The data in Table 3.1 below relates to state-of-the-art map reproduction equipmentthat the Department of Geographical & Environmental Science of the NationalUniversity of Lesotho hopes to purchase and to operate on a revenue generating basisusing seed capital borrowed from the University Bursary.Table 3,1Information on State-of-the-art Map Reproduction Equipment-Purchase cost of proposed equipmentM6 000 000-Estimated useful life of equipment8 years-Residual/scrap value at the end of useful life of M2 400 000equipment (i.e, end of year 8)-Estimated annual net cash revenue per year, which M110 000escalates by 5% per year from year 2 through toyear 8-Cost of capital15%(NB. Round discount factors to the nearest 2 decimal points)i)Calculate the present value of estimated annual cash revenues over the 8 years,ii)Calculate the present value of estimated residual/scrap value.ii)Calculate the Net Present Value (NPV) of the equipmentOn the basis of the NPV decision-rule, advice the Department of Geographical &Environmental Sciences on whether or not to proceed with the purchase of theequipment,iv)

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i) Calculate the present value of estimated annual cash revenues over the 8 years, ii) ii) Calculate the present value of estimated residual/scrap value. Calculate the Net Present Value (NPV) of the equipment

i) Calculate the present value of estimated annual cash revenues over the 8 years, ii) ii) Calculate the present value of estimated residual/scrap value. Calculate the Net Present Value (NPV) of the equipment

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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B2B Co. is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment is expected to cost $369,600 with a 8-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 147,840 units of the equipment's product each year. The expected annual income related to this equipment follows. Sales Costs Materials, labor, and overhead (except depreciation on new equipment) Depreciation on new equipment Selling and administrative expenses Total costs and expenses Pretax income Income taxes (30%) Net income If at least an 10% return on this investment must be earned, compute the net present value of this investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Chart Values are Based on: Select Chart n= j= Amount 8 10 % X PV Factor =
Subject: acounting
Discuss the effect on Free Cash Flow in each of the following situations. Assume that all other things remain constant. d) Increase in time over which capitalized expenses are depreciated e) Now only 60% of NWC is recoverable when a project winds up
Consider the following proposed capital investment in an engineering project and determine its (a) year-by-year ATCF, (b) after-tax AW, and (c) annual equivalent EVA.
Continental Railroad Company is evaluating three capital investment proposals by using the net present value method. Relevant data related to the proposals are summarized as follows: MaintenanceEquipment RampFacilities ComputerNetwork Amount to be invested $614,361 $418,741 $186,316 Annual net cash flows: Year 1 318,000 229,000 134,000 Year 2 296,000 206,000 92,000 Year 3 270,000 183,000 67,000 Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 Required: 1. Assuming that the desired rate of return is 20%, prepare a net present value analysis for each proposal. Use…
Here are cash flows for a project under consideration. C(0)= -$8160, C(1)=6180, and C(2)=20280. What is the IRR of the project?
2) The capital investment required in a certain project is $ 5000. The project production profile is as follows: year Production 20 25 15 12 10 Calculate the depreciation schedules using the following techniques: Straight-line depreciation. - Sum of the year's digits. - Declining balance -Units of production.
An organisation is considering a capital investment in new equipment . • The estimateed cash flows are as follows: • Year Cash flow • $ •0 ( $240000) •1 80000 •2 32000 •3 80000 •4 40000 •5 24000 •Calculate the IRR of the project to assess whether it should be undertaken.
a) Find the relevant cash flows for each of the relevant periods (Time 0 – Time 9). Operating cash flows for Time 1-8 should include: Earnings before taxes Taxes (30%) Net Income Depreciation Free Cash flows b) Calculate the NPV, IRR and Payback Period for the cash flows and indicate whether BGM should pursue the mining project or not.
A firm has projected the following financials for a possible project: YEAR Sales Cost of Goods S&A Depreciation Investment in NWC Investment in Gross PPE 0 1,130.00 105,468.00 1 132,716.00 Submit 549.00 2 62,780.00 62,780.00 30,000.00 30,000.00 30,000.00 21,093.60 21,093.60 21,093.60 Answer format: Currency: Round to: 2 decimal places. 3 132,716.00 132,716.00 132,716.00 549.00 What is the NPV of the project? (Hint: Be careful about rounding the WACC here!) 4 62,780,00 62,780.00 62,780.00 30,000.00 549.00 21,093.60 549.00 5 132,716.00 The firm has a capital structure of 37.00% debt and 63.00% equity. The cost of debt is 9.00%, while the cost of equity is estimated at 15.00%. The tax rate facing the firm is 38.00%. (Assume that you can't recover the final NWC position in year 5. i.e. only consider the change in NWC for each year) 30,000.00 21,093.60 549.00
Hh1.
Company Express S. A. asks you to construct cash flows for following three (3) investment projects, containing following information:PROJECT 1a. Sales (in ThCh$):- Year 1: 90,000- Year 2: 55,000- Year 3: 75,000- Year 4: 190,000b. Cost of sales is estimated at 53% of sales.c. Depreciation for year is ThCh$ 15,000 per period (period 1 to 3). In year 4 there is a sale of machinery that results in a gain on sale of non-current assets of ThCh$ 9,800. Total depreciation for year 4 is ThCh$ 12,500.d. Administrative expenses are equivalent to 17% of sales.e. In period 0 there is an investment of ThCh$ 58,000.f. There is credit financing of ThCh$ 32,000 which is amortized in equal parts of ThCh$ 8,000 per period with a financial expense of ThCh$ 3,700 per period.g. There is an investment in working capital of ThCh$ 24,000 in period 0, which is recovered in period 4.h. In period 4 there is an investment in land of ThCh$ 40,000.i. Income tax rate is 17%. Calculate: cash flow per period. Please…

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