Required information[The following information applies to the questions displayed below.]Following is information on an investment in a manufacturing machine. The machine has zero salvage value. The companyrequires a 3% return from its investments.Initial investmentNet cash flows:Year 1Year 2Year BYear 1Year 2Year 3TotalsInitial investmentNet present valueCompute this machine's net present value. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tablesprovided. Round all present value factors to 4 decimal places. Round present value amounts to the nearest dollar.)Net Cash FlowLUD$$ (230,000)0190,00096,000123,000Present Value Present Value of NetFactorCash Flows$0900

Time value of money is a financial concept which is used to analyze various investments and…

Following is information on an investment in a manufacturing machine. The machine has zero salvage value. The company requires a 3% return from its investments. Initial investment Net cash flows: Year 1 Year 2 Year 3 Compute this machine's net present value. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round all present value factors to 4 decimal places. Round present value amounts to the nearest dollar.) Year 1 Year 2 Year 3 Totals Initial investment Net present value Net Cash Flow $ $ (230,000) 190,000 96,000 123,000 0 Present Value Factor Present Value of Net Cash Flows $ $ 0 0

Following is information on an investment in a manufacturing machine. The machine has zero salvage value. The company requires a 3% return from its investments. Initial investment Net cash flows: Year 1 Year 2 Year 3 Compute this machine's net present value. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round all present value factors to 4 decimal places. Round present value amounts to the nearest dollar.) Year 1 Year 2 Year 3 Totals Initial investment Net present value Net Cash Flow $ $ (230,000) 190,000 96,000 123,000 0 Present Value Factor Present Value of Net Cash Flows $ $ 0 0

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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Consider two air-conditioning systems with the cash flow estimates as given below. Use AW analysis to determine the sensitivity of the economic decision to MARR values of 4%, 6%, and 8% per year. Air-Conditioning System 1 System First cost, $ AOC, $ per year Salvage value, $ New compressor and motor cost at midlife, $ Life, years -10,000 -500 -100 -1,850 8 The annual worth of air-conditioning system 1 when the MARR is 4% is $ The annual worth of air-conditioning system 2 when the MARR is 4% is $ The annual worth of air-conditioning system 1 when the MARR is 6% is $ The annual worth of air-conditioning system 2 when the MARR is 6% is $ The annual worth of air-conditioning system 1 when the MARR is 8% is $ The annual worth of air-conditioning system 2 when the MARR is 8% is $ Air-Conditioning System 2 -14,000 -85 -300 -2,540 12
Novak Company is contemplating an investment costing $168,810. The investment will have a life of 8 years with no salvage value and will produce annual cash flows of $30,500. Click here to view PV tables. What is the approximate internal rate of return associated with this investment? (Use the above table.) (Round answer to O decimal places, e.g. 15%) Internal rate of return. %6
Pitt Company is considering two alternative Investments. The company requires a 12% return from its Investments. Neither option has a salvage value. Project X Project Y $243,046 $175,883 Initial Investment Net cash flows anticipated: Year 1 Year 2 Year 3 Year 4 Year 5 82,000 60,000 91,000 82,000 75,000 A. Compute the IRR for both projects using the IRR spreadsheet function. Project X Project Y B. Which project should be recommended. Project X ✓ % % 35,000 54,000 73,000 69,000 26,000
Following is information on an investment in a manufacturing machine. The machine has zero salvage value. The company requires a 6% return from its investments. $ (260,000) 150,000 146,000 117,000 Initial investment Net cash flows: Year 1 Year 2 Year 3 Compute this machine's net present value. (PV of $1. EV of $1. PVA of $1, and EVA of $1) (Use appropriate factor(s) from the tables provided. Round all present value factors to 4 decimal places. Round present value amounts to the nearest dollar.) Year 1 Year 2 Year 3 Totals Initial investment Net present value Net Cash Flow $ 0 Present Value Factor Present Value of Net Cash Flows $ $ 0
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Foz Co. is considering four investment proposals (A, B, C, and D). The following table provides data concerning each of these investments: Compute the missing information pertaining to each investment proposal. (Round your percentage answer to 1 decimal place. Omit the "$" & "%" signs in your response.) A B C D Investment cost $ 48,000 $ 30,000 $ 49,000 $ Estimated salvage value 8,000 5,000 2,000 Average estimated net income 5,000 5,600 4,500 Return on average investment % 24 % 20 % 20 %
Carlin Company, which uses net present value to analyze investments, requires a 10% minimum rate of return. A staff assistant recently calculated a $740,000 machine's net present value to be $106,500, excluding the impact of straight-line depreciation. FV of 1 (i= 10%, n = 7): FV of a series of $1 cash flows (i W 10%, n = 7): PV of $1 (i= 10%; n = 7): PV of a series of $1 cash flows (i = 10%, n= 7): 1.949 9.487 0.513 4.868 If Carlin ignores Income taxes and the machine is expected to have a seven-year service life, the correct net present value of the machine would be:
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3. Compute Project Y’s accounting rate of return. The numerator drop down options are: accounts receivable, annual income, average investment, average total assets, cost of goods sold, current assets, current liabilities, net sales, total assets The denominator dropdown options are: accounts receivable, annual income, average investment, average total assets,

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