A company is evaluating a capital investment with the following projections: Initial Investment = $75,000 Salvage value = $15,000 Project life = 10 years Capital budgeting assumptions: Old Machine is fully depreciated Old machine annual operating cost: 40,000 Old machine annual maintenance cost: 10,000 New machine annual operating cost: 20,000 New machine annual maintenance cost: 9,000 Discount rate: 10% Tax rate: 20% What is the project's internal rate of return (IRR)?Answer as a whole number. 5% would be answered as 5.

A company is evaluating a capital investment with the following projections: Initial Investment = $75,000 Salvage value = $15,000 Project life = 10 years Capital budgeting assumptions: Old Machine is fully depreciated Old machine annual operating cost: 40,000 Old machine annual maintenance cost: 10,000 New machine annual operating cost: 20,000 New machine annual maintenance cost: 9,000 Discount rate: 10% Tax rate: 20% What is the project's internal rate of return (IRR)?Answer as a whole number. 5% would be answered as 5.

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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ZLX is evaluating an investment and has generated the following: Initial investment at time t=0 is $2,000,000 Life of project is 8 years Initial investment depreciated to $0 via straight-line over entire life NWC investment required = $0.00 Expected market salvage value of investment assets = $0.00 Starting 1-year from today, and remaining constant over project life: Incremental sales as a result of investment = $1,600,000 / year Incremental expenses as a result of investment = $1,100,000 / year firm' tax rate = 28% What is the IRR of this investment? Enter rate in decimal form, rounded to fourth digit, as in "0.1234"
Blossom Industries management is planning to replace some existing machinery in its plant. The cost of the new equipment and the resulting cash flows are shown in the accompanying table. The firm uses an 18 percent discount rate for projects like this. Should management go ahead with the project? Year Cash Flow 0 -$2,970,000 1 787,610 2 869,600 3 1,030,500 4 1,125,360 5 1,354,000 What is the NPV of this project? (Enter negative amounts using negative sign e.g. -45.25. Do not round discount factors. Round other intermediate calculations and final answer to 0 decimal places, e.g. 1,525.) The NPV is $enter The NPV in dollars rounded to 0 decimal places Should management go ahead with the project? The firm should select an option rejectaccept the project.
Compute the net present value of this investment.
Olinick Corporation is considering a project that would require an investment of $354,000 and would last for 8 years. The incremental annual revenues and expenses generated by the project during those 8 years would be as follows (ignore income taxes.): Sales Variable expenses Contribution margin Fixed expenses: Salaries Rents Depreciation Total fixed expenses Net operating income Multiple Choice The scrap value of the project's assets at the end of the project would be $30,000. The cash inflows occur evenly throughout the year. The payback period of the project is closest to: (Round your answer to 1 decimal place.) 4.8 years $ 210,000 22,000 188,000 7.5 years 40,000 53,000 48,000 141,000 $ 47,000
Please help me
Project Phoenix costs $1.25 million and yields annual cost savings of $300,000 for seven years. The assets involved in the project can be salvaged for $100,000 at the end of the project. Ignoring taxes, what is the payback period for Project Phoenix? Select one: a. 4 years b. 4 years and 1.7 months c. 4 years and 2 months d. 4 years and 3 months e. 5 years
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?
A company is intending to invest in a capital budgeting project to manufacture a medical testing device and has projected the following sales: Year 1 Year 2 Year 3 Year 4 Year 5 50,000 66,400 81,200 68,500 54,500 The installed cost of the new assets will be $18,500,000 which will be depreciated using the 7-year MACRS schedule. The assets will have a salvage value of $3,700,000. Initial NWC requirements are $1,500,000 and additional working capital needs are estimated to be 15% of the projected sales increases for the following year. Total fixed costs are $2,000,000 per year. The medical device has a selling price of $300 per unit and variable production costs are $175. The firm has a marginal tax rate of 35% and a required rate of return of 18%. Analyze this project and give your recommendation as to whether they should invest in it or…
ZLX is evaluating an investment and has generated the following: Initial investment at time t=0 is $2,000,000 Life of project is 8 years Initial investment depreciated to $0 via straight-line over entire life NWC investment required = $0.00 Expected market salvage value of investment assets = $0.00 Starting 1-year from today, and remaining constant over project life: Incremental sales as a result of investment = $1,600,000 / year Incremental expenses as a result of investment = $1,100,000 / year firm' tax rate = 28% What is the IRR of this investment? Enter rate in decimal form, rounded to fourth digit, as in "0.1234"
A small company wants to invest in Project A or B. The cash flows for both are shown below. Determine the payback period for each project assuming a MARR of 5% and suggest which project should be selected based on discounted payback period analysis.
Payback, Accounting Rate of Return, Net Present Value, Internal Rate ofReturnBlaylock Company wants to buy a numerically controlled (NC) machineto be used in producing specially machined parts for manufacturers oftractors. The outlay required is $384,000. The NC equipment will last 5years with no expected salvage value. The expected after-tax cash flowsassociated with the project follow: Required:Compute the payback period for the NC equipment.Compute the NC equipment's ARR. Round the percentage to one decimalplace.Compute the investment's NPV, assuming a required rate of return of10%.Compute the investment's IRR.
Vaughn Company is considering two capital investment proposals. Estimates regarding each project are provided below- Project Soup Project Nuts Initial investment $390870 $600000 Annual net income 27000 45100 Net annual cash 90900 142000 inflow Estimated useful 4 years 5 years life Salvage value The cash payback period for Project Soup is

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