Labeau Products, Limited, of Perth, Australia, has $35,000 to invest. The company is trying to decide between two alternative uses for the funds as follows: Investment required Annual cash inflows Invest in Project X $ 35,000 Invest in Project Y $ 35,000 $ 12,000 Single cash inflow at the end of 6 years Life of the project $ 90,000 6 years 6 years The company's discount rate is 18%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net present value of Project X. 2. Compute the net present value of Project Y. 3. Which project would you recommend the company accept? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute the net present value of Project Y. (Negative amounts should be indicated by a minus sign. Round your final answer to the nearest whole dollar amount.) Net present value

Labeau Products, Limited, of Perth, Australia, has $35,000 to invest. The company is trying to decide between two alternative uses for the funds as follows: Investment required Annual cash inflows Invest in Project X $ 35,000 Invest in Project Y $ 35,000 $ 12,000 Single cash inflow at the end of 6 years Life of the project $ 90,000 6 years 6 years The company's discount rate is 18%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net present value of Project X. 2. Compute the net present value of Project Y. 3. Which project would you recommend the company accept? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute the net present value of Project Y. (Negative amounts should be indicated by a minus sign. Round your final answer to the nearest whole dollar amount.) Net present value

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 13E: Buena Vision Clinic is considering an investment that requires an outlay of 600,000 and promises a...

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Buena Vision Clinic is considering an investment that requires an outlay of 600,000 and promises a net cash inflow one year from now of 810,000. Assume the cost of capital is 10 percent. Required: 1. Break the 810,000 future cash inflow into three components: a. The return of the original investment b. The cost of capital c. The profit earned on the investment 2. Now, compute the present value of the profit earned on the investment. 3. Compute the NPV of the investment. Compare this with the present value of the profit computed in Requirement 2. What does this tell you about the meaning of NPV?
Assume that an investment of 100,000 produces a net cash flow of 60,000 per year for two years. The discount factor for year 1 is 0.89 and for year 2 is 0.80. The NPV is a. 0 b. 6,800 c. 1,400 d. (4,000)
The management of Ryland International Is considering Investing in a new facility and the following cash flows are expected to result from the investment: A. What Is the payback period of this uneven cash flow? B. Does your answer change if year 6s cash inflow changes to $920,000?
Your company is planning to purchase a new log splitter for is lawn and garden business. The new splitter has an initial investment of $180,000. It is expected to generate $25,000 of annual cash flows, provide incremental cash revenues of $150,000, and incur incremental cash expenses of $100,000 annually. What is the payback period and accounting rate of return (ARR)?
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Garnette Corp is considering the purchase of a new machine that will cost $342,000 and provide the following cash flows over the next five years: $99,000, $88,000, $92,000. $87,000, and $72,000. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return in Excel. see Appendix C.
Labeau Products, Ltd., of Perth, Australia, has $16,000 to invest. The company is trying to decide between two alternative uses for the funds as follows: Invest inProject X Invest inProject Y Investment required $ 16,000 $ 16,000 Annual cash inflows $ 5,000 Single cash inflow at the end of 6 years $ 35,000 Life of the project 6 years 6 years The company’s discount rate is 15%. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net present value of Project X. 2. Compute the net present value of Project Y. 3. Which project would you recommend the company accept? REQUIRED 1 Compute the net present value of Project X. (Negative amount should be indicated by a minus sign. Round your final answer to the nearest whole dollar amount.) Net present value REQUIRED 2 Compute the net present value of Project Y. (Negative…
Labeau Products, Ltd., of Perth, Australia, has $16,000 to invest. The company is trying to decide between two alternative uses for the funds as follows: Invest inProject X Invest inProject Y Investment required $ 16,000 $ 16,000 Annual cash inflows $ 5,000 Single cash inflow at the end of 6 years $ 35,000 Life of the project 6 years 6 years The company’s discount rate is 15%. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net present value of Project X. 2. Compute the net present value of Project Y. 3. Which project would you recommend the company accept? REQUIRED 1 Compute the net present value of Project X. (Negative amount should be indicated by a minus sign. Round your final answer to the nearest whole dollar amount.) Net present value REQUIRED 2 Compute the net present value of Project Y. (Negative…
Labeau Products, Ltd., of Perth, Australia, has $35,000 to invest. The company is trying to decide between two alternative uses for the funds as follows: Invest inProject X Invest inProject Y Investment required $ 35,000 $ 35,000 Annual cash inflows $ 12,000 Single cash inflow at the end of 6 years $ 90,000 Life of the project 6 years 6 years The company’s discount rate is 18%. Required: 1. Compute the net present value of Project X. 2. Compute the net present value of Project Y. 3. Which project would you recommend the company accept?
Project XYZ has a cost of $200,000 and provides the following annual cash inflows: year 1 $35,000; year 2 $25,000; year 3 $175,000; and year 4 $10,000. What is the net present value of this investment, assuming the discount rate is 8%? Multiple Choice $101,050 O $200,135 O $4,687 O $135
Annual cash inflows that will arise from two competing investment projects are given below: Investment A $ 3,000 4,000 5,000 6,000 $ 18,000 Year 1 2 3 4 The discount rate is 10% Click here to view Exhibit 148 1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables Required: Compute the present value of the cash inflows for each investment Year 1234 S S Investment B $6,000 5,000 4,000 3,000 $18,000 Present Value of Cash Flows Investment A 300 300 $ Investment B
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