Consider the following project with a 4-year life. If terminated prior to 4 years,the equipment used will have a positive salvage value. Cash flows from theproject and salvage values at various stages are shown in the table below.Choose the optimal operating life of the project. Assume a WACC of 10%.Year Cash FlowSalvage Value0-5,0004,50013,2003,37522,2002,25031,5001,125490001 yearO years3 years2 years4 years

Optimal Operating Life of the ProjectWe can find the most efficient operating life of the challenge…

Answered: Consider the following project with a…

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter11: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 2STP

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Roberts Company is considering an investment in equipment that is capable of producing more efficiently than the current technology. The outlay required is 2,293,200. The equipment is expected to last five years and will have no salvage value. The expected cash flows associated with the project are as follows: Required: 1. Compute the projects payback period. 2. Compute the projects accounting rate of return. 3. Compute the projects net present value, assuming a required rate of return of 10 percent. 4. Compute the projects internal rate of return.
Please answer as quickly as possible A project is currently under review. An initial investment of $87,000 would be necessary for equipment. The profit is expected to be $21,000 each year, over the 6 year project period. The salvage value of the equipment at the end of the project period is projected to be 17,000. Assume a MARR of 9%. Find an IRR for this project (exact value or smallish interval). (Be careful with +/- signs) (if your approach requires a starting point, use 15%)
Project A requires an original investment of $50,900. The project will yield cash flows of $14,800 per year for 4 years. Project B has a computed net present value of $2,910 over a 4-year life. Project A could be sold at the end of 4 years for a price of $14,500. Following is a table for the present value of $1 at compound interest: Year 6% 10% 12% 0.943 0.909 0.893 0.890 0.826 0.797 3 0.840 0.751 0.712 4 0.792 0.683 0.636 5 0.747 0.621 0.567 Following is a table for the present value of an annuity of $1 at compound interest: Year 6% 10% 12% 0.943 0.909 0.893 1.833 1.736 1.690 3 2.673 2.487 2.402 4 3.465 3.170 3.037 5 4.212 3.791 3.605 Use the tables above. 2. 2.
Check whether the project is accepted or rejected and recommend the best project, MARR=6% and n=8 years, using Payback period, ROI, NPV, Aw, IRR methods. ID Project I Project II increase Annual Initial Annual cost revenues initial Annual Salvage value annual salvage value running in cost revenues maintenance revnues cost 1910095 280000 60000 2000 28000 400000 72000 2000 40000 12000
You are considering a project with the following financial data: Required initial investment at n = 0: $50M Project life: 10 years Estimated annual revenue: $X (unknown) Estimated annual operating cost: $15M Required minimum return 20% per year Salvage value of the project: 15% of the initial investment What is the minimum annual revenue (in $M) must be generated to make the project worthwile? a. X = 26.64 M b. X = 32.47 M c. X = 28.38 M d. X = 35.22 M
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
A project with the following costs are under consideration to determine its profitability. Using the IRR comparison, and an annual MARR of 10% compounded semiannually, determine if the project should be executed. First cost Semiannual operating cost Semiannual income Salvage value Life in years a. IRR = 18.7% semiannual O b. IRR = 15.3% semiannual Oc. IRR = 16.9% semiannual Od. IRR = 17% semiannual : $45,000 : $10,000 : $20,000 : $20,,000 : 4 years
You are required to investigate the following project: The initial Investment at n=0 is $100,000. The project life is 10 years. Estimated annual operating cost : 34,000. The required minimum return on the investment :14%. The salvage value 8,000. What is the minimum annual revenues that should be generated to make the project worthwhile? 97842 52758 81921 45716 O O O O
For the three mutually exclusive alternatives below, use a MARR of 15% per year to select the best alternative using (a.) rate of return analysis and (b.) Aw analysis on the actual cash flow estimates with MARR=15%.
Determine the Rate of Return (ROR) for the following project. Initial Capital Investment (P) = $2,942,825 Project Life (n) = 10 years Salvage Value at the end of year 10 $50,000 Equal Annual Revenues = $1,100,000 Equal Annual Operations and Maintenance Costs (AOC) = $400,000 Minimum Acceptable Rate of Return (MARR) = 22% ycy %3D %3D %3D That is the ROR of the project (to the nearest 1%)?
Which of the following values comes closest to the payback of a project that requires an initial investment of $34, produces cash flows of $12 for 5 consecutive years beginning at the end of year 1, and provides a final cash flow at the end of year 6 of $100? The project's required rate of return is 13%. Select one: a. 3 years b. 4 years c. Undefined-there is no payback for this project. d. 6 years e. 5 years
Harris Corporation has provided the following data concerning an investment project that it is considering: Initial investment Annual cash flow Salvage value at the end of the project Expected life of the project Discount rate $ 160,000 $ 54,000 $ 11,000 O $67,000 O $160,516 O $516 O $(5,776) 4 15 per year years % Use Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using the tables provided. The net present value of the project is closest to:

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