lakeside winery is considering expanding its winemaking operations. the expansion will require new equipment costinf $400,000 that would be depreciatedd on a stragith line basis to a zero balance ovef the four hear life of the project. theproject requires $20,000 initially for net working capital all of ehhch will be recoupsed at the end of the project. theprojext operafing cash flow is $250,000 a year. WACC is 10%. what is the net present value of this project? a.252, 308 b.430295 c.386127 d.579100

To find the net present value (NPV) of the project, we follow these steps:1. Calculate the present…

Answered: lakeside winery is considering…

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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Courtney Limited has capital project opportunities each of which would require an initial investment of $400,000. Details for each opportunity are shown below. Investment in manufacturing equipment Investment 1 $400,000 Investment 2 Net annual cash inflows Investment in working capital Life of the project CCA $100,000 $400,000 $100,000 12 Years 30% 12 Years The robotic equipment would have a salvage value of $75,000 in 12 years. The equipment would be depreciated over 12 years. At the end of 12 years, the investment in working capital would be released for use elsewhere. The company requires an after-tax return of 12% on all investments. The tax rate is 30%. Required: Compute the net present value of each investment project. (Hint. Use Microsoft Excel to calculate the discount factor(s).) (Do not round intermediate calculations and PV factor. Round the final answers to the nearest whole dollar.) > Answer is complete but not entirely correct. Net present value Investment 1 $ 103,186 x…
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ang Enabled Ex Jessica's at Boulder jewelry store is considering expanding its operations. The expansion will require new equipment costing $651,000 that would be depreciated on a straight-line basis to zero over the 5-year life of the project. The equipment will have a market value of $169,000 at the end of the project. The project requires $39,000 initially for net working capital, which will be recovered at the end of the project. The operating cash flow (pre-tax) will be $165,300 a year. What is the net present value of this project if the relevant discount rate is 13 percent and the tax rate is 35 percent? -$29.866 -$25,031 -$27812 -$32.962 -$35,498
Melton Manufacturing Ltd is considering two alternative investment projects. The first project calls for amajor renovation of the company’s manufacturing facility. The second involves replacing just a fewobsolete pieces of equipment in the facility. The company will choose one project or the other this year,but it will not do both. The cash flows associated with each project appear below and the firm discountsproject cash flows at 10%.Year Renovate Replace0 –$4,000,000 –$1,300,0001 2,000,000 1,000,0002 2,000,000 700,0003 2,000,000 300,0004 2,000,000 150,0005 2,000,000 150,000 Calculate the profitability index (PI) of each project and based on this criterion, indicate whichproject you would recommend for acceptance.
Melton Manufacturing Ltd is considering two alternative investment projects. The first project calls for amajor renovation of the company’s manufacturing facility. The second involves replacing just a fewobsolete pieces of equipment in the facility. The company will choose one project or the other this year,but it will not do both. The cash flows associated with each project appear below and the firm discountsproject cash flows at 10%.Year Renovate Replace0 –$4,000,000 –$1,300,0001 2,000,000 1,000,0002 2,000,000 700,0003 2,000,000 300,0004 2,000,000 150,0005 2,000,000 150,000 Discuss the important elements to consider when deciding between these two projects.
Vaughn Company is considering two capital investment proposals. Estimates regarding each project are provided below- Project Soup Project Nuts Initial investment $390870 $600000 Annual net income 27000 45100 Net annual cash 90900 142000 inflow Estimated useful 4 years 5 years life Salvage value The cash payback period for Project Soup is
Perit Industries has $115,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Project A Project B Cost of equipment required $ 115,000 $ 0 Working capital investment required $ 0 $ 115,000 Annual cash inflows $ 21,000 $ 69,000 Salvage value of equipment in six years $ 8,700 $ 0 Life of the project 6 years 6 years The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries’ discount rate is 15%. 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 A. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.) 2. Compute the net present value of Project B. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.) 3. Which investment…
Quad Enterprises is considering a new 3-year expansion project that requires an initial fixed asset investment of $2.1 million. The fixed asset falls into the 3-year MACRS class (MACRS Table) and will have a market value of $159,600 after 3 years. The project requires an initial investment in net working capital of $228,000. The project is estimated to generate $1,824,000 in annual sales, with costs of $729,600. The tax rate is 25 percent and the required return on the project is 11 percent. Calculate the project net cash flow from year 0 to year 3.
A 7-year project is expected to provide annual sales of $221,000 with costs of $97,500. The equipment necessary for the project will cost $360,000 and will be depreciated on a straight-line method over the life of the project. You feel that both sales and costs are accurate to +/-15 percent. The tax rate is 21 percent. What is the annual operating cash flow for the worst-case scenario? es Multiple Choice $77,946 $44,504 0 $70,623 $129,329 $49.221
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Lakeside Winery is considering expanding its winemaking operations. The expansion will require new equipment costing $697,000 that would be depreciated on a straight-line basis to zero over the 5-year life of the project. The equipment will have a market value of $192,000 at the end of the project. The project requires $62,000 initially for net working capital, which will be recovered at the end of the project. The operating cash flow will be $187,600 a year. What is the net present value of this project if the relevant discount rate is 14 percent and the tax rate is 21 percent? Multiple Choice -$19,132 -$3,975 -$16,142 -$22,893 -$21,257
Perit Industries has $210,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Project A Project B Cost of equipment required $ 210,000 $0 Working capital investment required $0 $ 210,000 Annual cash inflows $ 30,000 $ 52,000 Salvage value of equipment in six years $ 9, 100 $ 0 Life of the project 6 years 6 years The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries' discount rate is 15%. 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 A. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.) 2. Compute the net present value of Project B. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.) 3. Which investment alternative (if either) would you…

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