devrat Lambert Manufacturing has $120,000 to invest in either Project A or Project B. The following data are available on these projects(Ignore income taxes.):Cost of equipment needed nowWorking capital investment needednowAnnual net operating cash inflowsSalvage value of equipment in 6years.Show Transcribed TextProject A Project B$120,000$70,000$50,000$45,000Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using the tables provided.Both projects have a useful life of 6 years. At the end of 6 years, the working capital investment will be released for use elsewhere.Lambert's discount rate is 14%.The net present value of Project B is closest to:Multiple Choice$77,805$127,805$55,005$105,005$ 50,000$ 15,000

Npv is also known as Net Present value. It is a capital budegting technique which helps in decision…

Answered: Lambert Manufacturing has $120,000 to…

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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METHODS THAT CONSIDER TIME VALUE OF MONEY Two investment proposals have been made and the following data thereon are given: Project ALPHA Project BETA Investment P123,417 P155,934 Depreciable assets included in the investment figure 60,000 72,000 Economic life 8 years 12 years Annual sales revenue P65,000 P78,000 Annual out-of-pocket operating cost 36,000 42,500 Income tax rate 35% Cost of capital 10% Determine which proposal is the better one based on: a. Internal rate of return b. Net present value c. Profitability index d. Discounted payback period
Information for two alternative projects involving machinery investments follows: Project 1 Initial investment Salvage value Annual income $ (128,000) Ө Project 2 $ (98,000) 18,000 14,080 11,600 a. Compute accounting rate of return for each project. b. Based on accounting rate of return, which project is preferred? Complete this question by entering your answers in the tabs below. Required A Required B Compute accounting rate of return for each project. Project 1 Project 2 Numerator: Accounting Rate of Return Denominator: Required A Required B Based on accounting rate of return, which project is preferred? Based on accounting rate of return, is preferred. = Accounting rate of return
Information for two alternative projects involving machinery investments follows: Project 2 Project 1 $ (125,000) $ (95,000) 15,000 14,850 Initial investment Salvage value Annual income a. Compute accounting rate of return for each project. b. Based on accounting rate of return, which project is preferred? Complete this question by entering your answers in the tabs below. Required A Required B 0 16,250 Compute accounting rate of return for each project. Project 1 Project 2 Numerator: Accounting Rate of Return 1 7 Denominator: (Required A W Required B > Accounting rate of return
You are given the following cash flow information for Project A TV Inflows Year 0 PV Outflows -$150,000.00 1 Project A -$150,000.00 $80,000.00 -$25,000.00 $50,000.00 2 $80,000.00 -$30,000.00 $75,000.00 Totals 3 4 5 6 O 19.33% $75,000.00 Now assume that the project's cost of capital is 16.0 percent, but that its true reinvestment rate is 24.0 percent. Given this information, determine the project's modified internal rate of return (MIRR). Ⓒ 18.56% 5 pts
McGloire Construction is analyzing its capital expenditure proposals for thepurchase of equipment in the coming year. The capital budget is limited to $5,000,000 for theyear. Lori Alleyne, staff analyst at McGloire’s, is preparing an analysis of the three projectsunder consideration by Joyanne McGloire, the company’s owner. A B C D 1 Project A Project B Project C 2 Projected cash outflow 3 Net initial investment $3 000 000 $1 500 000 $4 000 000 4 5 Projected cash inflows 6 Year 1 $1 000 000 $400 000 $2 000 000 7 Year 2 1 000 000 900 000 2 000 000 8 Year 3 1 000 000 800 000 200 000 9 Year 4 1 000 000 100 000 10 11 Required rate of return 10% 10% 10% 1. Because the company’s cash is limited, McGloire thinks the payback methodshould be used to choose between the capital budgeting projects.a. List two benefits and two limitations of using the payback method to choosebetween projects? b. Calculate the payback…
ic Yo NS io cer ist bun ngs nnée Current Attempt in Progress Blossom Manufacturing Co. is evaluating two projects. The company uses payback criteria of three years or less. Project A has a cost of $905,000, and project B's cost is $1,247,300. Cash flows from both projects are given in the following table. Year 1 2 3 4 Project A $86,212 313,562 427,594 285,552 Project B $586,212 413,277 231,199 What are their discounted payback periods? (Round answers to 2 decimal places, e.g. 15.25. If discounted payback period exceeds life of the project, enter 0.00 for the answer.) Discounted payback period of project A Discounted payback period of project B will he accepted with a discount rate of 8 percent? átv zoom
Apply WACC in IRR. Leeward Sailboats is reviewing the following new boat line: Click on the Icon in order to copy its content into a spreadsheet. Category T₁ Investment Net working capital change Operating cash flow Salvage To - $10,244,762 - $569,000 $3,277,000 What is the IRR of the project? 10.5% (Round to two decimal places.) T2 $3,884,000 T3 $569,000 $4,570,000 $615,000 At what adjusted WACCS will the company accept this project? Hint: Find the IRR of the project, and use it as the maximum adjusted WACC for accepting the project.
Allenwood Inc. has provided the following data concerning an investment project that it is considering: Initial investment Annual cash flow Salvage value at the end of the project Expected life of the project Discount rate $ 140,000 O $20,462 O $67,000 O $160,516 O $6.292 $ 54,000 $ 11,000 4 15 per year years % Use Exhibit 7B-1 and Exhibit 78-2 in class videos or in your textbook page 394-395, to determine the appropriate discount factor(s). The net present value of the project is closest to:
) McGloire Construction is analyzing its capital expenditure proposals for the purchase of equipment in the coming year. The capital budget is limited to $5,000,000 for the year. Lori Alleyne, staff analyst at McGloire’s, is preparing an analysis of the three projects under consideration by Joyanne McGloire, the company’s owner.A B C D1 Project A Project B Project C2 Projected cash outflow3 Net initial investment $3 000 000 $1 500 000 $4 000 00045 Projected cash inflows6 Year 1 $1 000 000 $ 400 000 $2 000 0007 Year 2 1 000 000 900 000 2 000 0008 Year 3 1 000 000 800 000 200 0009 Year 4 1 000 000 100 0001011 Required rate of return 10% 10% 10%1. Because the company’s cash is limited, McGloire thinks the paybackmethod should be used to choose between the capital budgeting projects.a. List two benefits and two limitations of using the payback method to choose between projects? b. Calculate the payback period for each of the three projects. Ignore income taxes. Using the payback method,…
Project X (Videotapes of the Weather Report) ($10,000 investment) Project Y (Slow-Motion Replays of Commercials) ($30,000 investment) Year Cash Flow Year Cash Flow 1 $5,000 1 $15,000 2 3,000 8,000 ........ 3 4,000 9,000 4 3,600 4 11,000 .. Compute the payback period (PB), net present value (NPV), internal rate of return (IRR), profitability index (PI) and excess of IRR over k. Assume k at 10%. Decide on which Project will you choose and why?
Perit Industries has $155,000 to invest in one of the following two projects: Cost of equipment required Working capital investment required Annual cash inflows Salvage value of equipment in six years Life of the project Project A $ 155,000 $ 25,000 $ 8,600 6 1. Net present value project A 2. Net present value project B 3. Which investment alternative (if either) would you recommend that the company accept? X Answer is complete but not entirely correct. Project B $0 $ 155,000 $ 40,000 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 14%. 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. Note: 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. $(53,971) 70,527 X Project B $0…
You work for Whittenerg Inc., which is considering a new project whose data are shown below. What is the project's Year 1 cash flow? Sales revenues, each year $64,500 Depreciation $8,000 Other operating costs $25,000 Interest expense $8,000 Tax rate 35.0% a. $20,017 b. $20,715 c. $22,577 d. $19,318 e. $23,275

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