Mester Corporation has provided the following Information concerning a capital budgeting project: After-tax discount rate 13% Tax rate 30% Expected life of the project Investment required in equipment $ 84,000 Salvage value of equipment Annual sales Annual cash operating expenses One-time renovation expense in year 3 $ 185,000 $ 130, 000 $ 25,000 Click here to vlew Exhibit 7B-1 to determine the appropriate discount factor(s) using tables. The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the Initial Investments. The company takes Income taxes Into account in Its capital budgeting. The net present value of the project is closest to: (Round Intermedlate calculations and final answer to the nearest dollar amount.) Multiple Choice $77,700 $36,332 $121,108 $37,108

Mester Corporation has provided the following Information concerning a capital budgeting project: After-tax discount rate 13% Tax rate 30% Expected life of the project Investment required in equipment $ 84,000 Salvage value of equipment Annual sales Annual cash operating expenses One-time renovation expense in year 3 $ 185,000 $ 130, 000 $ 25,000 Click here to vlew Exhibit 7B-1 to determine the appropriate discount factor(s) using tables. The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the Initial Investments. The company takes Income taxes Into account in Its capital budgeting. The net present value of the project is closest to: (Round Intermedlate calculations and final answer to the nearest dollar amount.) Multiple Choice $77,700 $36,332 $121,108 $37,108

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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Assume the followling Information for a capital budgeting proposal with a five-year time horizon: Initial investment: Cost of equipment (zero salvage value) $ 560,000 Annual revenues and costs: $ 300, 000 $ 130,000 $ 50,000 $ 40,000 Sales revenues Variable expenses Depreciation expense Fixed out-of-pocket costs Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided. If the company's discount rate is 12%, then the net present value for this Investment is closest to: Multiple Choice $271,600. $(171,600). $1271,600). $191,350).
Assume the following information for a capital budgeting proposal with a five-year time horizon: Initial investment: Cost of equipment (zero salvage value) $ 570,000 Annual revenues and costs: Sales revenues $ 300,000 Variable expenses $ 130,000 Depreciation expense $ 50,000 Fixed out-of-pocket costs $ 40,000 Click here to view Exhibit 14B-1 and Exhibit 14B-2 to determine the appropriate discount factor(s) using the tables provided. This proposal’s internal rate of return is closest to: Multiple Choice 4%. 9%. 2%. 7%.
Assume the following information for a capital budgeting proposal with a five-year time horizon: Initial investment: Cost of equipment (zero salvage value) $ 460,000 Annual revenues and costs: Sales revenues $ 300,000 Variable expenses $ 130,000 Depreciation expense $ 50,000 Fixed out-of-pocket costs $ 40,000 Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using the tables provided. This proposal’s internal rate of return is closest to:
Assume the following information for a capital budgeting proposal with a five-year time horizon: Initial investment: Cost of equipment (zero salvage value) $ 500,000 Annual revenues and costs: $ 300,000 $ 130,000 $ 50,000 $ 40,000 Sales revenues Variable expenses Depreciation expense Fixed out-of-pocket costs 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 12%, then the net present value for this investment is closest to: Multiple Choice $211,600. $(31,350). $(111,600). $(211,600).
Assume the following information for a capital budgeting proposal with a five-year time horizon: Initial investment: Cost of equipment (zero salvage value) $ 530,000 Annual revenues and costs: Sales revenues $ 300,000 Variable expenses $ 130,000 Depreciation expense $ 50,000 Fixed out-of-pocket costs $ 40,000 Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided. If the company’s discount rate is 12%, then the net present value for this investment is closest to:
Information on four potential projects is given below: Projects A B C D Investment required $(350,000) $(390,000) $(450,000) $(480,000) Present value of cash inflows 535,000 590,000 670,000 730,000 Net present value $185,000 200,000 $220,000 $250,000 Ignore income taxes Required: Compute the project profitability index for each project. Rank the projects in terms of preference.
Information on four investment proposals is given below: Investment required Present value of cash inflows Net present value Life of the project 4 Required: 1. Compute the project profitability index for each investment proposal. (Round your answers to 2 decimal places.) 2. Rank the proposals in terms of preference. Investment Proposal A BUD C Project Profitability Index Investment Proposal A D $(106,000) $(116,000) $(86,000) $(144,000) 142,040 178,640 118,680 213,120 $36,048 $ 62,640 $ 32,680 $ 69,120 5 years 7 years years 6 years Rank Preference:
You are given the following financial information related to a capital investment project. What is the project's Year 1 Net Cash Flow? Sales revenues Depreciation Other operating costs Interest Exp Tax rate WACC Select one: a. $8,580 b. $8,900 c. $9,350 d. $9,463 e. $9,832 $22,250 $8,000 $12,000 $800 40.0% 12.0%
Required information [The following information applies to the questions displayed below.] The following capital expenditure projects have been proposed for management's consideration at Scott Inc. for the upcoming budget year: Use Table 6-4 and Table 6-5. (Use appropriate factor(s) from the tables provided. Round the PV factors to 4 decimals.) Project Year (s) D E $ (25,000) 5,000 5,000 5,000 5,000 5,000 5,000 $ 1,081 $ (25,000) $ (50,000) $ (50,000) 5,000 10,000 15,000 20,000 25,000 Initial investment $(100,000) 30,000 30,000 Amount of net cash return 16,000 16,000 16,000 16,000 16,000 10,000 15,000 10,000 10,000 6,000 15,000 15,000 5 Per year 6-10 15,000 NPV (14% discount rate) $ 2,942 Present value ratio 1.04 b. Calculate the present value ratio for projects B, C, D, and E. (Round your answers to 2 decimal places.) Project Present Value Ratio B D E
Basic Capital Budgeting Techniques Answer each independent question, (a) through (e).a. Project A costs $5,000 and will generate annual after-tax net cash inflows of $1,800 for 5 years.What is the payback period (in years, rounded to 2 decimal places) for this investment under theassumption that the cash inflows occur evenly throughout the year?b. Project B costs $5,000 and will generate after-tax cash inflows of $500 in year 1, $1,200 in year2, $2,000 in year 3, $2,500 in year 4, and $2,000 in year 5. What is the payback period (in years,rounded to 2 decimal places) for this investment assuming that the cash inflows occur evenlythroughout the year?c. Project C costs $5,000 and will generate net cash inflows of $2,500 before taxes each year for 5years. The firm uses straight-line depreciation with no salvage value and is subject to a 25% taxrate. What is the payback period (in years, and rounded to 2 decimal places) under the assumptionthat all cash inflows occur evenly throughout the…
You are given the following cash flows for a project. Assuming a cost of capital of 12.84 percent. determine the profitability index for this project. Year 0 1 2 3 4 5 O 14981 O 1.68/7 O1.7508 1.6245 1.5613 Cash Flow -$1,115.00 $554.00 $622.00 $648 00 $426.00 $216.00
Complete the projected income statement for the first five years of the project. Fill in the following details , Determine the PAT of the project as a banker will you finance them on the basis of PAT Year 1 2 3 4 Capacity utilization (%) 55 65 75 85 85 Sales Operating expenses Material Salaries Marketing & other 119 137 155 173 173 expenses PBDIT Depreciation 236.92 180.10 137.38 105.20 80.98 Prelm. Exp. Wloff 10 10 10 10 10 PBIT Int. on TL Int. on WC loan 4.50 4.50 4.50 4.50 4.50

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