>\Gem Robotics is evaluating an investment in automated production lines for its factory. The project requires an initial investment of $800,000. The company expects cashinflows of $225,000 per year for 5 years. The company's target is a 18% ROI and a maximum payback period of 6 years. For each answer, provide your answer to twodecimal places. Enter % as whole numbers (i.e. 48.68% would be entered 48.68)What is the return on investment? 40.63What is the payback period? 3.56What is your recommendation? Invest

Recommendation: According to the financial indicators estimated, it is advisable for Gem Robotics to…

Answered: >\ Gem Robotics is evaluating an…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 15E: Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided...

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Caduceus Company is considering the purchase of a new piece of factory equipment that will cost $565,000 and will generate $135,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return In Excel, see Appendix C.
Gardner Denver Company is considering the purchase of a new piece of factory equipment that will cost $420,000 and will generate $95,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further Instructions on internal rate of return in Excel, see Appendix C.
Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated revenue producing life of 4 years. Falkland has a cost of capital of 8%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?
Consider a project with an initial investment (today, t = 0) of $200,975. This project will generate cash flows of $49,500 per year for the next 8 years, at which time (end of Year 8) the company will pay $50,000 to another for clean-up and disposal. What is the Profitability Index (PI) of the project if shareholders demand a 16.295% return? Answer with a number rounded to three decimal places, e.g., 4.0877% should be entered as 4.088.
Consider a project with an initial investment (today, t = 0) of $225,000. This project will generate cash flows of $68,750 per year for the next 6 years. The company will pay $50,000 to another for clean-up and disposal in Year 6. What is the Profitability Index (PI) of the project if shareholders demand 8.25% return? Answer in whole numbers, rounded to three decimal places.
You are responsible to manage an IS project with a 4-year horizon. The annal cost of the project is estimated at $40,000 per year, and a one-time costs of $120,000. The annual monetary benefit of the project is estimated at $96,000 per year with a discount rate of 6 percent. a. Calculate the overall return on investment (ROI) of the project. b. Perform a break-even analysis (BEA). At what year does break-even occur?
Kirklin Clinic is evaluating a project that costs $60,000 and has expected net cash inflows of $7,500 per year for eight years. The first inflow occurs one year after the cost outflow, and the project has a cost of capital of 12%. What is the project's MIRR? (hint: remember to put the answer as a percentage). 13.9% 5.5% O 3.2% 22.1% W
4. Your company is considering the introduction of a new product line. The initial investment required for this project is $500,000, and annual maintenance costs are anticipated to be $35,000. Annual operating costs will be directly proportional to the level of production at $7.50 per unit, and each unit of product can be sold for $50. If the MARR is 15% and the project has a life of 5 years, what is the minimum annual production level for which the project is economically viable?
Giant Equipment Ltd. is considering two projects to invest next year. Both projects have the same start-up costs. Project A will produce annual cash flow of $42 000 at the beginning of each year for eight years. Project B will produce cash flow of $48 000 at the end of each year for seven years. The company requires a 12% return. Required:a. Whichprojectshouldthecompanyselectandwhy?b. Which project should the company select if the interest rate is 14% andthe cash flow in Project B is also at the beginning of each year?Please give me subheading answer.
A company that manufactures rigid shaft couplings has $600,000 to invest. The company is considering three different projects that will yield the following rates of return:Project X iX = 24%Project Y iY = 18%Project Z iZ = 30%The initial investment required for each project is $100,000, $300,000, and $200,000, respectively. If the company’s MARR is 15% per year and thecompany invests in all three projects, what overall rate of return will the company make?
FastTrack Bikes, Inc. is thinking of developing a new composite road bike. Development will take six years and the cost is $199,500 per year. Once in production, the bike is expected to make $303,531 per year for 10 years. The cash inflows begin at the end of year 7. For parts a-c, assume the cost of capital is 10.5%. a. Calculate the NPV of this investment opportunity. Should the company make the investment? b. Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged. c. How long must development last to change the decision? For parts d-f, assume the cost of capital is 13.3%. d. Calculate the NPV of this investment opportunity. Should the company make the investment? e. How much must this cost of capital estimate deviate to change the decision? f. How long must development last to change the decision?
4

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