Calibri11A A%Alignment Number Conditional Format asFormatting Table StylesCellCellsEditingPasteBIU-Clipboard aFontStylesB24feADE23Now1-724 Initial investment25 Annual cost savings26 Salvage value of the new machine27 Total cash flows28 Discount factor1.00029 Present value of the cash flows30 Net present value3132 Use Excel's PV function to compute the present value of the future cash flows33 Deduct the cost of the investment34 Net present value3536 3. Use Excel's RATE function to compute the project's internal rate of return3738 4. Compute the project's payback period.years3940 5. Compute the project's simple rate of return.41424344Sheet1...> Calibri11A A%в I UAlignment NumberConditional Format asCllCellsEditingPasteFormatting Table StylesClipboardFontStylesB24feABCD1 Laurman, Inc. is considering the following project:2 Required investment in equipment2$2,205,0003 Project life74 Salvage value225,00056 The project would provide net operating income each year as follows:7 Sales2,750,0008 Variable expenses9 Contribution margin10 Fixed expenses:1,600,0002$1,150,00011Salaries, rent and other fixed out-of pocket costs520,00012Depreciation13 Total fixed expenses350,000870,00014Net operating income280.0001516 Company discount rate18%1718 1. Compute the annual net cash inflow from the project.1920 2. Complete the table to compute the net present value of the investment.2122Year(s)23Now1-7Sheet1...>%24

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Laurman, Inc. is considering the following project: Required investment in equipment Project life 2,205,000 7 Salvage value 225,000 The project would provide net operating income each year as follows: Sales 2,750,000 Variable expenses 1,600,000 Contribution margin 1,150,000 Fixed expenses: Salaries, rent and other fixed out-of pocket costs 24 520,000 Depreciation 350,000 Total fixed expenses 870,000 Net operating income 280.000 Company discount rate 18% 1. Compute the annual net cash inflow from the project. 2. Complete the table to compute the net present value of the investment. %24

Laurman, Inc. is considering the following project: Required investment in equipment Project life 2,205,000 7 Salvage value 225,000 The project would provide net operating income each year as follows: Sales 2,750,000 Variable expenses 1,600,000 Contribution margin 1,150,000 Fixed expenses: Salaries, rent and other fixed out-of pocket costs 24 520,000 Depreciation 350,000 Total fixed expenses 870,000 Net operating income 280.000 Company discount rate 18% 1. Compute the annual net cash inflow from the project. 2. Complete the table to compute the net present value of the investment. %24

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Assume that a company is considering a $2,400,000 capital investment in a project that would earn net income for each of the next five years as follows: Sales Variable expenses Contribution margin $ 1,900,000 800,000 1,100,000 12:46 Fixed expenses: Out-of-pocket operating costs. $ 300,000 Depreciation 400,000 700,000 Net operating income $ 400,000 Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. If the company's discount rate is 21%, then the project's net present value is closest to
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