Pena company is considering an investment of $20,957 that provides net cash flows of $6900 annually for four years. Pena Company is considering an investment of $20,957 that provides net cash flows of $6,900 annually for four years.(a) If Pena Company requires a 9% return on its investments, what is the net present value of this investment? (PV of $1, FV of $1. PVAof $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your present value factor to 4 decimals.)(b) Based on net present value, should Pena Company make this investment?earchComplete this question by entering your answers in the tabs below.Required AWhat is the net present value of this investment?Years 1-4Required BNet present valueNet Cash FlowsO EtXBPPV FactorRequired< PrevPresent Value ofNet Cash Flows$FIS0nRequired B >6 of 16 wwwDELLNext >KA Weather alert opedBookMcGrawHillPena Company is considering an investment of $20,957 that provides net cash flows of $6,900 annually for four years.(a) If Pena Company requires a 9% return on its investments, what is the net present value of this investment? (PV of $1. FV of $1. PVAof $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your present value factor to 4 decimals.)(b) Based on net present value, should Pena Company make this investment?Complete this question by entering your answers in the tabs below.be here to searchRequired A Required BBased on net present value, should Pena Company make this investment?Based on net present value, should Pena Company make this investment?Et< Required ABP< PrevFIS6 of 16DELLNext >76°F Sunny

Net Present Value(NPV) is a financial metric that is used to evaluate the potential investment…

Answered: (a) If Pena Company requires a 9%…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Company XYZ expects sales for a new project to be P20,000 in the first year, growing at 4% per annum. The project is expected to last for 3 years. Working capital equal to 15% of annual sales is required and needs to be in place at the start of each year. Calculate the working capital cash flows for incorporation into the NPV calculation.
Jacob Inc. is considering a capital expansion project. The initial investment of undertaking this project is $188,500. This expansion project will last for five years. The net operating cash flows from the expansion project at the end of year 1, 2, 3, 4 and 5 are estimated to be $28,500, $38,780, $58,960, $77,680 and $95,380 respectively. Jacob has a weighted average cost of capital of 18%. Based on Jacob’s weighted average cost of capital, what is the profitability index (PI)of undertaking this project? That is, what is the profitability index if the weighted average cost of capital is used as the discount rate? Shall Jacob undertake the investment project?
An investment project will involve spending $300,000 at time zero and $450,000 at the end of year one. These investments will generate gross revenues of $420,000 at the end of year one and $660,000 at the end of each year two through eight. A royalty of $42,000 in year one and $66,000 in year two through eight will be incurred along with operating costs of $250,000 in year one and $350,000 at the end of each year two through eight.Calculate the project before-tax cash flow for each year.
An investment project requires a net investment of $100,000 and is expected to generate annual net cash inflows of $25,000 for 6 years. The firm's cost of capital is 12%. Determine the profitability index for this project.
Ace Barker Inc. is evaluating two mutually exclusive projects: A and B. The initial investment for each project is $42,000. Project A will generate cash inflows equal to $15,600 at the end of each of the next five years; Project B will generate only one cash inflow in the amount of $70,000 at the end of the fifth year (i.e., no cash flows are generated in the first four years). The required rate of return of Ace Barker Inc. is 10 percent. Which project should Ace Barker Inc. purchase? O Project A should be purchased because it has a higher net present value (NPV) than Project B O Project A should be purchased because it will produce cash every year for five years. O Project B should be purchased because it has a positive net present value (NPV). Neither project should be purchased, because neither has a positive net present value (NPV).
To invest $1,800,000 on this product with annual O&M of $75,000 starting end of year one.The proposal is expected to result in annual benefit in cash flow of $715,000, over nb years period with interest rate of 12 %.nb = 5
Determine the internal rate of return for an equipment that costs $150,000 and would provide positive cash flows of $60,000 , $50,000, $40,000, and $40,000 at the end of each year for the next four years.
A project that provides annual cash flows of $20,000 for 6 years costs $63,000 today. Determine the IRR for this project. Show answer using excel function.
The Salt Store is evaluating a capital expenditure proposal with the following predicted cash flows: Initial investment $(75,000) Operations, each year for four years 25,000 Salvage 8,000 The accounting rate of return on the initial investment presented is:
An investment of $50,000 in R&D results in additional revenue of $28,720 after 5 years and another revenue of $61,892 after 10 years. What is the rate of return on the investment?
A project requires an initial investment of $150,000, to be depreciated straight-line over 3 years to an expected salvage value of $0. In addition, working capital will increase during the life of the project and amount to 20% of next year's revenues, with the investment in working capital to be made at the beginning of each year. The project will generate $150,000 additional annual revenues and $85,000 additional annual expenses. The tax rate is 25%. Cost of capital amount to 7,5%. Please calculate the Net Present Value of the project and show your calculations. Would you recommend the investment? Please explain your advice.
A nine-year project is expected to generate annual revenues of $116,500, variable costs of $73,600, and fixed costs of $14,000. The annual depreciation is $3,500 and the tax rate is 34 percent. What is the annual operating cash flow?

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