Lignin is a basic component of almost any plant that grows, so it is one of the most abundant organic compounds in the world. Almost anything derived from oil can be made out of lignin. The question is “can we do it cost-effectively and consistently?” A startup company has developed a process to derive plastics, carbon fiber, and other advanced materials from lignin. The cash flow diagram for this process is shown below (in $ millions). If the company's hurdle rate (MARR) is 20% per year, is this a profitable undertaking? The diagram is a cash flow timeline representing cash inflows and outflows over a period of 10 years. Here is a detailed explanation of the timeline, including the notation and values depicted:- The timeline begins at year 0 and extends to year 9, with "EOY" indicating the end of the year.- At year 0, there is a cash outflow of 60 units. This is denoted by a downward arrow labeled with 60.- At year 1, there is another cash outflow of 40 units, again marked with a downward arrow.- At year 2, there is a cash outflow of 20 units.- From year 3 onwards, the timeline shows cash inflows: - Year 4 has a cash inflow of 20 units. - Year 5 has a cash inflow of 40 units. - Year 6 has a cash inflow of 60 units. - Year 7 has a cash inflow of 80 units. - Year 8 has a cash inflow of 100 units. - Year 9 has a substantial cash inflow of 120 units.The arrows pointing upwards represent cash inflows, whereas the arrows pointing downwards represent cash outflows. The numeric labels next to each arrow indicate the magnitude of the cash flow for that specific year. This timeline is useful for understanding the financial transactions over the years and can be applied in financial analysis, investment appraisal, or budget planning.

Present worth is the equivalent value of cash flow from the project based on time value of money and…

lignin is a basic component of almost any plant that grows, so it is one of the most abundant organic compounds in world. Almost anything derived from oil can be made out of lignin. The question is "can we do it cost-effectively Ind consistently?" A startup company has developed a process to derive plastics, carbon fiber and other advanced materials from lignin. The cash flow diagram for this process is shown below (in $ millions). If the company's hurdle ate (MARR) is 20% per year, is this a profitable undertaking? Click the icon to view the diagram for cash flows. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 20 per year. be present worth of the venture in illion (Pound to two decimal places)

lignin is a basic component of almost any plant that grows, so it is one of the most abundant organic compounds in world. Almost anything derived from oil can be made out of lignin. The question is "can we do it cost-effectively Ind consistently?" A startup company has developed a process to derive plastics, carbon fiber and other advanced materials from lignin. The cash flow diagram for this process is shown below (in $ millions). If the company's hurdle ate (MARR) is 20% per year, is this a profitable undertaking? Click the icon to view the diagram for cash flows. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 20 per year. be present worth of the venture in illion (Pound to two decimal places)

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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Arcmat plc owns a factory which at present is empty. Mrs X, a business strategist, has been working on a proposal for using the factory for doll manufacture. This will require complete modernisation. Mrs X is a little confused about project appraisal and has asked your advice about which of the following are relevant and incremental cash flows. 1) The future cost of modernising the factory.2) The $100,000 spent two months ago on a market survey investigating the demand for these plastic dolls.3) Machines to produce the dolls – cost $10m payable on delivery.4) Depreciation on the machines.5) Arcmat’s other product lines are expected to be more popular due to the complementary nature of the new doll range with these existing products – the net cash flow effect is anticipated at $1m. 6) Three senior managers will be drafted in from other divisions for a period of a year. 7) A proportion of the US head office costs. 8) The tax saving due to the plant investment being offset against…
Lignin is a basic component of almost any plant that grows, so it is one of the most abundant organic compounds in the world. Almost anything derived from oil can be made out of lignin. The question is “can we do it cost effectively and consistently?” A startup company has developed a process to derive plastics, carbon fiber, and other advanced materials from lignin. The cash-flow diagram for this process is shown below (in $ millions). If the company’s hurdle rate (MARR) is 20% per year, is this a profitable undertaking?
Mad Scientist, Inc. is considering investing into the nanotechnology business. After conducting a detailed due diligence process, the company's board decided that the current cost of entry into the nanotechnology business is too high. The board also thinks that the commercialization of technological advancements will eventually drive costs down and the company should get into the nanotech business one or two years from now, when they can realize a higher NPV on their investment. Given the above, the board has chosen the option to: Expand Abandon Delay
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Webmasters.com has developed a powerful new server that would be used for corporations’ Internet activities. It would cost $10 million at Year 0 to buy the equipment necessary to manufacture the server. The project would require net working capital at the beginning of each year in an amount equal to 10% of the year’s projected sales; for example, NWC0 10% Sales1. The servers would sell for $24,000 per unit, and Webmasters believes that variable costs would amount to $17,500 per unit. After Year 1, the sales price and variable costs will increase at the inflation rate of 3%. The company’s non-variable costs would be $1 million in Year 1 and would increase with inflation. The server project would have a life of 4 years. If the project is undertaken, it must be continued for the entire 4 years. Also, the project’s returns are expected to be highly correlated with returns on the firm’s other assets. The firm believes it could sell 1,000 units per year. The equipment would be depreciated…
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Pinder Co., Ltd. is considering investing $500, 000 to build a factory to produce electric bicycles. Pinder Co., Ltd. has signed a contract with a large retailer that guarantees that Pinder Co., Ltd. will get $50 for every bicycle sold, in addition to all production - related costs. This means that the annual cash flow generated by the production of bicycles will be $50 multiplied by the number of bicycles sold. In exchange for this guarantee, the retailer will take over the factory at a price of $200, 000 in five years. Pinder Co., Ltd. is expected to sell 7, 000 bicycles every year in the next five years. Assume that the discount rate of Pinder Co., Ltd. is 10%. How much do the sales of bicycles need to be reduced before this project reduces the wealth of the shareholders of Pinder Co., Ltd. ?
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You are considering buying a machine to produce widgets (again!). It takes you one year to finetune the machine so that it produces exactly the kind of widgets you want. The machine costs $40,000 today and produces 100,000 widgets in year 2. (You cannot produce in year 1 because you have to fine-tune the machine first.) Expected revenues are $1 per widget. The cost of producing widgets depends on the type of gas the machine uses. The machine uses one unit of gas per widget produced. In its current version the machine runs on a gas called "Gas A". The price of "Gas A" in year 2 is uncertain and will be known only at the beginning of year 2. This price will be either $0.75 or $0.25 per unit of gas with equal probability. All revenues and costs (except the cost of the machine) accrue at the end of year 2. The discount rate is 10%. a) What is the NPV of the project? b) The manufacturer of the machine offers you a device that can be attached to the machine. You will have to buy the device…

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