Elearning Company would like to develop its technology process by purchasing a production equipment for 11.2 million HUF. The equipment is expected to have a useful life of 5 years, and will be sold at the end of 5 years for 2.5 million HUF. The annual operating costs are predicted to be 1.5 million HUF. The estimated revenues are in yearly sequence ( HUF) 5.2 million; 5.5 million; 6.1million; 7 million; 7.5 million. The company's required rate of return is 12 percent. You can see the way of the economic efficiency calculation in the table. Some of the data are missing. Enter the missing data in the table. Perform further calculations and explain the results obtained.

Elearning Company would like to develop its technology process by purchasing a production equipment for 11.2 million HUF. The equipment is expected to have a useful life of 5 years, and will be sold at the end of 5 years for 2.5 million HUF. The annual operating costs are predicted to be 1.5 million HUF. The estimated revenues are in yearly sequence ( HUF) 5.2 million; 5.5 million; 6.1million; 7 million; 7.5 million. The company's required rate of return is 12 percent. You can see the way of the economic efficiency calculation in the table. Some of the data are missing. Enter the missing data in the table. Perform further calculations and explain the results obtained.

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

See similar textbooks

Similar questions

The engineering team at Manuel’s Manufacturing, Inc., is planning to purchase an enterprise resource planning (ERP) system. The software and installation from Vendor A costs $380,000 initially and is expected to increase revenue $125,000 per year every year. The software andinstallation from Vendor B costs $280,000 and is expected to increase revenue $95,000 per year. Manuel’s uses a 4-year planning horizon and a 10%/year MARR. Solve, a. What is the future worth of each investment?b. What is the decision rule for determining the preferred investment basedon future worth ranking? c. Which (if either) ERP system should Manuel purchase?
New equipment costs $847,000 and is expected to last for five years with the salvage value of 10% of the equipment cost. During this time the company will use a 20% CCA rate. The new equipment will save $280,000 annually before taxes. If the company's required rate of return is 5.35%, determine the PVCCATS of the purchase. Assume a tax rate of 35%. Please show all the calculations by which you came up with the final answer.
The initial investment cost of machine A is 9,000 TL, the useful life of the machine is 6 years and annual operating costs are 5,000 TL. The initial investment cost of machine B is 16,000 TL, and at the end of its 9-year useful life, the machine can be sold for 4,000 TL. Since the operating costs of machine B are 4,000 TL per year, compare the two machines according to the present value analysis based on an analysis period of the least common multiple of the alternative life of the machines. The interest rate is 10% per year.
DSSS CorporationDSSS Corporation is considering a new project to manufacture widgets. The cost of the manufacturing equipment is $135,000. The cost of shipping and installation is an additional $5,300. The asset will fall into the 3-year MACRS class. The year 1- 4 MACRS percentages are 33.33%, 44.45%, 14.81%, and 7.41%, respectively. Sales are expected to be $230,000 per year. Cost of goods sold will be 61% of sales. The project will require an increase in net working capital of $5,300. At the end of three years, DSSS plans on ending the project and selling the manufacturing equipment for $20,000. The marginal tax rate is 39% and DSSS Corporation’s appropriate discount rate is 15%. The fixed expenses is $12,000.Refer to DSSS Corporation. What is the operating cash flow for year 2? Group of answer choices $62,363 $65,634 $55,501 $71,719
A project requires an initial investment in equipment of $96,600 and then requires an initial investment in working capital of $14,400 (at t= 0). You expect the project to produce sales revenue of $131,000 per year for three years. You estimate manufacturing costs at 60 percent of revenues. (Assume all revenues and costs occur at year-end [i.e., t= 1, t= 2, and t=3]). The equipment depreciates using straight-line depreciation over three years. At the end of the project, the firm can sell the equipment for $12,420 and recover the investment in net working capital. The corporate tax rate is 21 percent and the cost of capital is 15 percent. Calculate the NPV of the project. Multiple Choice O O O $4,679 -$3,574 $13,573
Natural Foods Inc. is planning to invest in new manufacturing equipment to make a new garden tool. The new garden tool is expected to generate additional annual sales of 7,600 units at $38 each. The new manufacturing equipment will cost $123,500 and is expected to have a 10-year life and a $9,500 residual value. Selling expenses related to the new product are expected to be 5% of sales revenue. The cost to manufacture the product includes the following on a per-unit basis: Direct labor $6.50 Direct materials 21.00 Fixed factory overhead-depreciation 1.50 Variable factory overhead 3.30 Total $32.30 Determine the net cash flows for the first year of the project, Years 2–9, and for the last year of the project. Use the minus sign to indicate cash outflows. Do not round your intermediate calculations but, if required, round your final answers to the nearest dollar. Natural Foods Inc.Net Cash Flows Year 1 Years 2-9 Last Year Initial investment $fill in the blank 1…
The cost for manufacturing a component used in intelligent interface converters was $23,000 the first year. The company expects the cost to increase by 2% each year. Calculate the present worth of this cost over a five-year period at an interest rate of 10% per year.
The operating and maintenance expenses for a mining machine are expected to be $11000 in the first year and increase by $700 per year during the 25-year life of the machine. What uniform series of payments would cover these expenses over the life of the machine? Interest is 10%/year compounded annually. $4
DSSS CorporationDSSS Corporation is considering a new project to manufacture widgets. The cost of the manufacturing equipment is $135,000. The cost of shipping and installation is an additional $5,300. The asset will fall into the 3-year MACRS class. The year 1- 4 MACRS percentages are 33.33%, 44.45%, 14.81%, and 7.41%, respectively. Sales are expected to be $230,000 per year. Cost of goods sold will be 61% of sales. The project will require an increase in net working capital of $5,300. At the end of three years, DSSS plans on ending the project and selling the manufacturing equipment for $20,000. The marginal tax rate is 39% and DSSS Corporation’s appropriate discount rate is 15%. The fixed expenses is $12,000.Refer to DSSS Corporation. What is the total cash flow generated in year 3? Group of answer choices $71,719 $74,988 $19,488 $55,501
Winthrop Company has an opportunity to manufacture and sell a new product for a five-year period. To pursue this opportunity, the company would need to purchase a plece of equipment for $130,000. The equipment would have a useful life of five years and a $10,000 salvage value. The CCA rate for the equipment is 30%. After careful study. Winthrop estimated the following annual costs and revenues for the new product: Sales revenues: Variable expenses Fixed expenses $250,000 $130,000 $ 70,000 The company's tax rate is 30% and its after-tax cost of capital is 10%. Required: 1. Compute the net present value of the project. (Hint Use Microsoft Excel to calculate the discount factor(s).) (Do not round intermediate calculations and PV factor. Round the final answers to the nearest whole dollar. Negative value should be indicated with minus sign.) 2. Would you recommend that the project be undertaken? 1. Net present value 2 Would you recommend that the project be undertaken?
Cardinal Company is considering a project that would require a $2,782,000 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 18%. The project would provide net operating income each year as follows: Sales $ 2,873,000 Variable expenses 1,019,000 Contribution margin 1,854,000 Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs $ 754,000 Depreciation 516,400 Total fixed expenses 1,270,400 Net operating income $ 583,600 Required:If the equipment’s salvage value was $400,000 instead of $200,000, what would be the project’s simple rate of return? (Round your answer to 2 decimal places.)
A process for producing the mosquito repellant Deet has an initial investment of $210,000 with annual costs of $52,000. Income is expected to be $90,000 per year. What is the payback period at i = 0% per year? At i = 12% per year?

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS