Cullumber, Inc., management is considering purchasing a new machine at a cost of $3,960,000. It expects this equipment to produce cash flows of $799,090, $843,550, $911,430, $989,200, $1,184,560, and $1,168,400 over the next six years. If the appropriate discount rate is 15 percent, what is the NPV of this investment? (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Do not round discount factors. Round other intermediate calculations and final answer to O decimal places, e.g. 1,525.) The NPV is $

Cullumber, Inc., management is considering purchasing a new machine at a cost of $3,960,000. It expects this equipment to produce cash flows of $799,090, $843,550, $911,430, $989,200, $1,184,560, and $1,168,400 over the next six years. If the appropriate discount rate is 15 percent, what is the NPV of this investment? (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Do not round discount factors. Round other intermediate calculations and final answer to O decimal places, e.g. 1,525.) The NPV is $

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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Niagra Falls Power and Light is considering a project that will produce annual cash flows of $37,500, $46,200, $56,900, and $22,400 over the next four years, respectively. What is the internal rate of return if the project has an initial cost of $113,500?
Ivanhoe Industries management is planning to replace some existing machinery in its plant. The cost of the new equipment and the resulting cash flows are shown in the accompanying table. The firm uses an 18 percent discount rate for projects like this. Should management go ahead with the project? Year Cash Flow 0 -$3,046,900 1 803,710 2 889,200 3 1,247,600 4 1,285,160 5 1,576,500 What is the NPV of this project? - NPV $?
Compute the present value, P, for the following cash flows. You supervise an aging production line that constantly needs maintenance and new parts. Last month you spent $25,000 replacing a failed controller. Should the following plan be accepted if the interest rate is 15%? The net installed cost of the new line to replace the old line is $600,000 with a useful life of six years. In the first year its operating cost will be $100,000, and it will generate annual revenues of $300,000. Each year the operating cost will increase by $5000 and the revenues will fall by $15,000. After six years the equipment will have a value of $100,000 in the next re-building of the line.
Normal Manufacturing Co. is purchasing a production facility at a cost of $22.5 million. The firm expects the project to generate annual cash flows of $7 million over the next five years. What is the internal rate of return on this project? (Round the finall answer to the nearest percent.) 20% 18% O 17% O 19%
Big Steve's, makers of swizzle sticks, is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $90000 and will generate net cash inflows of $21000 per year for 11 years. What is the internal rate of return? Should it be accepted? Why or why not?
If a copy center is considering the purchase of a new copy machine with an initial investment cost of $148,546 and the center expects an annual net cash flow of $14,877 per year, what is the payback period? Round to the nearest tenth, one decimal place.
Folsom Advertising, Inc. is considering an investment in a new information system. The newsystem requires an investment of $1,800,000 and either has (a) even cash flows of $750,000 peryear or (b) the following expected annual cash flows: $450,000, $225,000, $600,000, $600,000,and $150,000.Required:Calculate the payback period for each case.
Management of Sunland Home Furnishings is considering acquiring a new machine that can create customized window treatments. The equipment will cost $266,550 and will generate cash flows of $81,750 over each of the next six years. If the cost of capital is 15 percent, what is the MIRR on this project? - MMR = ? %
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? %
Use the NPV method to determine whether Kyler Products should invest in the following projects: Project A: Costs $280,000 and offers seven annual net cash inflows of $52,000. Kyler Products requires an annual return of 12% on investments of this nature. Project B: Costs $385,000 and offers 9 annual net cash inflows of $75,000. Kyler Products demands an annual return of 10% on investments of this nature. (Click the icon to view Present Value of $1 table.) (Click the icon to view Present Value of Ordinary Annuity of $1 table.) Read the requirements. Project B: Years 1-9 0 Project A Project B Present value of annuity Investment Net present value of Project B Requirement 2. What is the maximum acceptable price to pay for each project? Maximum Project A Project B Net Cash Inflow Acceptable Price Annuity PV Factor (i=10%, n=9) Requirement 3. What is the profitability index of each project? (Round to two decimal places, X.XX.) Select the formula, then enter the amounts to calculate the…
(Net present value calculation) Big Steve's, makers of swizzle sticks, is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $105,000 and will generate net cash inflows of $20,000 per year for 8 years. a. What is the project's NPV using a discount rate of 9 percent? Should the project be accepted? Why or why not? b. What is the project's NPV using a discount rate of 16 percent? Should the project be accepted? Why or why not? c. What is this project's internal rate of return? Should the project be accepted? Why or why not? **** a. If the discount rate is 9 percent, then the project's NPV is $. (Round to the nearest dollar.)
Carla Vista Company is considering a long-term investment project called ZIP. ZIP will require an investment of $118,665. It will have a useful life of 4 years and no salvage value. Annual cash inflows would increase by $81,000, and annual cash outflows would increase by $40,500. 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 whole number (e.g., 15%).) Internal rate of return on this project is between Determine whether this project should be accepted? % and %. The project should be accepted.

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