A garage is installing a new 'bubble-wash' car wash, which requires an initial investment of $280,000 in year 0. It will promote the car wash as a fun activity for the family and it is expected that the novelty of this approach will boost sales the medium term. The garage plans on using an opportunity cost of capital of 10% to evaluate this project. Based on extensive research, it has prepared the following incremental cash flow projections: Year 1 Year 2 Revenues Costs of Goods Sold Gross Profit Selling, General and Admin Depreciation EBIT 120 000 -60 000 60 000 -6 000 -70 000 -16 000 400 000 -200 000 200 000 -6 000 -70 000 124 000 Year 3 400 000 -200 000 200 000 -6 000 -70 000 124 000 Year 4 300 000 -150 000 150 000 -6 000 -70 000 74 000

A garage is installing a new 'bubble-wash' car wash, which requires an initial investment of $280,000 in year 0. It will promote the car wash as a fun activity for the family and it is expected that the novelty of this approach will boost sales the medium term. The garage plans on using an opportunity cost of capital of 10% to evaluate this project. Based on extensive research, it has prepared the following incremental cash flow projections: Year 1 Year 2 Revenues Costs of Goods Sold Gross Profit Selling, General and Admin Depreciation EBIT 120 000 -60 000 60 000 -6 000 -70 000 -16 000 400 000 -200 000 200 000 -6 000 -70 000 124 000 Year 3 400 000 -200 000 200 000 -6 000 -70 000 124 000 Year 4 300 000 -150 000 150 000 -6 000 -70 000 74 000

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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A neighborhood shopping center is expected to generate after-tax cash flow of $750,000 per year (at end of year) indefinitely. If an interested buyer has a cost of money of 13 %, how much will he be willing to pay for this shopping center? A $6.64 million B) $7.50 million $5.77 million D $2.21 million
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Herky Foods is considering acquisition of a new wrapping machine. By purchasing the machine, Herky will save money on packaging in each of the next 5 years, producing the series of cash inflows shown in the following table: The initial investment is estimated at $1.46 million. Using a 9% discount rate, determine the net present value (NPV) of the machine given its expected operating cash inflows. Based on the project's NPV, should Herky make this investment? The net present value (NPV) of the new wrapping machine is $. (Round to the nearest cent.)
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Hi there, I am working on this problem, how do i solve it without using excel? CCM ltd. has a budget of $32 million dollars to spend on these investments (the table attached). Choose the best combination of investments using the profitability index. The cost of capital is 6%. Cash flow from investments are all per year in perpetuity.
Answer the following question with complete solutions and cash flow diagram. An engineer launches a project in the country's top technohub. This involves rental of a computer unit for online class students. He felt that because of the density of students in the area, 90% of his 30-units will be occupied per sem (5 months each) per year. He desires a rate of return of 20%. Other pertinent data are the following: Office investment Computer investment per unit Cost of computers after 10 yrs |Office rental per month Computer rental per unit per month Annual maintenance budget per unit Business tax P 1,000,000 P 35,000 P 5,000 P 9,000 P 2,000 P 5,000 1% of Total Investment Insurance 0.5% of Total Investment Assess the project using (1) ROR, (2) Present Worth Method, and (3) Future Worth Method. (4) Estimate the payback period of this project.
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XYZ, which currently sells art products, is considering project Q, which would involve teaching art lessons For most of its existence, XYZ sold art products, taught art lessons, and painted murals Project Q Would require an initial investment of $87,300 today and is expected to produce annual cash flows of $10,200 each year forever with the first annual cash flow expected in 1 year What is the NPV of project Q. based on the information in this paragraph and the following table and applying the pure play approach to detemining a project's cost of capital? Firm XYZ Frisco Frescos NorCal Art Art Factory Line of business Sells art products Paints murals at residential and commercial sights Teaches art lessons Sells art products, teaches art lessons, & paints murals WACC 144 percent 82 percent 95 percent 77 percent O a. $20,068 (plus or minus $10) Ob. $144,518 (plus or minus $10) OC. $37,090 (plus or minus $10) O d. $45,168 (plus or minus $10) O e. None of the above is within $10 of the…
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