Calculate NPV, present value ratio, and payback Cowboy Recording Studio is considering the investment of $140,000 in a new recording equipment. It is estimated that the new equipment will generate additional cash flow of $21,000 per year for each year of its 12-year life and will have a salvage value of $15,000 at the end of its life. Cowboy's financial managers estimate that the firm's cost of capital is 12%. Required: a. Calculate the net present value of the investment.

Calculate NPV, present value ratio, and payback Cowboy Recording Studio is considering the investment of $140,000 in a new recording equipment. It is estimated that the new equipment will generate additional cash flow of $21,000 per year for each year of its 12-year life and will have a salvage value of $15,000 at the end of its life. Cowboy's financial managers estimate that the firm's cost of capital is 12%. Required: a. Calculate the net present value of the investment.

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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NPV and maximum return A firm can purchase new equipment for $25,000 that generates an annual cash inflow of $8,000 for 5 years. a. Determine the net present value (NPV) of the asset, assuming that the firm has a cost of capital of 15%. Is the project acceptable? b. Determine the maximum required rate of return that the firm can have and still accept the asset. a. The net present value (NPV) of the new equipment is (Round to the nearest cent.)
LENLEN Company is considering on investing in new automated machinery. The machinery will be used for five years in the project. (Prevailing cost of capital at 10% per annum) The new investment needs a P1,700,000 cash outflow. The estimated cash inflow of income from the investment of machinery for the next five (5) years would be: CASH INFLOWS YEAR 1 P 950,000 750,000 650,000 350,000 150,000 REQUIRED: By applying the following evaluation techniques if the investment economically acceptable. Show your complete solution and Answer it if acceptable or not acceptable from 1 to 4 below: 3. Net Present Value 4. Profitability Index
不 NPV for varying costs of capital LePew Cosmetics is evaluating a new fragrance-mixing machine. The machine requires an initial investment of $320,000 and will generate cash inflows of $61,850 per year for 8 years. If the cost of capital is 13%, calculate the net present value (NPV) and indicate whether to accept or reject the machine. The NPV of the project is $ (Round to the nearest cent.) Should this project be accepted? (Select the best answer below.) No ○ Yes
a
Give typing answer with explanation and conclusion Consolidated Industries is considering a 4- year project. The project is expected to generate operating cash flows of $2 million, $6, million, $5 million, and $3 million over the four years, respectively. It will require initial capital expenditures of $12 million dollars and an intitial investment in NWC of $6 million. The firm expects to generate a $8 million after tax salvage value from the sale of equipment when the project ends, and it expects to recover 100% of its nwc investments. Assuming the firm requires a return of 10% for projects of this risk level, what is the project's NPV? $4,061,769 $3,854,536 $3,937,429 $3,771,643 $4,144,662
NPV (net present value) Craig is considering several capital investments for the upcoming year. Use the NPV (net present value) method to determine whether the company should investment in the following independent projects: Project 1 costs $28,000 and offers 8 annual cash flows of $8,600. Craig feels this type of investment should require an annual return of 16% on projects like this. Project 2 costs $35,000 and offers 6 annual cash flows of $12,000. Craig feels this type of investment should require an annual return of 12% on projects like this. Requirements 1. Calculate the NPV of both of these projects 2. What is the maximum acceptable price Craig should pay for each of these projects?
T1.
Coffer Company is analyzing two potential investments. Project X Cost of machine Net cash flow: Year 1 Year 2 $ 85,470 Project Y $ 65,000 33,000 33,000 3,000 30,000 Year 3 Year 4 33,000 0 • 30,000 25,000 If the company is using the payback period méthod, and it requires a payback period of three years or less, which project(s) should be selected? Multiple Choice Project Y. Project X. Both X and Y are acceptable projects. Neither X nor Y is an acceptable project.
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
| All techniques Rieger International is evaluating the feasibility of investing $109,000 in a piece of equipment that has a 5-year life. The firm has estimated the cash inflows associated with the proposal as shown in the following table: firm has a cost of capital of 11%. The a. Calculate the payback period for the proposed investment. b. Calculate the discounted payback period for the proposed investment. c. Calculate the net present value (NPV) for the proposed investment. d. Calculate the probability index for the proposed investment. e. Calculate the internal rate of return (IRR) for the proposed investment. Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Year (t) 1 GAW N 2 3 4 5 Print Cash inflows (CF₂) $35,000 $20,000 $30,000 $35,000 $40,000 Done X ces.)

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