Edelman Engineering is considering including two pieces of equipment, a truck and an overhead pulley system, in this year's capital budget. The projects are independent. The cash outlay for the truck is $15,000, and that for the pulley system is $21,000. The firm's cost of capital is 11%. After-tax cash flows, including depreciation, are as follows: Year Truck Pulley 1 $5,100 $7,500 NM 2 5,100 7,500 3 5,100 7,500 45 5,100 5,100 7,500 7,500 Calculate the IRR, the NPV, and the MIRR for each project, and indicate the correct accept/reject decision for each. Do not round intermediate calculations. Round the monetary values to the nearest dollar and percentage values to two decimal places. Use a minus sign to enter negative values, if any. IRR NPV EA $ MIRR Truck Value Decision 90 % -Select- ▼ -Select- ✔ % -Select- ✔ 69 Pulley Value Decision % -Select- ✔ -Select- ▼ % -Select- ✓

Edelman Engineering is considering including two pieces of equipment, a truck and an overhead pulley system, in this year's capital budget. The projects are independent. The cash outlay for the truck is $15,000, and that for the pulley system is $21,000. The firm's cost of capital is 11%. After-tax cash flows, including depreciation, are as follows: Year Truck Pulley 1 $5,100 $7,500 NM 2 5,100 7,500 3 5,100 7,500 45 5,100 5,100 7,500 7,500 Calculate the IRR, the NPV, and the MIRR for each project, and indicate the correct accept/reject decision for each. Do not round intermediate calculations. Round the monetary values to the nearest dollar and percentage values to two decimal places. Use a minus sign to enter negative values, if any. IRR NPV EA $ MIRR Truck Value Decision 90 % -Select- ▼ -Select- ✔ % -Select- ✔ 69 Pulley Value Decision % -Select- ✔ -Select- ▼ % -Select- ✓

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 8P: Edelman Engineering is considering including two pieces of equipment, a truck and an overhead pulley...

See similar textbooks

Similar questions

Postman Company is considering two independent projects. One project involves a new product line, and the other involves the acquisition of forklifts for the Materials Handling Department. The projected annual operating revenues and expenses are as follows: Required: Compute the after-tax cash flows of each project. The tax rate is 40 percent and includes federal and state assessments.
Manzer Enterprises is considering two independent investments: A new automated materials handling system that costs 900,000 and will produce net cash inflows of 300,000 at the end of each year for the next four years. A computer-aided manufacturing system that costs 775,000 and will produce labor savings of 400,000 and 500,000 at the end of the first year and second year, respectively. Manzer has a cost of capital of 8 percent. Required: 1. Calculate the IRR for the first investment and determine if it is acceptable or not. 2. Calculate the IRR of the second investment and comment on its acceptability. Use 12 percent as the first guess. 3. What if the cash flows for the first investment are 250,000 instead of 300,000?
Consolidated Aluminum is considering the purchase of a new machine that will cost $308,000 and provide the following cash flows over the next five years: $88,000, 92,000, $91,000, $72,000, and $71,000. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return in Excel, see Appendix C.
There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $35,000 and is expected to generate the following cash flows: If the discount rate is 12%, compute the NPV of each project.
Edelman Engineering is considering including two pieces of equipment, a truck and an overhead pulley system, in this year's capital budget. The projects are independent. The cash outlay for the truck is $15,000, and that for the pulley system is $21,000. The firm's cost of capital is 11%. After-tax cash flows, including depreciation, are as follows: Year Truck Pulley 1 $5,100 $7,500 2 5,100 7,500 3 5,100 7,500 4 5 5,100 7,500 5,100 7,500 Calculate the IRR, the NPV, and the MIRR for each project, and indicate the correct accept/reject decision for each. Do not round intermediate calculations. Round the monetary values to the nearest dollar and percentage values to two decimal places. Use a minus sign to enter negative values, if any. Truck Pulley Value Decision Value Decision IRR % -Select- v % -Select- v $ NPV MIRR -Select- v -Select- v Activate Windows % -Select- v % -Select- v Go to Settings to activate Windows
Edelman Engineering is considering including two pieces of equipment, a truck and an overhead pulley system, in this year's capital budget. The projects are independent. The cash outlay for the truck is $17,100, and that for the pulley system is $22,430. The firm's cost of capital is 14%. After-tax cash flows, including depreciation, are as follows: Year Truck Pulley 1. $5,100 $7,500 5,100 7,500 5,100 7,500 5,100 7,500 5 5,100 7,500 Calculate the IRR, the NPV, and the MIRR for each project, and indicate the correct accept/reject decision for each. Do not round intermediate calculations. Round the monetary values to the nearest dollar and percentage values to two decimal places. Use a minus sign to enter negative values, if any. Truck Pulley Value Decision Value Decision IRR % Аcсept % Reject %24 $ NPV -Select- V |-Select- v MIRR -Select- v % |-Select- v
Please correct with steps. Formulas
Jason Corporation is considering including two pieces of equipment, a truck and an overhead pulley system, in this year’s capital budget. The projects are independent. The cash outlay for the truck is Rs 17.1 million, and that for the pulley system is Rs 22.43 million. The firm’s cost of capital is 15 percent. After-tax cash flows, including depreciation, are as follows: Year Truck Pulley 1 Rs in million 5.1 Rs in million $6.5 2 5.5 7.0 3 5.0 7.5 4 6.0 8.0 5 7.0 8.5 Required: Calculate for each: a) Internal Rate of Return, b) Net Present Value, c) Modified Internal Rate of Return, reinvestment rate is 10% d) Payback Period, e) Discounted Payback Period f) Indicate the correct accept/reject decision for each project.
abc Inc., is considering two projects. Each requires an initial investment of $100,000. John Proton, president of the company, has set a maximum payback period of 4 years. The after-tax cash inflows associated with each project are shown in the following table. Cash inflows (CF,) Year Project A Project B $10,000 $40,000 2. 20,000 30,000 3 30,000 20,000 4 40,000 10,000 5 20,000 20,000 Compute the payback period of each project. Which should the company invest in, firstly, what if the projects are independent? Secondly, what if the projects are mutually exclusive? Please support your recommendations of project investment with own interpretations.
Jonathon Miller's Co, has provided the following information concerning a capital budgeting project: Investment required in equipment $160,000 Expected life of the project 4 years Salvage value of the equipment $0 Annual sales $360,000 Annual cash operating expenses $290,000 Working capital requirement $20,000 One-time renovation expense in year 3 $20,000 The company’s income tax rate is 30% and its after-tax discount rate is 8%. The working capital would be required immediately and would be released for use elsewhere at the end of the project. The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. The net present value of the entire project is closest to: The following tables have been provided for your reference (using tables provided is optional): Present Value of $1; 1 / (1+r)n Periods 4% 5% 6% 7% 8% 9%…
Colsen Communications is trying to estimate the first-year cashflow (at Year 1) for a proposed project. The financial staff has collected the following informationon the project:Sales revenues $15 millionOperating costs (excluding depreciation) 10.5 millionDepreciation 3 millionInterest expense 3 millionThe company has a 40% tax rate, and its WACC is 11%.a. What is the project’s cash flow for the first year (t = 1)?b. If this project would cannibalize other projects by $1.5 million of cash flow before taxesper year, how would this change your answer to part a?c. Ignore part b. If the tax rate dropped to 30%, how would that change your answer topart a?
A firm with a 13% WACC is evaluating two projects for this year's capital budget. After-tax cash flows, including yearly depreciation, are as follows: Project M -$6,000 $2,000 $2,000 $2,000 $2,000 $2,000 Project N -$18,000 $5,600 $5,600 $5,600 $5,600 $5,600 Calculate discounted payback for each project. Do not round intermediate calculations. Round your answers to two decimal places. Project M: years Project N: years