You are faced with making a decision on a large capital investment proposal. The capital investment amount is $640,000. Estimated annual revenue at the end of each year in the eight year study period is $180,000. The estimated annual year-end expenses are $42,000 starting in year one. These expenses begin decreasing by $4,000 per year at the end of year four and continue decreasing through the end of year eight. Assuming a $20,000 market value at the end of year eight and a MARR = ɛ =12% per year, answer the following questions.

You are faced with making a decision on a large capital investment proposal. The capital investment amount is $640,000. Estimated annual revenue at the end of each year in the eight year study period is $180,000. The estimated annual year-end expenses are $42,000 starting in year one. These expenses begin decreasing by $4,000 per year at the end of year four and continue decreasing through the end of year eight. Assuming a $20,000 market value at the end of year eight and a MARR = ɛ =12% per year, answer the following questions.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 11P

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You are faced with making a decision on a large capital investment proposal. The capital investment amount is $640,000. Estimated an annual revenue at the end of each year in the eight-year study period is $180,000. The estimated annual year-end expenses are $42,000 starting in year one. These expenses begin decreasing by $4,000 per year at the end of year four and continue decreasing through the end of year eight. Assuming a $20,000 market value at the end of year eight and a MARR = 12% per year, answer the following questions. What is the PW, AW, and FW of this proposal?
Show complete solutions.You are faced with making a decision on a large capital investment proposal. The capital investment amount is $640,000. Estimated annual revenue at the end of each year in the eight year study period is $180,000. The estimated annual year-end expenses are $42,000 starting in year one. These expenses begin decreasing by $4,000 per year at the end of year four and continue decreasing through the end of year eight. Assuming a $20,000 market value at the end of year eight and a MARR = € =12% per year, answer the following questions. a). Using FW, AW and PW, determine whether this proposal is acceptable b). What is the ERR of this proposal? Is it acceptable c). What is the IRR of this proposal? Is it acceptable d). What is the simple and discounted payback period for this proposal?
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Assuming you are facing making a decision on a large capital investment proposal. the capital investment amount is $640,000, Estimated the study period is 8 years. The annual revenue at the end of each year is $180,000, and the estimated annual year-end expense is $42000starting in year one, Assuming a market value at the end year is $ 20,000, and the benchmark rate is 10%, Find the cash flow chart, the NPV, the dynamic payback period, and the IRR of this project.
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