6Project A requires a $375,000 initial investment for new machinery with a five-year life and a salvage value of $43,000. Project A isexpected to yield annual income of $22,700 per year and net cash flow of $93,750 per year for the next five years.Compute Project A's accounting rate of return.04:19:42Numerator:Accounting Rate of ReturnDenominator:Accounting Rate of ReturnAccounting rate of return

To Compute the average profit after tax : Average profit after tax = Total profit after tax / No. of…

Answered: 6 Project A requires a $375,000 initial…

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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A8
Question 5 An investment of $50,000 is made to purchase machinery that will allow us to manufacture a new product. The annual expenses to make the product are (5,000 + 5x) and the revenues from the product are 30 x, where x = the number of products sold each year. How many products must be sold per year, x, to break even? Consider a 7 year project life and an MARR of 12%.
QUESTION 10 A project will produce operating cash flows of $57,000 a year for 3 years. During the life of the project, inventory will be lowered by $10,000 and accounts receivable will increase by $20,000. Accounts payable will decrease by $5,000. The project requires the purchase of equipment at an initial cost of $90,000. The equipment will be salvaged at the end of the project creating a $17,000 after-tax cash inflow. At the end of the project, net working capital will return to its normal level. What is the net present value of this project given a required return of 12%? $48,772.08 $54,681.35 $56,209.19 $42,908.17 $44,141.41
QUESTION 6 Seaborn Co. has identified an investment project with the following cash flows. Year Cash Flow $950 1,050 1,320 1,200 1 2 3 4 If the discount rate is 10 percent, what is the present value of these cash flows? 3542.76 3578.84 3418.66 4470.00 3847.03 Click Save and Submit to save and submit. Click Save All Answers to save all answers. SEP 28 30 tv ♫ A
QUESTION 5 Compare the following two mutually exclusive projects on the basis of Accounting Rate of Return (ARR). Cash flows and salvage values are in thousands of ringgit. Use the straight line depreciation method. Year Cash Outflow Cash Inflow Salvage Value Year Cash Outflow Cash Inflow Salvage Value Required: 0 -250 0 -228 Project A 1 91 Project B 1 87 a. Compute ARR for Project A b. Compute ARR for Project B C. Advise Management on which project to select 2 2 130 110 3 3 105 10 84 18
QUESTION 4 J'adore Corporation is in the process of deciding to purchase new equipment. The cost of capital is 10 percent and expected cash flows for each equipment are given as follows: a) b) Year 0 1 2 3 Calculate the following: c) d) 4 5 Equipment AAA (RM) 10,000 7,000 3,500 3,000 1,500 2,500 Payback period for the two projects. Net present value for the two projects. Internal rate of return for Project BBB only. Which project would be selected? State your reason. Equipment BBB (RM) 10,000 4,000 4,000 4,000 4,000 4,000
Subject: acounting
3
QUESTION FIVE You are considering investing in a new project called Lolis with the following cash flows: Annual Cash Flow (K) 40,000 120,000 Year 1 3 150,000 150,000 180,000 4 5 The initial cash outflow amounted to K400,000 and the cost of capital is 10%. Required: a) Calculate the following financial viability indicators: i. Undiscounted payback period ii. Net Present Value i. Discounted Payback period Profitability Index Internal Rate of Return iv. V. b) Comment on whether the project is financial viable or not. (4
QUESTION 3 A company has the project cashflow presented in the table below. If the inflation-free interest rate is 12% per year and the inflation rate is 4% per year, determine the Present Worth of the company's cashflow. Cashflow Item Amount First Cost -18,000 Annual Operating Cost Salvage Value No. of Years -7500 5000 10
What is Question Four a. Assume that Green Housing Company is considering an investment of $200,000 in a new at the end of its useful life. The annual cash inflows are £250,000, and the annual cash outflows equipment. The new equipment is expected to last 12 years. It will have a zero salvage value are 150,000. Assume that the annual cash flows are uniform over the asset's useful life. Management has a required rate of return of 18%. i. Calculate the present value of net cash flows ii. Calculate the net present value for this investment iii. Calculate the Discounted Payback Period iv. Advice management of Green Housing Company base on your results

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