A hospital is considering the possibility of two new purchases: newX-ray equipment and new biopsy equipment. Each project wouldrequire an investment of P750,000. The expected life for each is 5years with no expected salvage value. The net cash inflowsassociated with the two independent projects are as follows:X-ray EquipmentYearBiopsy Equipment1P 75,00023475,000525,000600,000675,000What is the net present value of each project assuming a requiredrate of return of 12%?5c. X-ray: P54,312 Biopsy: P512,389, Not SelectedCorrect answer:P375,000b. X-ray: P55,821 Biopsy: P514,766a. X-ray: P56,378 Biopsy: P499,818150,000300,000150,00075,000

Answer to Question: b. X-ray P55,821 Bioposy P514,766 Meaning: The word "Net" in the tern Net…

A hospital is considering the possibility of two new purchases: new X-ray equipment and new biopsy equipment. Each project would require an investment of P750,000. The expected life for each is 5 years with no expected salvage value. The net cash inflows associated with the two independent projects are as follows: Year X-ray Equipment Biopsy Equipment 1 P 75,000 2 3 4 5 150,000 75,000 300,000 525,000 150,000 600,000 75,000 675,000 What is the net present value of each project assuming a required rate of return of 12%? c. X-ray: P54,312 Biopsy: P512,389 Not Selected Correct answer: b. X-ray: P55,821 a. X-ray: P56.378 P375,000 Biopsy: P514,766 Biopsy: P499.818

A hospital is considering the possibility of two new purchases: new X-ray equipment and new biopsy equipment. Each project would require an investment of P750,000. The expected life for each is 5 years with no expected salvage value. The net cash inflows associated with the two independent projects are as follows: Year X-ray Equipment Biopsy Equipment 1 P 75,000 2 3 4 5 150,000 75,000 300,000 525,000 150,000 600,000 75,000 675,000 What is the net present value of each project assuming a required rate of return of 12%? c. X-ray: P54,312 Biopsy: P512,389 Not Selected Correct answer: b. X-ray: P55,821 a. X-ray: P56.378 P375,000 Biopsy: P514,766 Biopsy: P499.818

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Vaughn Company is considering two capital investment proposals. Estimates regarding each project are provided below- Project Soup Project Nuts Initial investment $390870 $600000 Annual net income 27000 45100 Net annual cash 90900 142000 inflow Estimated useful 4 years 5 years life Salvage value The cash payback period for Project Soup is
Three mutually exclusive project alternatives are being evaluated. The estimated cash flows for each alternative are shown below. The MARR is 15% per year. A decision maker can select one of these alternatives or decide to select none of them. Make a recomendation using the annual worth analysis. Project A Project B Project C Investment ($) 6,000 8,000 9,000 Project life (years) 10 10 10 Annual revenue ($) 5,200 6,000 7,500 Annual cost ($) 2,100 1,800 2,000 Salvage value (S) 1,200 1,500 2,500
The Horizon Company will Invest $84,000 in a temporary project that will generate the following cash inflows for the next three years. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. Year Cash Flow $22,000 34,000 58,000 7 3 The firm will also be required to spend $10,000 to close down the project at the end of the three years. a. Compute the net present value if the cost of capital is 8 percent. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places.) Net present value b. Should the investment be undertaken? Ⓒ Yes O No
The Butler-Perkins Company (BPC) must decide between two mutually exclusive projects. Each costs $7,000 and has an expected life of 3 years. Annual project cash flows begin 1 year after the initial investment and are subject to the following probability distributions: Project A Project B Probability Cash Flows Probability Cash Flows 0.2 $6,250 0.2 $0 0.6 $7,000 0.6 $7,000 0.2 $7,750 0.2 $19,000 BPC has decided to evaluate the riskier project at 12% and the less-risky project at 10%. a. What is each project's expected annual cash flow? Round your answers to two decimal places. Project A: $ Project B: $ Project B's standard deviation (σB) is $6,131.88 and its coefficient of variation (CVB) is 0.77. What are the values of (σA) and (CVA)? Round your answers to two decimal places. σA = $ CVA = b. Based on the risk-adjusted NPVs, which project should BPC choose? c. If you knew that Project B's cash flows were negatively correlated with the firm's other cash flow, but Project A's cash flows…
The production department is proposing the purchase of an automatic insertion machine. It has identified 3 machines, each with an estimated life of 10 years. Which machine offers the best internal rate of return? Annual net cash flows Average investment Machine A only Machine B only Machine C only O Machines A and B Machine A $ 50,000 250,000 Machine B $ 40,000 300,000 Machine $ 75,000 500,000
Consider a project to supply your church with 55,000 gallons of hand sanitizer annually for church services. You estimate that you will need an initial Gh¢4,200,000 in terms of investment to get the project started. The project will last for 5 years. The project will bring in annual cash flows of Gh¢1,375,000. It also estimates a salvage value of Gh¢300,000 after dismantling costs. Your cost of capital is 13 percent. Assume no taxes or depreciation. Required: d) You just received additional information that suggests that your base case (answer to a), best case (b) and worst case (c) scenarios have probabilities of 0.35, 0.35 and 0.30 respectively. What will be the expected NPV of the sanitizer project. What about the standard deviation of the sanitizer project? Do you think the project is still viable?
Central Mass Ambulance Service can purchase a new ambulance for $200,000 that will provide an annual net cash flow of $50,000 per year for five years. The salvage value of the ambulance will be $25,000. Assume the ambulance is sold at the end of year 5. Calculate the NPV of the ambulance if the required rate of return is 9%. (Round your answer to the nearest $1.) A) $(10,731) B) $10,731 C) $(5,517) D) $5,517
Boseman Department Store is considering the purchase of a new machine at a cost of $22,802. The machine will provide $3,500 per year in cash flow for nine years. Boseman has a cost of capital of 10%. (Round discount factor to five decimal places.) Based on the internal control method, should this project be undertaken? A partial table of the present value of an annuity of $1 in arrears is as follows: Year 1% 3% 5% 7% 9% 11% 13% 15% 9 8.56602 7.78611 7.10782 6.51523 5.99525 5.5370 5.1317 4.7716 What is the internal rate of return for this investment? (Round discount factor to five decimal places.)
Maud Dib Intergalactic has a new project available on Arrakis. The cost of the project is $36,000 and it will provide cash flows of $19,800, $25,300, and $24,200 over each of the next three years, respectively. Any cash earned in Arrakis is "blocked" and must be reinvested in the country for one year at an interest of 3.5 percent. The project has a required return of 8.5 percent. What is the project's NPV?
Mobilio Company has hired a consultant to propose a way to increase the company’s revenues. The consultant has evaluated two mutually exclusive projects with the following information provided for each project: Project Tiger Project SharkCapital investment $1,105,000 $625,000Annual cash flows 180,000 105,000Estimated useful life 10 years 10 years Mobilio Company uses a discount rate of 9% to evaluate both projects.Instructions(a) Calculate the net present value of both projects.(b) Calculate the profitability index for each project.(c) Which project should Mobilio accept?
The management of Advanced Alternative Power Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows: Biofuel Equipment $300,000 300,000 3 300,000 4 300,000 The wind turbines require an investment of $887,600, while the biofuel equipment requires an investment of $911,100. No residual value is expected from either project. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 0.909 1.736 2.487 3.170 3.791 4.355 4.868 Year 1 2 1 2 3 4 5 6 7 8 9 10 0.943 1.833 2.673 3.465 4.212 4.917 5.582 6.210 6.802 7.360 Wind Turbines $280,000 280,000 280,000 280,000 5.335 5.759 6.145 0.893 1.690 2.402 3.037 3.605 4.111 4.564 4.968 5.328 5.650 0.870 1.626 2.283 2.855 3.353 3.785 4.160 4.487 4.772 5.019 20% 0.833 1.528 2.106 2.589 2.991 3.326 3.605 3.837 4.031 4.192
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…