$2,000Required:Determine the payback period of the investment.1.Deld the payback period be affected if the cash inflow in the last year were several times as large?2.EXERCISE 13-2 Net Present Value Analysis LO13-2The management of Kunkel Company is considering the purchase of a $27,000 machine thatould reduce operating costs by $7,000 per year. At the end of the machine's five-year useful life,it will have zero salvage value. The company's required rate of return is 12%.Required:1. Determine the net present value of the investment in the machine.2. What is the difference between the total, undiscounted cash inflows and cash outflows overthe entire life of the machine?

1. Compute net present value of investment in the machine as shown below: The net present value…

Answered: $2,000 Required: Determine the payback…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The ABC Resort is redoing its golf course at a cost of $843,000. It expects to generate cash flows of $593,000, $743,000 and $129,000 over the next three years. If the appropriate discount rate for the company is 17.5 percent, what is the NPV of this project (to the nearest dollar)? O a. $279363 O b. $373541 O c. $1965363 O d. $112202
4
Management of Wildhorse, Inc., is considering switching to a new production technology. The cost of the required equipment will be $4,000,000. The discount rate is 11 percent. The cash flows that management expects the new technology to generate are as follows. Years 1-2 3-5 6-9 CF 0 $750,000 $1,450,000 a. Compute the payback and discounted payback periods for the project. (Round answers to 2 decimal places, e.g. 15.25.) The payback for the project is The NPV of the project is $ years, and the discounted payback period is b. What is the NPV for the project? Should the firm go ahead with the project? (Enter negative amounts using negative sign e.g. -45.25. Do not round discount factors. Round intermediate calculations to O decimal places, e.g. 1,525 and final answer to O decimal places, e.g. 5,125.) The IRR of the project is , and using the NPV rule the project should be c. What is the IRR, and what would be the decision based on the IRR? (Round answer to 3 decimal places, e.g.…
Technology Innovations is planning to purchase one of two chip insertion machines. Due to the pace of technological change in this area, it is realistic to assume that these are one-shot investments. The expected cash flows for each machine are shown below. MARR is 8%/year. Based on a present worth analysis, which machine is preferred?
3. Your company has been presented with an opportunity to invest in a project. The facts on the project are presented below: The project is expected to operate as shown for ten years. If management expects to make 15% on its investments before taxes, would you recommend this project? Solve the Problem using Present Worth Method. * Investment Required Salvage Value after 10 Years Gross Income Annual Operating Costs: Php 50,000,000 Php 18,000,000 Labor Php 2,500,000 Php 1,000,000 Php 1,000,000 Php 500,000 Materials, Licenses, Insurance, etc* Fuel and Other Costs Maintenance Costs
Management of TSC, Inc. is evaluating a new $79,000 investment with the following estimated cash flows: Year Cash Flow 1 $ 13,000 2 29,000 3 47,000 4 61,000 The firm’s cost of capital is 14 percent and the project will require that the firm spend $25,000 to terminate the project. Use Appendix B to answer the question. Use a minus sign to enter a negative value, if any. Round your answer to the nearest dollar. The NPV of the investment is $ . Should the firm make the investment? The firm make the investment.
Is the return on this investment proposal exactly 14%, more than 14%, or less than 14%? Explain. The Net Present Value Method-An Extended Example
The Amani Company is planning a $200,000 equipment investment that has an estimated eight-year life with no estimated salvage value. The company has projected the following annual cash flows for the investment. Year Cash Inflows $120,000 $70,000 $60,000 $60,000 $60,000 Total $370,000 1 4. Assuming that the cash inflows occur evenly over the year, what is the payback period for the investment? (Ignore income taxes in this problem.)
JS er st un gs Sunland, Inc. management is considering purchasing a new machine at a cost of $4,370,000. They expect this equipment to produce cash flows of $791,390, $796,950, $866,730, $1,116,300, $1,212,360, and $1,300,900 over the next six years. If the appropriate discount rate is 15 percent, what is the NPV of this investment? (Enter negative amounts using negative sign e.g. -45.25. Do not round discount factors. Round other intermediate calculations and final answer to 0 decimal places, e.g. 1,525.) The NPV is tA $
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Staple Company is considering two capital investment proposals. Estimates regarding each project are provided below: Project Beans Project Rice Initial investment Annual net income Net annual cash flow Estimated useful life Salvage value Periods 5 6 9% The company requires a 10% rate of return on all new investments. Present Value of an Annuity of 1 11% 12% 3.890 4.486 10% 3.791 $400,000 4.355 20,000 100,000 5 years -0- 3.696 4.231 $600,000 42,000 142,000 6 years -0- The net present value for Project Rice is 3.605 4.111
Saved Cardinal Company is considering a project that would require a $2,765,000 investment in equipment with a useful life of five years. At the end of five years, the project would terminate and the equipment would be sold for its salvage value of $200,000. The company's discount rate is 12%. The project would provide net operating income each year as follows: Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs Depreciation Total fixed expenses $2,861,000 1,101,000 1,760,000 $ 705,000 513,000 03:08:19 1,218,000 $ 542,000 Net operating income Required: What is the project's payback period? (Round your answer to 2 decimal places.) Project's payback period years

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