A retail outlet is being designed in a strip mall in Nebraska. For this outlet, the installed fiberglass insulation to protectagainst heat loss in the winter and heat gain in the summer will cost an estimated $115,000. The annual savings inenergy due to the insulation will be $18,000 at EOY one in the 7-year life of the outlet, and these savings will increase by15% each year thereafter. If the annual interest rate is 20%, is the cost of the proposed amount of insulation justified?Click the icon to view the interest and annuity table for discrete compounding when i = 15% per year.Click the icon to view the interest and annuity table for discrete compounding when i= 20% per year.The present equivalent of energy savings is $. (Round to the nearest dollar.)Is the cost of the proposed amount of insulation justified?YesNo

The feasibility of a project is determined using a method of capital budgeting where the time value…

Answered: A retail outlet is being designed in a…

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 want to start an organic garlic farm. The farm costs $210,000, to be paid in full immediately. Year 1 cash inflow will be $25,000, after which the inflows are expected to grow at a 5% annual rate until the end of year 5 when you anticipate selling the farm for $260,000 (at the end of year 5 you get both the cash inflow from operations and from selling the farm). What is the IRR of your garlic farm investment? Round to the tenth of a percent (e.g. 5.6%=5.6). [Hint: You'll want to solve this in Excel using the IRR function or Goal Seek. Make sure the IRR cell is set to show decimals.]
The Culinary Institute is considering a classroom remodeling project. The cost of the remodel would be $350,000 and will be depreciated over six years using the straight- line method. The model will acoomoodate five extra student per year. Additional information related to the project follows:Cost of the remodel project: $350,000 Useful life of project in years: 6 Annual number of extra students: 5 Annual tuition per student: $22,000 Before- tax incremental cost of a student: $2,000 Company's income tax rate: 20% Required rate of return: 12% Assuming a six- year time horizon, what is the internal rate of return of the remodeling project? Calculate using both present value factors and separately using Excel's IRR function. Please include formulas to show how you arrive at each solution! A) Annual cash flow: Revenue ? Less costs:Other than depreciation ? Depreciation ? Income before taxes ? Income tax expense ?…
Crow Corporation, a company that specializes in precision metal fabrication, is conducting a study to determine if it should update equipment now or later. If the cost 2 years from now is estimated to be $260,000, how much can the company afford to spend now if its minimum attractive rate of return is 12% per year compounded monthly?
Kerfuffle Corporation is considering the purchase of a new computer system. The cost for the new system, including set-up and delivery costs of $20,000, will be $2 million. The new system will provide annual before-tax cost savings of $650,000 for the next five years. The increased efficiency of the new system will lower net working capital by $150,000 today. The CCA rate on the new system will be 30%. At the end of five years, the system can be salvaged for $125,000. The firm’s required rate of return is 15%, and its marginal tax rate is 35%. What is the NPV of this cost-cutting project? Select one: a. –$24,412.99 b. –$22,882.55 c. $50,258.43 d. $62,147.09 e. $63,385.37
Elijah Enterprises will need to upgrade the computer system in 10 years. They anticipate the upgrade to cost $99,000. If the discount rate is 10%, what will be the required yearly investment needed to obtain the money for the upgrade?Round your (1+R)^n value to 2 decimal places and use that number for your final amount required rounded to the nearest dollar. Future Value / (1+R)^n = Amount Required / = What would be required if the discount rate was 6%? Future Value / (1+R)^n = Amount Required / =
Sauer Food Company has decided to buy a new computer system with an expected life of three years. The cost is $430,000. The company can borrow $430,000 for three years at 13 percent annual interest or for one year at 11 percent annual interest. Assume interest is paid in full at the end of each year. a. How much would Sauer Food Company save in interest over the three-year life of the computer system if the one-year loan is utilized and the loan is rolled over (reborrowed) each year at the same 11 percent rate? Compare this to the 13 percent three- year loan. 11 percent loan 13 percent loan Interest savings Interest b. What if interest rates on the 11 percent loan go up to 16 percent in year 2 and 19 percent in year 3? What would be the total interest cost compared to the 13 percent, three-year loan? Fixed-rate 13% loan Variable-rate loan Additional interest cost Interest
Show in excel format how to solve the following - Westland Manufacturing spends $20,000 to update the lighting in its factory to more energy - efficient LED fixtures. This will save the company $4,000 per year in electricity costs. The company estimates that these fixtures will last for 10 years. If the company's cost of funds is 8%, what is the discounted payback period of this project?
Westland Manufacturing spends $20,000 to update the lighting in its factory to more energy-efficient LED fixtures. This will save the company $4,000 per year in electricity costs. The company estimates that these fixtures will last for 10 years. If the company’s cost of funds is 8%, what is the modified IRR of this project?
Two years ago, the Fun Center deposited $3,200 in an investment account for the purpose of buying new equipment three years from today. Today, it is adding another $5,000 to this account. It plans on making a final deposit of $3,500 to the account next year. How much will be available when it is ready to buy the equipment, assuming the account earns a rate of return of 6.85 percent?
Elijah Enterprises will need to upgrade the computer system in 4 years. They anticipate the upgrade to cost $105,300. If the discount rate is 13%, what will be the required yearly investment needed to obtain the money for the upgrade?Round your (1+R)^n value to 2 decimal places and use that number for your final amount required rounded to the nearest dollar. Future Value / (1+R)^n = Amount Required / = What would be required if the discount rate was 8%? Future Value / (1+R)^n = Amount Required / =
A large standby electricity generator in a hospital operating room has a first cost of $67,250 and may be used for a maximum of 6 years. Its salvage value, which decreases by 15% per year, is described by the equation S = 67,250(1 − 0.15)n, where n is the number of years after purchase. The operating cost of the generator will be constant at $9,000 per year, and the interest rate is 12% per year. Determine the economic service life and associated AW values. The economic service life is 6 years and the AW value is $−__.
Elijah Enterprises will need to upgrade the computer system in 5 years. They anticipate the upgrade to cost $98,900. If the discount rate is 15%, what will be the required yearly investment needed to obtain the money for the upgrade?Round your (1+R)^n value to 2 decimal places and use that number for your final amount required rounded to the nearest dollar.

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