ABC Inc. is considering a project that will have annual sales of $36,750 and costs, including depreciation, of $21,500. Taxes will be $3,800 and the depreciation expense will be $2,125. An initial investment cash outlay of $1,750 is required for net working capital. What is the project's operating cash flow? a. $12,642 b. $9,700 c. $11,450 d. $7,575 e. $13,575 f. $9,325

ABC Inc. is considering a project that will have annual sales of $36,750 and costs, including depreciation, of $21,500. Taxes will be $3,800 and the depreciation expense will be $2,125. An initial investment cash outlay of $1,750 is required for net working capital. What is the project's operating cash flow? a. $12,642 b. $9,700 c. $11,450 d. $7,575 e. $13,575 f. $9,325

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 3CMA

See similar textbooks

Similar questions

Redbird Company is considering a project with an initial investment of $265,000 in new equipment that will yield annual net cash flows of $45,800 each year over its seven-year life. The companys minimum required rate of return is 8%. What is the internal rate of return? Should Redbird accept the project based on IRR?
18
X construction is considering two projects to develop. The estimated net cash flow from each project is as follows:YearProject X ($)Project Y ($)1110,00075,000265,000150,0003100,00060,0004115,00055,000535,00060,000Total425,000400,000Each project requires an investment of $ 200,000. The cost of capital is 10%.Require toa) Calculate Net Present Value, Payback period, ARR and Profitability Index.b) Which Project is to be recommended to develop based on NPV, Profitability Index, Payback period and ARR? Suggest
te.7
NPV and EVA A project cost $3.2 million up front and will generate cash flows in perpetuity of $270,000. The firm's cost of capital is 8%. a. Calculate the project's NPV. b. Calculate the annual EVA in a typical year. c. Calculate the overall project EVA. a. The project's NPV is $. (Round to the nearest dollar.) ibra culat ource Enter your answer in the answer box and then click Check Answer. Check Ans udy Clear All 2 parts remaining Lation Tools> pe here to search
4. Capital expenditure of a new investment project is $ 120,000,000; the expected annual net cash flows generated from the investment are given below. Suppose that the company's cost of capital is 10%, calculate and comment on the accounting rate of return, internal rate of return, and discounted payback period of the project. Years Cash flows($000) DF (10%) 1 40,000 0.909 2 42,000 0.826 3 50,000 0.751 4 52,000 0.683 5 55,000 0.621 SV 60,000 0.565
3. A Project X initially costing $ 250,000 generates following cash flows. If the cost of capital is 12%, calculate a) Net Present Value b) Profitability Index of the project. Year Cash flow I 90,000 II 80,000 III 70,000 IV 60,000 V 50,000 Whether the project should be accepted or not?
4. Capital expenditure of a new investment project is $ 120,000,000; the expected annualnet cash flows generated from the investment are given below. Supposethat the company's cost of capital is 10%, calculate and comment on the accounting rate of return, internal rate of return, and discounted payback period of the project. Cash flows($000) DE (10%) 40,000 42,000 50,000 Years 1. 0.909 2. 0.826 0.751 52,000 0.683 55,000 0.621 SV 60,000 0.565
8. An investment opportunity requires an initial cash outlay of £30,000. Cash flows are expected to be as follows: Year 1 Year 2 Year 3 Year 4 (£7,000) (£2,000) £13,000 £36,000 The company’s cost of capital is 9%. Depreciation is to be charged annually on a straight line basis over the life of the project. What is the NPV of the project? a. (£2,579) b. £27,421 c. £2,579 d. (27,421)
A firm is considering a project that is expected to generate daily cash flows of $26,000 for the next 11 years. The project requires an initial investment of $58,254,666.70. The cost of capital is 7.22%. What is the IRR of the project? 10.93% 11.88% 12.59% 11.05% 12.47%
A firm is considering a 18-year project that is expected to generate annual cash flows of $30,000 during the life of the project. The project requires an initial investment of $341,292.53 and the cost of capital is 4.83%. What is the IRR of the project? ○ 5.35% 5.24% O 5.14% 5.46% 5.62%
22