Nestor Company is considering the purchase of an asset for $100,000. It is expected to produce the following net cash flows. The cash flows occur evenly throughout each year. Year 1 Year 2 Year 3 Year 4 Year 5 Annual Net Cash Flows $ 40,000 $ 40,000 $ 35,000 $ 35,000 $ 30,000 Compute the payback period for this investment. (Round to two decimal places.) Multiple Choice 2.85 years. 2.57 years.

Nestor Company is considering the purchase of an asset for $100,000. It is expected to produce the following net cash flows. The cash flows occur evenly throughout each year. Year 1 Year 2 Year 3 Year 4 Year 5 Annual Net Cash Flows $ 40,000 $ 40,000 $ 35,000 $ 35,000 $ 30,000 Compute the payback period for this investment. (Round to two decimal places.) Multiple Choice 2.85 years. 2.57 years.

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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Sterling Corporation has borrowed $84,000 that must be repaid in two years. This $84,000 is to be invested in an eight-year project with an estimated annual net cash flow of $14,000. The payback period for this investment is: Multiple Choice Two years. Six years. Eight years. Indeterminable with the given information.
Using the previous table, enter the correct factor for three periods at 5%: Periodic payment x Factor = Present value $6,000 x = $16,338 The controller at Ross has determined that the company could save $6,000 per year in engineering costs by purchasing a new machine. The new machine would last 12 years and provide the aforementioned annual monetary benefit throughout its entire life. Assuming the interest rate at which Ross purchases this type of machinery is 9%, what is the maximum amount the company should pay for the machine? $fill in the blank 5aca5ff34fa005f_2 (Hint: This is basically a present value of an ordinary annuity problem as highlighted above.) Assume that the actual cost of the machine is $50,000. Weighing the present value of the benefits against the cost of the machine, should Ross purchase this piece of machinery? Use snippets to answer
Please
1. A mechanical device will cost $30,000 when purchased. Maintenance will cost $2,000 each year. The device will generate revenues of $5,000 each year for five years. At the end of the fifth year, the salvage value of the device is $6,500. Draw and simplify the cash flow diagram. Calculate: (a) the present value and (b) the equivalent annual cost of the cash flows using a discount rate of 12%.
Project A requires an original investment of $64,300. The project will yield cash flows of $19,600 per year for seven years. Project B has a calculated net present value of $3,760 over a four-year life. Project A could be sold at the end of four years for a price of $14,000. Below is a table for the present value of $1 at Compound interest. Year 6% 10% 12% 1 0.943 0.909 0.893 2 0.890 0.826 0.797 3 0.840 0.751 0.712 4 0.792 0.683 0.636 5 0.747 0.621 0.567 Below is a table for the present value of an annuity of $1 at compound interest. Year 6% 10% 12% 1 0.943 0.909 0.893 2 1.833 1.736 1.690 3 2.673 2.487 2.402 4 3.465 3.170 3.037 5 4.212 3.791 3.605 Use the tables above. (a) Using the present value tables above, determine the net present value of Project A over a four-year life with salvage value assuming a minimum rate of return of 12%. Round your answer to two decimal places. Enter negative values as negative numbers.$fill in the blank 1 (b) Which…
The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment: Operating Net Cash Year Income Flow 1 $18,750 $93,750 2 18,750 93,750 3 18,750 93,750 4 18,750 93,750 5 18,750 93,750 The cash payback period for this investment a. 4 years Xb. 3 years c. 5 years d. 20 years
An apartment property that will be held for 10 years has the following forecasted cash flows before taxes: 1 2 3 4 $ 5 2,760 2,720 2,686 2,659 2,636 $13,387 $23,199 $88,400 EOP $90,500 6 7 8 9 10 2,581 It is expected that the end of year 10 sales proceeds before taxes will be $39,697. How much initial investment can an equity investor pay for the equity portion if the investor requires a 15-percent, before-tax return? $ 2,619 2,604 2,594 2,587
The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment: Year 1 2 $18,750 18,750 18,750 18,750 18,750 The average rate of return for this investment 3 4 Operating Income 5 Net Cash Flow $93,750 93,750 93,750 93,750 93,750
Compute the payback statistic for Project A if the appropriate cost of capital is 9 percent and the maximum allowable payback period is four years. (Round your answer to 2 decimal places.) Project A Time: 0 1 2 3 4 5 Cash flow: −$2,100 $790 $810 $740 $520 $320 Payback: ? Years
Munabhai
Lanham Incorporated recently invested in a project with a 3-year life span. The net present value was $9,000 and annual cash inflows were $21,000 for year 1; $24,000 for year 2; and $27,000 for year 3. The initial investment for the project, assuming a 15% required rate of return, was Year Present Value of 1 at 15% PV of an Annuity of 1 at 15% 1 .870 .870 2 .756 1.626 3 .658 2.283
You have been asked to estimate the market value of an income-producing property. The table below provides 5 years of projected cash flows for the property. Use the discounted cash flow approach to income valuation to calculate the market value. Assume that you sell the property at the end of year 5 and that the net proceeds from the sale are $5 million. Also assume that the discount rate is 10%. PGI EGI NOI Year 1 $4.18 million $750,000 $780,000 $811,200 $637,500 $663,000 $689,520 $318,750 $331,500 $344,760 $6.11 million $4.12 million Year 2 $4.40 million Year 3 Year 4 $843,648 $717,101 $358,550 Year 5 $877,394 $745,785 $372,892

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