Calculate the NPV of Project A using the below information: Project period: 5 Years Amount paid for research: $10,500 Cost of equipment: $150,000 (Depreciation method: Straight line for 5 years) Annual savings from this project A: $55,500 Cost of Capital: 12% Tax rate: 38% a. $4,634.80 b. -$25,959.65 c. $15,134.80 d. -S36,459.65

Calculate the NPV of Project A using the below information: Project period: 5 Years Amount paid for research: $10,500 Cost of equipment: $150,000 (Depreciation method: Straight line for 5 years) Annual savings from this project A: $55,500 Cost of Capital: 12% Tax rate: 38% a. $4,634.80 b. -$25,959.65 c. $15,134.80 d. -S36,459.65

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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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Calculate the NPV of Project A using the below information:
Project period: 5 Years
Amount paid for research: $10,500
Cost of equipment: $150,000 (Depreciation method: Straight line for 5 years)
Annual savings from this project A: $55,500
Cost of Capital: 12%
Tax rate: 38%
a. $4,634.80
b. -$25,959.65
C. $15,134.80
d. -$36,459.65
U:
0.0 kB/s
D:
0.3kBls
rch
DELL

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Merrill Corporation has the following information available about a potential capital investment: $ 1,200,000 $ 120,000 Initial investment Annual net income Expected life Salvage value 8 years. $ 130,000 10 Merrill's cost of capital Assume straight line depreciation method is used. Required: 1. Calculate the project's net present value. (Future Value of $1.Present Value of $1. Future Value Annuity of $1. Present Value Annuity of $1.) Note: Use appropriate factor(s) from the tables provided. 2. Without making any calculations, determine whether the internal rate of return (IRR) is more or less than 10 percent. 3. Calculate the net present value using a 13 percent discount rate. (Future Value of $1. Present Value of $1. Future Value Annuity of $1. Present Value Annuity of $1.) Note: Use appropriate factor(s) from the tables provided. 4. Without making any calculations, determine whether the internal rate of return (IRR) is more or less than 13 percent.
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