Cash Payback Period, Net Present Value Analysis, and Qualitative ConsiderationsThe plant manager of Shenzhen Electronics Company is considering the purchase of new automated assembly equipment. The newequipment will cost $144,000. The manager believes that the new investment will result in direct labor savings of $36,000 per year for 10years.Present Value of an Annuity of $1 at Compound InterestYear6%10%12%15%20%10.9430.9090.8930.8700.83321.8331.7361.6901.6261.5282.6732.4872.4022.2832.10643.4653.1703.0372.8552.5894.2123.7913.6053.3532.9914.9174.3554.1113.7853.3265.5824.8684.5644.1603.60586.2105.3354.9684.4873.8376.6.8025.7595.3284.7724.031107.3606.1455.6505.0194.192a. What is the payback period on this project?yearsb. What is the net present value, assuming a 12% rate of return? Use the table provided above. Round to the nearest whole dollar.Net present valuec. What else should the manager consider in the analysis?Depreciation.Taxes and maintenance costs.Depreciation and Taxes.Maintenance costs.Таxes.3.

Here we will use the different tools of capital budgeting. The capital budgeting tools will be used…

. What is the payback period on this project? years . What is the net present value, assuming a 12% rate of return? Use the tal Net present value . What else should the manager consider in the analysis? Depreciation.

. What is the payback period on this project? years . What is the net present value, assuming a 12% rate of return? Use the tal Net present value . What else should the manager consider in the analysis? Depreciation.

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

See similar textbooks

Similar questions

If the net present value of A is +$60 and of B is +$30, then what is the net present value of the combined project?
I need to know the Cash payback period for each project, the Net present value, the annual rate of return for each project and finally I need the projects ranked best to worse (1, 2, 3) on their cashpayback, net present value, and annual return. Finally I need to know which is the best project. Question 1 of 1 > E Pharoah Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows. Project Bono Project Edge Project Clayton Capital investment $172,000 $182,000 $202,000 Annual net income: Year 1 14,700 18,900 28,350 2 14,700 17,850 24,150 3 14,700 16,800 22,050 4 14,700 12.600 13,650 5 14,700 9,450 12,600 5 14,700 9,450 12,600 Total $73,500 $75,600 $100,800 Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.)
The economic service life of a project is best described as _____________________? a. Another term for the analysis period of a benefit-cost analysis.b. The number of years for which depreciation is on-going for an asset.c. The present worth of the project after taxes.d. The amount of time (usually in years) that an asset should be used to achieve thesmallest annual cost of operation.
1. Calvulate the internal rate of return(IRR) of each project and based on this criterion. Indicate which project you would recommend or acceptance.
14. Consider the following possible returns over the next year on an asset Return probability -£40 0.5 £40 0.5 What is the variance of return of the asset.
Consider Supertech and Slowpoke. We find that the expected returns on these two securities are 17.5% and 5.5%, respectively. If the investor with $100 invests $60 in Supertech and $40 in Slowpoke, what is the expected return on a portfolio of these two securities are?
In my accounting class I am learning to find accounting rate of return. To solve for this I subtracted net cash flow- the salvage value divided by the initial investment. Have I done something incorrect?
Comparing all methods. Risky Business is looking at a project with the following estimated cash flow:. Risky Business wants to know the payback period, NPV, IRR, MIRR, and Pl of this project. The appropriate discount rate for the project is 10%. If the cutoff period is 6 years for major projects, determine whether the management at Risky Business will accept or reject the project under the five different decision models. What is the payback period for the new project at Risky Business? years (Round to two decimal places.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Initial investment at start of project: $11,300,000 Cash flow at end of year one: $2,034,000 Cash flow at end of years two through six: $2,260,000 each year Cash flow at end of years seven through nine: $2,237,400 each year Cash flow at end of year ten: $1,721,077 HERY BU De DULU LUDIV Print (...) Diana - X Clear all Check answer
1. A project requires an initial capital cost of (40 million ID). The investor expects the project will generate annual returns of (12 million ID), with expenditures about (4 million ID) annually. If you know that the economic life is (12) years, and the salvage value after the end of the economic life is (4 million ID). Considering that the less acceptable interest rate for the investor is (10%): A. Determining the economic feasibility for investing using the present worth method? B. What is the equivalent annual worth of this investment? C. Find the internal rate of return?
You are considering the following project. What is the NPV of the project? WACC of the project: 0.10 Revenue growth rate: 0.05 Tax rate: 0.40 Revenue for year 1: 13,000 Fixed costs for year 1: 3,000 variable costs (% of revenue): 0.30 project life: 3 years Economic life of equipment: 3 years Cost of equipment: 20,000 Salvage value of equipment: 4,000 Initial investment in net working capital: 2,000
Garden-Grow Products is considering a new investment whose data are shown below. The equipment would be depreciated on a straight-line basis over the project's 3-year life, would have a zero salvage value, and would require some additional working capital that would be recovered at the end of the project's life. Revenues and other operating costs are expected to be constant over the project's life. What is the project's NPV? (Hint: Cash flows are constant in Years 1 to 3.) Project cost of capital (r) Net investment in fixed assets (basis) Required new working capital Straight-line deprec. rate Sales revenues, each year Operating costs (excl. deprec.), each year Tax rate a. $31,573 b. $30,069 c. $36,550 d. $34,809 e. $33,152 10.0% $75,000 $15,000 33.333% $75,000 $25,000 25.0%
The terminal cap rate used for valuation purposes in a DCF is fundamentally different than the discount rate used in that same DCF. The assumed sale of the property takes place at the end of your hold period, generally 10 years later in most models. The property is older and the market and the economy have changed. With that said, what do you believe to be the right approach for terminal cap rate selection in a DCF on a development project and why?

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS