Edelman Engineering is considering including two pieces of equipment, a truck and an overhead pulley system, in this year's capital budget. The projectsare 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 cashflows, including depreciation, are as follows:YearTruckPulley1$5,100$7,50025,1007,50035,1007,500455,1007,5005,1007,500Calculate the IRR, the NPV, and the MIRR for each project, and indicate the correct accept/reject decision for each. Do not round intermediatecalculations. Round the monetary values to the nearest dollar and percentage values to two decimal places. Use a minus sign to enter negative values, ifany.TruckPulleyValueDecisionValueDecisionIRR%-Select- v%-Select- v$NPVMIRR-Select- v-Select- vActivate Windows%-Select- v%-Select- vGo to Settings to activate Windows

For computing the IRR the IRR function of excel will be used. The syntax is: IRR(values) Where…

Answered: Edelman Engineering is considering…

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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As a member of UA Corporation's financial staff, you must estimate the Year 1 cash flow for a proposed project with the following data. Under the new tax law, the equipment used in the project is eligible for 100% bonus depreciation, so it will be fully depreciated at t = 0. What is the Year 1 cash flow? Do not round the intermediate calculations and round the final answer to the nearest whole number. Sales revenues, each year $45,500 Other operating costs $22,522 Interest expense $4,000 Tax rate 25.0%
Company is evaluating two projects, Project A and Project B. The initial investment on both the projects are $25,000. Both have equal lives. The Project A will generate cash flows of $20,000 and $35,000 in year 2 and year 3. The Project B will generate $15,000 in yea- 1, $22,000 year-2, and $25,000 in year-3. Compute the incremental (B-A) IRR. а. -21.38% b. 56.80% с. 21.38% d. -24.75%
A firm with a 13% WACC is evaluating two projects for this year's capital budget. After-tax cash flows, including depreciation, are as follows: 0 1 + 2 + -Select- % 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 a. Calculate NPV for each project. Do not round intermediate calculations. Round your answers to the nearest cent. Project M: $ Project N: $ Calculate IRR for each project. Do not round intermediate calculations. Round your answers to two decimal places. Project M: Project N: Calculate MIRR for each project. Do not round intermediate calculations. Round your answers to two decimal places. Project M: Project N: Calculate payback for each project. Do not round intermediate calculations. Round your answers to two decimal places. Project M: Project N: years Calculate discounted payback for each project. Do not round intermediate calculations. Round your answers to two decimal places. Project M: Project N: years b. Assuming…
he cash flows associated with a public works project in Buffalo, New York, are shown. Use the modified B/C ratio at a discount rate of 5% per year to determine the economic justification. First cost, $ 30,000,000 AW of benefits, $/year 7,700,000 AW of disbenefits, $/year 1,700,000 M&O costs, $/year 1,525,000 Life of project, years 30 The modified B/C ratio is . The project is economically (Click to select) justified not justified .
The Salt Store is evaluating a capital expenditure proposal with the following predicted cash flows: Initial investment $(75,000) Operations, each year for four years 25,000 Salvage 8,000 The accounting rate of return on the initial investment presented is:
Plant company is contemplating the purchase of a new piece of equipment for $59,000. Plant is in the 20% income tax bracket.
Majan Company considers to appraise two projects. The cost of capital is 8%. The Initial investment in Project A is OMR 42,000 and in Project B is OMR 36,000. The cash flows for the projects are as follows: You are required to:1. Explain which project should be considered if the Majan Company want to recover the initial investment in less than 4 years’ time.2. If Majan Company wants to appraise projects according to the current value of cash explain which project should be considered by Majan LLC in terms of current value.
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
Colsen Communications is trying to estimate the first-year cash flow (at Year 1) for a proposed project. The assets required for the project were fully depreciated at the time of purchase. The financial staff has collected the following information on the project: Sales revenues $20 million Operating costs 16 million Interest expense 2 million The company has a 25% tax rate, and its WACC is 13%. Write out your answers completely. For example, 13 million should be entered as 13,000,000. What is the project's operating cash flow for the first year (t = 1)? Round your answer to the nearest dollar.$ If this project would cannibalize other projects by $1.5 million of cash flow before taxes per year, how would this change your answer to part a? Round your answer to the nearest dollar.The firm's OCF would now be $ .
Berwick's Bike shops initial capital cost (not including working capital) is 750,000, expected after - tax operating cash flow is $225,000 per year for five years, and the recovery of capital assets after five years is §75,000. There is also a $100,000 increase in working capital at the beginning of the project that is recovered in whole atthe end of the life of the project in year 5. Ifthis project has a required rate of return of 15%, what is its IRR? Use a financial calculator to determine your answer
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%…

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