Consider the following project: Net cash flow -225 Period Change in value (economic depreciation) Expected economic income 2 91.55 253.25 The internal rate of return is 17%. The NPV, assuming a 17% opportunity cost of capital, is exactly zero. Calculate the expected economic income and economic depreciation in each year. (Negative answers should be indicated by a minus sign. Do not ro intermediate calculations. Round your answers to 2 decimal places.) Period 2

Consider the following project: Net cash flow -225 Period Change in value (economic depreciation) Expected economic income 2 91.55 253.25 The internal rate of return is 17%. The NPV, assuming a 17% opportunity cost of capital, is exactly zero. Calculate the expected economic income and economic depreciation in each year. (Negative answers should be indicated by a minus sign. Do not ro intermediate calculations. Round your answers to 2 decimal places.) Period 2

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 1E: A firm has the opportunity to invest in a project having an initial outlay of $20,000. Net cash...

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A firm has the opportunity to invest in a project having an initial outlay of $20,000. Net cash inflows (before depreciation and taxes) are expected to be $5,000 per year for five years. The firm uses the straight-line depreciation method with a zero salvage value and has a (marginal) income tax rate of 40 percent. The firms cost of capital is 12 percent. Compute the IRR and the NPV. Should the firm accept or reject the project?
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e quanty or capital per e, an increase in the depreciation rate will the curve (n+d)k, and will n, szt (k). Therefore, quantity of capital id output per worker will epreciation rate will make it to bu current savings to keep not affect cause a movement down shift to the right cause a movement up shift to the left
A process plant making 5000kg /day of a product selling for $1.75 per kg has annual directproduction costs of $2 million at 100 percent capacity and other fixed costs of $700,000. What isthe fixed charge per kg at the break-even point? If the selling price of the product is increased by10 percent, what is the dollar increase in net profit at full capacity if the income tax rate is 35percent of gross earnings?
2- A rough rule of thumb for the chemical industry is that OMR 1 of annual sales required OMR 2 of fixed capital investment. In a chemical processing plant where this rule applies, the total capital investment is OMR 3200000 and the working capital is 18% of the total capital investment. The annual net total product cost amounts to 1500000 OMR. If the income tax rates on gross earnings total 21%, determine the following: (a) Percent of total capital investment returned annually as gross earning. (b) Percent of total capital investment returned annually as net profit.
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Consider the following project: Period Net cash flow 0 -100 1 0 2 78.55 3 78.55 The internal rate of return is 20%. The NPV, assuming a 20% opportunity cost of capital, is exactly zero. Calculate the expected economic income and economic depreciation in each year. (Negative answers should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.) Period 1 2 3 Change in value (economic depreciation) Expected economic income
Store Local Department Store Across Town Neighboring City Travel Time Each Way (Minutes) 15 30 60 Juanita makes $16 an hour at work. She has to take time off work to purchase her skirt, so each hour away from work costs her $16 in lost income. Assume that returning to work takes Juanita the same amount of time as getting to a store and that it takes her 30 minutes to shop. As you answer the following questions, ignore the cost of gasoline and depreciation of her car when traveling. Store Local Department Store Across Town Price of a Skirt (Dollars per skirt) 103 87 64 Complete the following table by computing the opportunity cost of Juanita's time and the total cost of shopping at each location. Opportunity Cost of Time (Dollars) Neighboring City Price of a Skirt (Dollars per skirt) 103 87 64 Total Cost (Dollars) Assume that Juanita takes opportunity costs and the price of the skirt into consideration when she shops. Juanita will minimize the cost of the skirt if she buys it from the…
Q2. a. Explain why depreciation is important in Economic analysis b. A machinery worth Rs 30,000 has a lifetime of 10 years and a salvage value of Rs. 1800. Calculate the accumulated depreciation(Dn) on the 10th year and book value at the end 10th year annually if interest rate is 9% using one of the Depreciation methods .Show the calculation in a table .
4 03:16:23 Mc Graw Hill Determine if each item below is a traceable or a common fixed cost. Depreciation on equipment used only by one segment Multiple Choice Traceable fixed cost Common fixed cost