Q5RevenuesCost of GoodsSoldGross ProfitSelling, Generaland AdminDepreciationEBITIncome tax (35%)IncrementalEarningsCapitalPurchasesChanges to NWCYear 0 Year 1-280,000Year 2140,00 440,0000-70,00 220,0000Year 3 Year 4440,00 350.0000220,00 175,000070,000 220,00 220,0000-6400 64006400175,000640075.00 75.000 75,000 75,0000-11,40 138,60 138.60 93,6000003990 -48,5148,51032,7600-7410 90,090 90,090 60,840-5.000 -5,000 -5,000 -5,000A garage is installing a new "bubble-wash" car wash. It will promote the car wash as a fun activity for the family, and it is expected that thenovelty of this approach will boost sales in the medium term. If the cost of capital is 10%, what is the net present value (NPV) of thisproject? Show all calculations

Net present value is determined by deducting the initial investment from the current value of cash…

Answered: A garage is installing a new…

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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You work for an outdoor play structure manufacturing company and are trying to decide between the following two projects: Year-End Cash Flows ($ thousands) Project 0 1 2 Playhouse (minor project) -30 19 18 Fort (major poject) -75 38 52 You can undertake only one project. If your cost of capital is 6%, which one should you choose? O Playhouse because the incremental IRR is 10.56% O Playhouse because the IRR of Fort is lower Playhouse because the NPV of Playhouse is higher O Fort because the incremental IRR is 10.56%
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
How do I solve this accounting question?
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Solve the following three independent scenarios: A grocery store is considering the purchase of a new refrigeration unit with an initial investment of $412,000, and the store expects a return of $100,000 in year one, $72,000 in years two and three, $65,000 in years four and five, and $38,000 in year six and beyond, what is the payback period? Payback period years. Round your Payback Period (PB) answer to two decimal places (i.e. 12.34). An auto repair company needs a new machine that will check for defective sensors. The machine has an initial investment of $224,000. Incremental revenues, including cost savings, are $120,000, and incremental expenses, including depreciation, are $50,000. There is no salvage value. What is the accounting rate of return (ARR)? Accounting Rate of Return (ARR) = Round your ARR answer, in percentage format, to two decimal places (i.e. 12.34%).
You are considering making a movie. The movie is expected to cost $10.1 million up front and take a year to produce. After that, it is expected to make $4.1 million in the year it is released and $1.9 million for the following four years. What is the payback period of this investment? If you require a payback period of two years, will you make the movie? Does the movie have positive NPV if the cost of capital is 10.9% 7 What is the payback period of this investment? The payback period is years. (Round to two decimal places)
Suppose you plan on spending $100/ac on restoring a forest on bare land you plan to buy. The project is projected to yield a harvest worth $2500/ac in 30 years. After which you sell the land for $400/ac. If you want to earn at least 6% rate of return, what is your willingness to pay for the land? Assume no other costs and revenues and that all values are in real terms. Show your work solving the problems a.) $490.28 b.) $265.63 C.) $636.27 d.) $404.92 e.) none of the above
Suppose you are considering building a factory that produces turbo jets. Price of a turbo jet right now is $200. Next year the price could go up to $220 or go down to $180 or stay at $200 with equal probabilities. The price then remains fixed for a long time. (This assumption makes this cash flow risky). This will be your revenue. Cost of factory is $300 and it can be built right away since you have infrastructure in place. WACC is 30%. Cost of debt is 10%. You have the option to wait one year and see whether the price goes up or down and then invest only if price is above $180? What is the NPV? 414.22 167.52 312.82 566.67
You are considering making a movie. The movie is expected to cost $10.1 million up front and take a year to produce. After that, it is expected to make $4.7 million in the year it is released and $1.5 million for the following four years. What is the payback period of this investment? If you require a payback period of two years, will you make the movie? Does the movie have positive NPV if the cost of capital is 10.1%? What is the payback period of this investment? The payback period is years. (Round to two decimal places.)
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1. Solve the following three independent scenarios: A. If a copy center is considering the purchase of a new copy machine with an initial investment cost of $150,000 and the center expects an annual net cash flow of $20,000 per year, what is the payback period? Payback period = ? years. Round your Payback Period (PB) answer to one decimal place (i.e. 12.3). B. If a garden center is considering the purchase of a new tractor with an initial investment cost of $120,000, and the center expects a return of $30,000 in year one, $20,000 in years two and three, $15,000 in years four and five, and $10,000 in year six and beyond, what is the payback period? Payback period = ? years. Round your Payback Period (PB) answer to one decimal place (i.e. 12.3). C. A mini-mart needs a new freezer and the initial investment will cost $300,000. Incremental revenues, including cost savings, are $200,000, and incremental expenses, including depreciation, are $125,000. There is no salvage value. What is…

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