Assume that a company has provided the following information regarding a capital investment opportunity:$ 150,000$ 30,000$ 160,000$ 70,000$ 20,000Initial investment in equipmentInitial investment in working capitalEstimated annual salesEstimated annual cash operating expensesRepairs and maintenance in 3 yearsClick here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided.The equipment has a four-year useful life and no salvage value. The working capital will be released at the end of the project. The company's tax rate is 30%. Assuming a discount rate of 20%, the present value of all relevant cash flows from Year 2 is closest to:Multiple Choice$43.722$53,822.$41.630.$51,530.

The cash flow from the operation would be the after deduction of operating expenses and taxes and…

Initial investment in equipment Enitial investment in working capital $ 150,000 $ 30,000 $ 160,000 $ 70,000 $ 20,000 Estimated annual sales Estimated annual cash operating expenses tepairs and maintenance in 3 years ck here to view Exhibt 148-1 and Exhibit 148-2. to determine the appropriate discount factorts) using the tables provided. e equipment has a four-year useful ife and no salvage value. The working capital will be released at the end of the project. Multiple Choice $43.722 $53.822 $41630. $5L530.

Initial investment in equipment Enitial investment in working capital $ 150,000 $ 30,000 $ 160,000 $ 70,000 $ 20,000 Estimated annual sales Estimated annual cash operating expenses tepairs and maintenance in 3 years ck here to view Exhibt 148-1 and Exhibit 148-2. to determine the appropriate discount factorts) using the tables provided. e equipment has a four-year useful ife and no salvage value. The working capital will be released at the end of the project. Multiple Choice $43.722 $53.822 $41630. $5L530.

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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Assume that a company is considering a capital investment project with a four-year time horizon and the following cash flows: Cost of new equipment $ 210,000 Working capital required $ 50,000 Annual net cash inflows $ 100,000 Maintenance and repairs in third year $ 40,000 Salvage value of equipment in fourth year $ 30,000 Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. Assuming the company’s required rate of return is 12%, the profitability index of the project is closest to:
4. A company is considering one of the following 3 mutually exclusive alternatives. Project Initial Investment operating Cost per year Revenue per year Salvage value Life (years) A B $63,000.00 $61,000.00 $15,000.00 $11,000.00 $38,000.00 $26,000.00 $12,000.00 $17,500.00 6 4 C $85,000.00 $13,000.00 $35,000.00 $16,000.00 12 If the company uses a MARR of 8%, which of the alternatives will they select using Present Worth Analysis?
The information below relates to the purchase of equipment: investment in the project: $10,000 Net annual cash inflows: 2,400 Working capital required: 5,000 Salvage value of the equipment: 1,000 Life of the project: 8 years At the completion of the project, the working capital will be released for use elsewhere. Compute the net present value of the project, using a discount rate of 10% $606 $8,271 ($1,729) $1,729
24
An engineering analysis by net present worth (NPW) is to be made for the purchase of two devices, A and B. If an 8% interest rate is used, recommend the device to be purchased.
Help please The following details relate to a particular asset Future Cash flows (per annum) 90,000 Expected period of cash flows 3 years Discount Rate 10% Open market price of asset 210,000 Cost of asset 630,000 Accumulated depreciation 450,000 Calculate both : a)determine the recoverable amount for this asset b)Determine whether the asset is impaired
Should WLW lease or construct their own production facilityOption 1: ConstructCosts to incur:Buying land, construct building and getting ready for use$ 360,000Taxes, insurance, and repairs (per year)$ 34,000Intended years of use20Projected market value in 20 years$ 1,600,000Maximum down payment WLW can make$ 500,000Remainder in four payments of;$ 160,000Revenue opportunityBuilding annex will be leased to a tenant and will generate a lease revenue (per year) for 10 years$60,000Option 2: LeaseIntended years of use20First lease payment due now$ 90,000Rest of the lease payments (years 2-20)$ 90,000Operating costs to be paid by WLWRepairs (annual)$ 9,000Maintenance (annual)$ 26,000Initial one-time deposit, will be returned in year 20$ 40,000Required rate of return15%Methodology:The consulting team is proposing to perform a NPV analysis and determine the benefit to leasing or construction.Based on the analysis, they will recommend the preferred option (construction or leasing).
expense of $500. Consider a yearly Two machines are evaluated for a new project, consider a yearly interest rate of 6% and the information described in the following table. Determine EUAC for both alternatives and determine the best option. Purchase cost Salvage value Duration Machine A Machine B $10,000 $15,000 $1,250 $1,950 5 years 10 years 11 13 L
Compare three alternatives on the basis of their capitalized costs at /= 8% per year and select the best alternative. Alternative E F G $-460,000 $-30,000 $90,000 4 First Cost AOC, per Year Salvage Value Life, Years $-80,000 $-65,000 $40,000 2 The capitalized cost of alternative E is $ The best alternative is (Click to select) ▼ alternative F is $ $-960,000 $-3,000 $450,000 ∞0 and alternative G is $
Problems 43 and 44 are based on the following statement: Used New machine machine Initial Cost 15,000 40,000 ($) Annual 8,000 2,000 operating cost ($/year) Salvage 5,000 10,000 value ($) Life (years) 3 6 Use an interest rate of 10% per year 43. The present worth of the new machine is closest to: (A) $43,630 (B) $43,066 (C) $45,210 (D) $49,660 44. To compare the machines on the basis of a present worth analysis, the present worth values to use are: (A) PWused $31,139, PW new = $43,066 (B) PWused $31,139, PW new = $37,461 (C) PWused $54,533, PW new = $43,066 (D) PWused $54,533, PW new = $37,461
Explorer Company is considering the following investment proposal: Initial investment: Depreciable assets (straight-line) $28,800 Working capital 3,200 Operations (per year for 4 years): Cash receipts $20,000 Cash expenditures 8,800 Disinvestment: Salvage value of equipment $2,400 Recovery of working capital 3,200 Discount rate: 10 percent Additional information for interest rate of 10 percent and four time periods: Present value of $1 0.68301 Present value of an annuity of $1 3.16987 What is the net present value for the investment? Select one: a. $14,658 b. $35,503 c. $3,825 d. $7,327
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