An investment has an initial cost of $3.2 million. This investment will be depreciated by $900,000 a year over the 3-year life of the project. Should this project be accepted based on the average accounting rate of return if the required rate is 10.5 percent? Why or why not? Net Income $211.700 186.400 165.500 Year 123

An investment has an initial cost of $3.2 million. This investment will be depreciated by $900,000 a year over the 3-year life of the project. Should this project be accepted based on the average accounting rate of return if the required rate is 10.5 percent? Why or why not? Net Income $211.700 186.400 165.500 Year 123

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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An investment of $158397 is expected to generate an after-tax cash flow of $94000 in one year and another $129000 in two years. The cost of capital is 10 percent. What is the internal rate of return? O 24.27 percent O 24.47 percent O 24.07 percent O 24.67 percent
You have been offered a project paying $300 at the beginning of each year for the next 20 years. What is the maximum amount of money you would invest in this project if you require 9 percent rate of return to your investment? OA. $2,739 B. $2,985 C. $15,348 OD. $16,729
Compute the payback statistic for Project A if the appropriate cost of capital is 8 percent and the maximum allowable payback period is four years. (Round your answer to 2 decimal places.) Project A Time: Cash flow: Payback 0 1 -$1,000 $350 years 2 $480 3 $520 4 $300 5 $100
1. Compare the following alternatives using the Net Present Worth (NPW) method. Rate 5% per year. Construction $ Benefits $/yr Life years A 400,000 200,000 5 700,000 220,000 10 2. Solve the same problem using the Net Equivalent Uniform Annual (NEUA) method. What do you conclude?
A company is considering two projects. The discount rate is 10 percent, and the projects' cash flows would be: Years 1 2 3 Project A -S700 S500 S300 S100 Project B -S700 $100 $300 S600 a. Calculate the projects' NPVS. b. If the two projects are independent, which project(s) should be chosen? c. If the two projects are mutually exclusive, which project should be chosen?
) A company requires an initial investment of $75,000 with a residual value of $12,500 after five years. The estimated annual returns over the five years are $20,000 at 12% compounded annually. What is the net present value of this project? ____________ b. What is the project’s internal rate of return (IRR)? __________
0. A $45,000 investment in a new conveyor system is projected to improve throughput and increasing revenue by $14,000 per year for five years. The conveyor will have an estimated market value of $4,000 at the end of five years. Using NPV with a MARR of 12%, is this a good investment?
7
A project requires an increase of $2100 in Net Working Capital at the beginning of the project, which will be fully recovered after the completion of the project. Equipment with a book value of $11,000 will be sold at the end of the project for a salvage value of $6,000. The tax rate is 20%. What is the incremental free cash flow in the year following the end of the project? Question 3Answer a. $9100 b. $7100 c. $4900 d. $2900
A proposed project is expected to increase accounts receivable by $25,000, decrease inventory by $8,000 and increase accounts payable by $16,000. What is the project's initial requirement for net working capital? Select one: a. +$17,000 b. $1000 c. -$9,000 d. +$9,000
am. 144.
Engineering Economics 00012 Please use the Rate of Return (ROR) Solution

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