Lakelord Company is considering two mutually exclusive projects, A and B. Project A costs $94072 and is expected to generate $56196 in year one and $67090 in year two. Project B costs $118377 and is expected to generate $52195 in year one, $60452 in year two, $62774 in year three, and $47559 in year four. The firm's required rate of return for these projects is 0.060. The net present value for Project A is Instruction: Type ONLY your numerical answer in the unit of dollars, NO $ sign, NO comma, and round to the nearest whole number. E.g.. if your answer is $7,001.56, should type ONLY the number 7002, NEITHER 7,001.6, $7001.6, $7.001.6, NOR 7001.56. Otherwise, Blackboard will treat it as a wrong answer.

Lakelord Company is considering two mutually exclusive projects, A and B. Project A costs $94072 and is expected to generate $56196 in year one and $67090 in year two. Project B costs $118377 and is expected to generate $52195 in year one, $60452 in year two, $62774 in year three, and $47559 in year four. The firm's required rate of return for these projects is 0.060. The net present value for Project A is Instruction: Type ONLY your numerical answer in the unit of dollars, NO $ sign, NO comma, and round to the nearest whole number. E.g.. if your answer is $7,001.56, should type ONLY the number 7002, NEITHER 7,001.6, $7001.6, $7.001.6, NOR 7001.56. Otherwise, Blackboard will treat it as a wrong answer.

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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Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.1 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $2,150,000 in annual sales, with costs of $1,311,236. Required: If the tax rate is 35 percent, what is the OCF for this project? (Do not include the dollar sign ($). Enter your answer in dollars(e.g., 1,234,567), not millions of dollars.)
The proposed capital project calls for the Manufacturing Department to fully automate a production facility using one of two different advanced robotics systems. System A will incur development costs of $175,500. System B will cost $650,000 to develop. Both systems will be capitalized and amortized using a CCA rate of 10%. In addition, the firm believes that Net Working Capital will rise by $95,000 at time zero and then by an additional $9,000 at the end of each year for each year that the new system is operating (except at the end of the final year of the project). This applies to both alternatives. However, all of the increase in Net Working Capital will be recovered at the end of the project.If the new automated robotics system is put into use, the pre-tax cost savings each year are estimated as follows:Table 1Year System A System B1 $60,000 $350,0002 $50,000 $220,0003 $50,000 $240,0004 $50,000 $260,0005 $25,000 $280,000 As the financial analyst, you are required to draft a…
Delta Corporation wishes to invest in one of three transport infrastructure projects X, Y and Z with initial outlays of $800 million, $850 million and $930 million respectively. Projects are expected to produce each year free after-tax cash flows of $252 million for project X, project Y is expected to generate $250 million and project Z $290 million. Each project has depreciable lives of 10 years. The required rate of return is 15 percent. a. Use the Net Present Value Technique and determine the most appropriate investment for Delta Corporation. b. State four (4) reasons why Delta Corporation should not use the Payback Technique in order to determine the most viable infrastructure project. c. Describe two (2) factors that impact the demand for rail transport.
Axis Corp. is studying two mutually exclusive projects. Project Kelvin involves an overhaul of the existing system; it will cost $40,000 and generate cash inflows of $20,000 per year for the next 3 years. Project Thompson replaces the existing system; it will cost $285,000 and generate cash inflows of $65,000 per year for 6 years. Using a(n) 9.07% cost of capital, calculate each project's NPV, and make a recommendation based on your findings. The NPV of project Kevin is ____ The NPV of project Thompson is _____ Which project should the company choose?
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Project S requires an initial outlay at t = 0 of $19,000, and its expected cash flows would be $5,500 per year for 5 years. Mutually exclusive Project L requires an initial outlay at t = 0 of $37,000, and its expected cash flows would be $10,800 per year for 5 years. If both projects have a WACC of 13%, which project would you recommend? Select the correct answer. a. Project L, because the NPVL > NPVS. b. Neither Project S nor L, because each project's NPV < 0. c. Both Projects S and L, because both projects have NPV's > 0. d. Both Projects S and L, because both projects have IRR's > 0. e. Project S, because the NPVS > NPVL.
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