value using a 10 percent discount rate. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use…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%Merrill Corporation has the following information available about a potential capital investment: $ 1,200,000 $ 120,000 Initial investment Annual net income Expected life Salvage value 8 years. $ 130,000 10 Merrill's cost of capital Assume straight line depreciation method is used. Required: 1. Calculate the project's net present value. (Future Value of $1.Present Value of $1. Future Value Annuity of $1. Present Value Annuity of $1.) Note: Use appropriate factor(s) from the tables provided. 2. Without making any calculations, determine whether the internal rate of return (IRR) is more or less than 10 percent. 3. Calculate the net present value using a 13 percent discount rate. (Future Value of $1. Present Value of $1. Future Value Annuity of $1. Present Value Annuity of $1.) Note: Use appropriate factor(s) from the tables provided. 4. Without making any calculations, determine whether the internal rate of return (IRR) is more or less than 13 percent.
- Merrill Corp. has the following information available about a potential capital investment: Initial investment $ 2,400,000 Annual net income $ 170,000 Expected life 8 years Salvage value $ 180,000 Merrill’s cost of capital 8 % Assume straight line depreciation method is used. Required:1. Calculate the project’s net present value. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Do not round intermediate calculations. Round the final answer to nearest whole dollar.) 2. Without making any calculations, determine whether the internal rate of return (IRR) is more or less than 8 percent. multiple choice 1 Greater than 8 Percent Less than 8 Percent 3. Calculate the net present value using a 10 percent discount rate. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use…Chee company has gathered the following data on a proposed investment project? Investment required in equipment : 240,000$ Annual cash inflows : 50,000$Salvage value: 0$ Life of the investment: 8 years Requried rate of return : 10% Assets will be depreciated using straight line deperciation method. Required: Using the net Present value and the interval rate of return methods, Is this a good investment?Welch Corporation is planning an investment with the following characteristics (Ignore income taxes.): Useful life 11 years Yearly net cash inflow $40,000 Salvage value $ Internal rate of return 13% Required rate of return 9% Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using the tables provided. The initial cost of the equipment is closest to:
