An investment that costs $25,000 will produce annual cash flows of $5,000 for a period of 6 years. Further, the investment has an expected salvage value of $3,000. Given a desired rate of return of 12%, the investment will generate a (Do not round your PV factors and intermediate calculations.Round your answer to the nearest whole dollar):Multiple Choicenegative net present value of $2,923.negative net present value of $1,520.negative net present value of $25,000.positive net present value of $20,557

Net present value method (NPV): Net present value method is the method which is used to compare the…

Answered: An investment that costs $25,000 will…

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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Calculate the net present value of each project (project A and B)
Compare two alternatives, 1 and 2, on the basis of a present worth evaluation using 10% per year and a study period of 8 years. Alternative First Cost Annual Operating Cost Overhaul in Year 4 Salvage Value Life Answer to the nearest whole dollars for currency, and the nearest percentage (no decimals) for interest, and a whole number for the number of years. Do NOT enter commas. DO enter minus signs for negative values. 1) What is the Present Worth of Project 1? $ 1 2 ($13,000) ($49,000) ($6,000) ($5,000) $0 ($3,350) $1,800 $6,800 4 years 8 years
A project that costs $2,300 to install will provide annual cash flows of $730 for each of the next 5 years. a. Calculate the NPV if the opportunity cost of capital is 12%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) NPV b. Is this project worth pursuing? Yes O No c. What is the project's internal rate of return IRR? (Do not round intermediate calculations. Round your answer to 2 decimal places.) %24
a
1. Two mutually exclusive alternatives requiring different investments are being considered. The life of all two alternatives is estimated to be 20 years with no salvage value. The MARR that is considered is acceptable is 12%. The cash flows representing these two alternatives are as follows: Investment cost Net income per year Alternative A $100,000 $15,000 Alternative B $60,000 $11,000 Find the investment that should be selected using IRR on incremental investment (use PW formula).
It is estimated that an investment alternative with an initial investment cost of 250000 TL will generate annual revenues of 85000 TL and annual expenses of 20000 TL. It is expected to have a scrap value of 95000 TL at the end of its 7-year life. Find out how sensitive the investment decision of this investment alternative is to its revenues. (MARR: %10) Select one: a. 0.32294 b. 0.48225 c. 0.05634 d. 0.27838 e. 0.082902 f. 0.1719 g. 0.52003 h. 0.37235
An investment under consideration has a payback of seven years and a cost of $870,000. Assume the cash flows are conventional. If the required return is 11 percent, what is the worst-case NPV? (A negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Answer is complete but not entirely correct. Worst-case NPV $ 3,270,444.91 ×
Generro Company is considering the purchase of equipment that would cost$60,000and offer annual cash inflows of$16,300over its useful life of 5 years. Assuming a desired rate of return of10%, is the project acceptable? (PV of \$1 and PVA of \$1) (Use appropriate factor(s) from the tables provided.) Mitiple Choice The answer cannot be detergined. No, since the negative net present value indicates the investmeot will yield a fate of retum below the desred tate of return. Yes, since the investment will generate$81.500in future cosh flows, which is gremer than the purchase cont of$60,000Yes, since the positve net present valse ind cates the investment will eam a rate of return greater than10 h.
You are considering the following project. What is the NPV of the project? WACC of the project: 0.10 Revenue growth rate: 0.05 Tax rate: 0.40 Revenue for year 1: 13,000 Fixed costs for year 1: 3,000 variable costs (% of revenue): 0.30 project life: 3 years Economic life of equipment: 3 years Cost of equipment: 20,000 Salvage value of equipment: 4,000 Initial investment in net working capital: 2,000
3. Compute Project Y’s accounting rate of return. The numerator drop down options are: accounts receivable, annual income, average investment, average total assets, cost of goods sold, current assets, current liabilities, net sales, total assets The denominator dropdown options are: accounts receivable, annual income, average investment, average total assets,
The estimated negative cash flows for three design alternatives are shown below. The MARR is 13% per year and the study period is six years. Which alternative is best based on the IRR method? Doing nothing is not an option. Capital investment Annual expenses A. Alternative A B. Alternative C OC. Alternative B EOY 0 1-6 Which alternative would you choose as a base one? Choose the correct answer below. A $79,300 7,900 Alternative B $63,000 12,370 $71,600 10,120
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