Blossom Company is considering a long-term investment project called ZIP. ZIP will require an investment of $126,225. It will have a useful life of 4 years and no salvage value. Annual cash inflows would increase by $85,000, and annual cash outflows would increase by $42,500. The company's required rate of return is 12%. Click here to view the factor table. Calculate the internal rate of return on this project. (Round answers to O decimal places, eg. 15%) Internal rate of return on this project is between % and %.

Blossom Company is considering a long-term investment project called ZIP. ZIP will require an investment of $126,225. It will have a useful life of 4 years and no salvage value. Annual cash inflows would increase by $85,000, and annual cash outflows would increase by $42,500. The company's required rate of return is 12%. Click here to view the factor table. Calculate the internal rate of return on this project. (Round answers to O decimal places, eg. 15%) Internal rate of return on this project is between % and %.

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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Wayne Company is considering a long-term investment project called ZIP. ZIP will require an investment of $137,956. It will have a useful life of 4 years and no salvage value. Annual cash inflows would increase by $79,900, and annual cash outflows would increase by $42,000. Compute the cash payback period. (Round answer to 2 decimal places, e.g. 10.52.) Cash payback period _________? enter the Cash payback period in years rounded to 2 decimal places years.
Mayberry, Inc., is considering a design change that will cost $6,000 and will result in an annual savings of $1,000 per year for the 6-year life of the project. A cost of $2,000 will be avoided at the end of the project as a result of the change. MARR is 8%/year. What is the annual worth of this investment? $Carry all interim calculations to 5 decimal places and then round your final answer to the nearest dollar. The tolerance is ±4.
Brown Company is considering purchasing a machine that would cost $320,000 and would last for 6 years. At the end of 6 years, the machine would have a salvage value of $50,000. The machine would provide annual cost savings of $75,000. The company requires a rate of return of 11% on all investment projects. What is the net present value of the proposed project? (Select the answer that is closest to your calculations.) Present value tables are provided below. Present Value of $1 Table (Exhibit 11B-1) (Partial table) Periods 4% 5% 6% 7% 8% 9% 10% 11 12% 13% 14% 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0.877 0.925 0.907 0.890 0.873 0.857 0.842 0.826 0.812 0.797 0.783 0.769 0.889 0.864 0.840 0.816 0.794 0.772 0.751 0.731 0.712 0.693 0.675 0.855 0.823 0.792 0.763 0.735 0.708 0.683 0.659 0.636 0.613 0.592 0.822 0.784 0.747 0.713 0.681 0.650 0.621 0.593 0.567 0.543 0.519 1 2. 4 5. 6 0.790 0.746 0.705 0.666 0.630 0.596 0.564 0.535 0.507 0.480 0.456 0.760 0.711 0.665 0.623…
Novak Company is contemplating an investment costing $168,810. The investment will have a life of 8 years with no salvage value and will produce annual cash flows of $30,500. Click here to view PV tables. What is the approximate internal rate of return associated with this investment? (Use the above table.) (Round answer to O decimal places, e.g. 15%) Internal rate of return. %6
Rambus Inc. would like to purchase a production machine for $325,000. The machine is expected to have a life of three years, and a salvage value of $50,000. Annual maintenance costs will total $12,500. Annual savings are predicted to be $112,500. The company's required rate of return is 12%. Required: Ignoring the time value of money, calculate the net cash inflow or outflow resulting from this investment opportunity.
Manama Beverage Company is considering an investment in a project that has rate of return of 20%. The only cash outflow for this project is the initial investment. The project is estimated to have an 8-year life and no salvage value. Cash inflows from this project are expected to be $100,000 per year in each of the 8 years. Manama's discount rate is 16%. What is the net present value of this project? Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. $5,215 $15,464 $50,700 $55,831
You are considering opening a new plant. The plant will cost $103.2 million upfront. After that, it is expected to produce profits of $30.9 million at the end of every year. The cash flows are expected to last forever. Calculate the NPV of this investment opportunity if your cost of capital is 8.6%. Should you make the investment? Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged. If your cost of capital is 8.6%, the NPV of this investment opportunity is S Should you make the investment? (Select the best choice below.) O A. Yes, because the project will generate cash flows forever. O B. No, because the NPV is not greater than the initial costs. O C. Yes, because the NPV is positive. O D. No, because the NPV is less than zero. million. (Round to one decimal place.) The IRR of the investment is %. (Round to two decimal places.) The maximum deviation allowable in the cost of capital is %. (Round to two…
Malkind Hardware is adding a new product line that will require an investment of $1,454,000. Managers estimate that this investment will have a 10-year life and generate net cash inflows of $300,000 the first year, $270,000 the second year, and $250,000 each year thereafter for eight years. Assume the project has no residual value. Compute the ARR for the investment. Round to two places. Select the formula, then enter the amounts to calculate the ARR (accounting rate of return) for the new product line. (Round ARR to the nearest hundredth percent [two decimal places], X.XX%) ARR
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
Your answer is partially correct. Sunland Company is considering a long-term investment project called ZIP. ZIP will require an investment of $123,600. It will have a useful life of 4 years and no salvage value. Annual cash inflows would increase by $82,400, and annual cash outflows would increase by $41,200. The company's required rate of return is 12%. Click here to view the factor table. Calculate the internal rate of return on this project. (Round answers to whole number (e.g., 15%).) Internal rate of return on this project is between 3 % and 1539 % Determine whether this project should be accepted? The project should be accepted.
Pablo Company is considering buying a machine that will yield Income of $3,400 and net cash flow of $16,500 per year for three years. The machine costs $45,600 and has an estimated $6,300 salvage value. Pablo requires a 15% return on Its Investments. Compute the net present value of this Investment. (PV of $1, FV of $1. PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Negative amounts should be indicated by a minus sign. Round your present value factor to 4 decimals.) Years 1-3 Year 3 salvage Totals Initial investment Net present value Net Cash Flows x PV Factor = = = = Present Value of Net Cash Flows $ 0 0
GTO Incorporated is considering an investment costing $214,720 that results in net cash flows of $32,000 annually for 10 years. (PV of $1. FV of $1. PVA of $1, and EVA of $1) (Use appropriate factor(s) from the tables provided.) (a) What is the internal rate of return of this investment? (b) The hurdle rate is 8.5%. Should the company invest in this project on the basis of internal rate of return? a. Internal rate of return b. Should the company invest in this project on the basis of internal rate of return? %

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