Parker & Stone, Incorporated, is looking at setting up a new manufacturing plant in South Park to produce garden tools. The companybought some land six years ago for $7.4 million in anticipation of using it as a warehouse and distribution site, but the company hassince decided to rent facilities elsewhere. If the land were sold today, the company would net $10.2 million. The company now wantsto build its new manufacturing plant on this land; the plant will cost $21.4 million to build, and the site requires $890,000 worth ofgrading before it is suitable for construction. What is the proper cash flow amount to use as the initial investment in fixed assets whenevaluating this project?Note: Do not round intermediate calculations and enter your answer in dollars, not millions, rounded to the nearest whole number,e.g., 1,234,567.Answer is complete but not entirely correct.Cash flow$32,490,000 x

The cash flow is monitoring the money coming in and going out. A positive amount is achieved when…

grading before it is suitable for construction. What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project? Note: Do not round intermediate calculations and enter your answer in dollars, not millions, rounded to the nearest whole number, e.g. 1.234 567

grading before it is suitable for construction. What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project? Note: Do not round intermediate calculations and enter your answer in dollars, not millions, rounded to the nearest whole number, e.g. 1.234 567

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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Subject :- Accounting
The payback period is a non - discounted cash flow technique that measures: a. The time required to recover the initial investment b. The profitability of the project c. The net present value of the project d. The internal rate of return of the project
Which of the following statements is CORRECT? The discounted payback method recognizes all cash flows over a project's life, and it also adjusts these cash flows to account for the time value of money. The regular payback method was, years ago, widely used, but virtually no companies even calculate the payback today. The regular payback is useful as an indicator of a project's liquidity because it gives managers an idea of how long it will take to recover the funds invested in a project. The regular payback does not consider cash flows beyond the payback year, but the discounted payback overcomes this defect. The regular payback method recognizes all cash flows over a project's life.
solve these 2 pratice problems
Which of the following statements is true? O The salvage value of new equipment should not be considered when using the internal rate of return method to evaluate a project. O The internal rate of return method assumes that the cash flows generated by a project are reinvested at a rate of return that equals the company's cost of capital. O The profitability index and the internal rate of return will always result in the same preference ranking for investment projects. O In calculating the profitability index, the initial investment in the project should be reduced by any proceeds from the sale of old equipment. O None of the above statements is true.
In the estimation of incremental cash flows for a new project, several costs and issues are considered. In reference to the lecture materials for cash flow estimation, list the seven important issues to be kept track of in estimating incremental cash flows for expansion, replacement, or new capital projects. [No explanation is required for this part.]
A characteristic of the payback method is that it: (See your Chapter 25 notes, page 9) Uses accrual accounting inflows in the numerator of the calculation Uses the estimated expected useful life of the asset in the denominator of the calculation Incorporates cash flows received after the payback period has been reached Is based on accounting income Incorporates the time value of money Ignores total project profitability
In my accounting class I am learning to find accounting rate of return. To solve for this I subtracted net cash flow- the salvage value divided by the initial investment. Have I done something incorrect?
22)
Which of the following statements is FALSE? A. When evaluating a capital budgeting decision, we generally include interest expense. B. Only include as incremental expenses in your capital budgeting analysis the additional overhead expenses that arise because of the decision to take on the project. C. Many projects use a resource that the company already owns. O D. As a practical matter, to derive the forecasted cash flows of a project, financial managers often begin by forecasting earnings.
The IRR evaluation method assumes that cash flows from the project are reinvested at the same rate equal to the IRR. However, in reality the reinvested cash flows may not necessarily generate a return equal to the IRR. Thus, the modified IRR approach makes a more reasonable assumption other than the project's IRR. Consider the following situation: Celestial Crane Cosmetics is analyzing a project that requires an initial investment of $2,750,000. The project's expected cash flows are: Year Year 1 Year 2 Year 3 Year 4 Celestial Crane Cosmetics's WACC is 7%, and the project has the same risk as the firm's average project. Calculate this project's modified internal rate of return (MIRR): O 19.45% Cash Flow $350,000 -125,000 500,000 425,000 O -16.52% O24.02% O 20.59% If Celestial Crane Cosmetics's managers select projects based on the MIRR criterion, they should Which of the following statements about the relationship between the IRR and the MIRR is correct? O A typical firm's IRR will be…
or a typical capital investment project, the bulk of the investment-related cash outflow occurs: Multiple Choice During the initiation stage of the project (i.e., at time period 0). During the operation stage of the project (i.e., after time period 0). Either during the initiation stage or the operation stage. During neither the initiation stage nor the operation stage. Evenly during all three stages: initiation, operation, and final disposal.

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