Germaine Metals is considering installing a new molding machine which is expected to produce operating cash flows of $52,200 per year for 7 years. At the beginning of the project, inventory will increase by $19,800, accounts receivables will increase by $15,400, and accounts payable will increase by $19,000. At the end of the project, net working capital will return to the level it was prior to undertaking the new project. The initial cost of the molding machine is $262,000. The equipment will be depreciated straight-line to a zero book value over the life of the project. The equipment will be salvaged at the end of the project creating an aftertax cash flow of $42,400. What is the net present value of this project given a required return of 12.7 percent? Change in NWC = $ CFO = $ CF7 = $ NPV = $

Germaine Metals is considering installing a new molding machine which is expected to produce operating cash flows of $52,200 per year for 7 years. At the beginning of the project, inventory will increase by $19,800, accounts receivables will increase by $15,400, and accounts payable will increase by $19,000. At the end of the project, net working capital will return to the level it was prior to undertaking the new project. The initial cost of the molding machine is $262,000. The equipment will be depreciated straight-line to a zero book value over the life of the project. The equipment will be salvaged at the end of the project creating an aftertax cash flow of $42,400. What is the net present value of this project given a required return of 12.7 percent? Change in NWC = $ CFO = $ CF7 = $ NPV = $

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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Management of Crane Home Furnishings is considering acquiring a new machine that can create customized window treatments. The equipment will cost $209,550 and will generate cash flows of $83,750 over each of the next six years. If the cost of capital is 11 percent, what is the MIRR on this project?
A project will produce an operating cash flow of $78,900 a year for five years. The initial cash outlay for equipment will be $110,530. The net after-tax salvage value of $33,147 will be received at the end of the project. The project requires $17,938 of net working capital that will be fully recovered at the end of the project. What is the net present value of the project if the required rate of return is 12 percent?
An initial $400,000 investment in new production equipment will yield annual positive cash flows of $150,000 in year 1. Annual cash flows will decrease by $25,000 each year thereafter. The new equipment has a useful life of 7 years. MARR is 10% per year. Determine the DPBP of this project.
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Management of Blossom Home Furnishings is considering acquiring a new machine that can create customized window treatments. The equipment will cost $225,550 and will generate cash flows of $97,750 over each of the next six years. If the cost of capital is 12 percent, what is the MIRR on this project?

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