An indium-gallium-arsenide-nitrogen alloy developed at Sandia National Laboratory is said to have potential uses in electricity- generating solar cells. The new material is expected to have a longer life, and it is believed to have a 40% efficiency rate, which is nearly twice that of standard silicon solar cells. The useful life of a telecommunications satellite could be extended from 10 to 15 years by using the new solar cells. What rate of return could be realized if an extra investment now of $880,000 would result in extra revenues of $450,000 in year 11, $500,000 in year 12, and amounts increasing by $50,000 per year through year 15? The rate of return that could be realized was %.

An indium-gallium-arsenide-nitrogen alloy developed at Sandia National Laboratory is said to have potential uses in electricity- generating solar cells. The new material is expected to have a longer life, and it is believed to have a 40% efficiency rate, which is nearly twice that of standard silicon solar cells. The useful life of a telecommunications satellite could be extended from 10 to 15 years by using the new solar cells. What rate of return could be realized if an extra investment now of $880,000 would result in extra revenues of $450,000 in year 11, $500,000 in year 12, and amounts increasing by $50,000 per year through year 15? The rate of return that could be realized was %.

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

See similar textbooks

Similar questions

Oil from a specific type of marine microalgae can be converted into biodiesel that may serve as an alternate transportable fuel for automobiles and trucks. If lined ponds are used to grow the algae, the construction cost is $12 million and the M&O cost is estimated at $1.6 million per year. Alternatively, if long plastic tubes are used for growing the algae, the initial cost will be higher at $16 million, but less contamination will render the M&O cost lower at $0.4 million per year. At an interest rate of 10% per year and a 5-year project period, which system is better—ponds or tubes? Use a present worth analysis. The present worth of lined ponds is $ ____million and that of plastic tubes is $ ____million. ____ (Lined ponds or plastic tubes) are used to grow algae.
GE Marine Systems is planning to supply a Japanese shipbuilder with aero-derivative gas turbines to power 11DD-class destroyers for the Japanese Self-Defense Force. The buyer can pay the total contract price of $2,100,000 two years from now, when the turbines will be needed, or an equivalent amount now. At an interest rate of 10% per year, what is the equivalent amount now?
Webmasters.com has developed a powerful new server that would be used for corporations' Internet activities. It would cost $10 million at Year 0 to buy the equipment necessary to manufacture the server. The project would require net working capital at the beginning of each year in an amount equal to 10% of the year's projected sales; for example, NWC = 10% (Sales). The servers would sell for $24,000 per unit, and Webmasters believes that variable costs would amount to $17,500 per unit. After Year 1, the sales price and variable costs will increase at the inflation rate of 3%. The company's nonvariable costs would be $1 million at Year 1 and would increase with inflation. The server project would have a life of 4 years. If the project is undertaken, it must be continued for the entire 4 years. Also, the project's returns are expected to be highly correlated with returns on the firm's other assets. The firm believes it could sell 1,000 units per year. The equipment would be depreciated…
FastCars is debating whether its next car model should be a gas or electric car. Due to factorylimitations, FastCars will only be able to introduce one new model in the next five years• Both models would have a five-year lifecycle, before they would need to be completelyredesigned. Thus FastCars will evaluate the project with a five-year time horizon• The gas model would have the following projected sales and cost of goods sold (in millions):Year 1 2 3 4 5Sales 14 17 19 19 15COGS 10 10 12 10 5 • The electric model would have the following projected sales and cost of goods sold (in millions):Year 1 2 3 4 5Sales 5 10 25 30 30COGS 4 7 15 15 12• Initial capital expenditures for retooling the factory will be 10 million dollars for the gas modeland 20 million dollars for the electric model. This cost will be depreciated fully using the straightline depreciation method over five years• A feasibility study was conducted that cost 1 million dollars and has already been paid for• The company’s…
9
Ang Electronics, Incorporated, has developed a new mesh network. If successful, the present value of the payoff (when the product is brought to market) is $33.6 million. If the mesh network fails, the present value of the payoff is $11.6 million. If the product goes directly to market, there is a 40 percent chance of success. Alternatively, the company can delay the launch by one year and spend $1.26 million to test market the mesh network. Test marketing would allow the firm to improve the product and increase the probability of success to 70 percent. The appropriate discount rate is 12 percent. Calculate the NPV of going directly to market and the NPV of test marketing before going to market. (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) Answer is complete but not entirely correct. Go to market now $ Test marketing first IS 20,400,000 22,850,000 Should the firm conduct test…
A firm is considering an investment in a new machine with a price of $15.9 million to replace its existing machine. The current machine has a book value of $5.7 million and a market value of $4.4 million. The new machine is expected to have a 4-year life, and the old machine has four years left in which it can be used. If the firm replaces the old machine with the new machine, it expects to save $6.45 million in operating costs each year over the next four years. Both machines will have no salvage value in four years. If the firm purchases the new machine, it will also need an investment of $280,000 in net working capital. The required return on the investment is 11 percent and the tax rate is 23 percent. The company uses straight-line depreciation. a)- What is the NPV of the decision to purchase the new machine? b) What is the IRR of the decision to purchase the new machine? c) WHat is the NPV of the decison to keep using the old machine? d) What is the IRR of the decison to keep…
To improve crack detection in aircraft, the U.S. Air Force combined ultrasonic inspection procedures with laser heating to identify fatigue cracks. Early detection of cracks may reduce repair costs by as much as $200,000 per year. a) Write any equation using the appropriate compound interest factor(s) for the present worth of these savings over a 10-year period at an interest rate of 10% per year. b) Solve your equation from Part A. Use the Excel calculator to determine the compound interest factor(s). c) Verify your result from Part B with a cash-flow table like the one shown below.
Webmasters.com has developed a powerful new server that would be used for corporations’ Internet activities. It would cost $10 million at Year 0 to buy the equipment necessary to manufacture the server. The project would require net working capital at the beginning of each year in an amount equal to 10% of the year’s projected sales; for example, NWC0 10% Sales1. The servers would sell for $24,000 per unit, and Webmasters believes that variable costs would amount to $17,500 per unit. After Year 1, the sales price and variable costs will increase at the inflation rate of 3%. The company’s non-variable costs would be $1 million in Year 1 and would increase with inflation. The server project would have a life of 4 years. If the project is undertaken, it must be continued for the entire 4 years. Also, the project’s returns are expected to be highly correlated with returns on the firm’s other assets. The firm believes it could sell 1,000 units per year. The equipment would be depreciated…
OptiLux is considering Investing in an automated manufacturing system. The system requires an initial Investment of $6.0 million, has a 20-year life, and will have zero salvage value. If the system is Implemented, the company will save $740,000 per year in direct labor costs. The company requires a 10% return from Its Investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) a. Compute the proposed Investment's net present value. b. Using the answer from part a, is the investment's Internal rate of return higher or lower than 10%? Hint: It is not necessary to compute IRR to answer this question. Complete this question by entering your answers in the tabs below. Required A Required B Compute the proposed investment's net present value. Net present value
The company would like you to look at a new project. This project involves the purchase of a new $2,000,000 fully auto mated plasma cutter that can be used in our metal works division. The products manufactured using the new technol ogy are expected to sell for an average price of $300 per unit, and the company analyst expects that the firm can sell 20,000 units per year at this price for a period of five years. The cutter will have a residual or savage value of $200,000. at the end of the project's five-year te. The firm also expects to have to invest an additional $300,000 in working capital to support the new business. Other pertinent Information concerning the business venture is as follows: (look at the picture attached) a) Estimate the cash flows for the investment under the listed base-case assumptions. Calculate the project NPV for these cash flows. b) Evaluate the NPV of the investment under the worst-case and best-case assumptions.
Ang Electronics Inc. has developed a new DVD-R. If the DVD-R is successful, the PV of the payoff (when the product is brought to market) is $37 million. If the DVD-R fails, the PV of the payoff is $24 million. If the product goes directly to market, there is a 34 percent chance of success. Alternatively, Ang can spend $9.0 million immediately and delay the launch by one year to test market the DVD-R. Test marketing would allow the firm to improve the product and increase the probability of success to 80 percent. The appropriate discount rate is 14 percent. a. Calculate the NPV of going directly to market now. (Round the answer to the nearest whole number. Enter the answer in dollars, not millions of dollars. Omit $ sign in your response.) $ NPV b. Calculate the NPV of test marketing first. (Do not round intermediate calculations. Round the answer to 2 decimal places. Enter the answer in dollars, not millions of dollars. Omit $ sign in your response.) $ c. Should the firm conduct test…

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS