Net Present Value and Competing ProjectsFor discount factors use Exhibit 12B.1 and Exhibit 12B.2.Spiro Hospital is investigating the possibility of investing in new dialysis equipment. Two local manufacturers of this equipment are beingconsidered as sources of the equipment. After-tax cash inflows for the two competing projects are as follows:YearPuro EquipmentBriggs Equipment1$320,000$120,0002280,000120,0003240,000320,0004160,000400,000120,000440,000Both projects require an initial investment of $560,000. In both cases, assume that the equipment has a life of 5 years with no salvage value.Required:Round present value calculations and your final answers to the nearest dollar.1. Assuming a discount rate of 12%, compute the net present value of each piece of equipment.Puro equipment:XBriggs equipment:2. A third option has surfaced for equipment purchased from an out-of-state supplier. The cost is also $560,000, but this equipment willproduce even cash flows over its 5-year life. What must the annual cash flow be for this equipment to be selected over the other two? Assumea 12% discount rate.Х per yearFeedbackV Check My WorkIncorrect Net Present ValueUse Exhibit 12B.1 and Exhibit 12B.2 to locate the present value of an annuity of $1, which is the amount to be multiplied times the futureannual cash flow amount.Each of the following scenarios is independent. Assume that all cash flows are after-tax cash flows.a. Campbell Manufacturing is considering the purchase of a new welding system. The cash benefits will be $480,000 per year. The systemcosts $3,350,000 and will last 10 years.b. Evee Cardenas is interested in investing in a women's specialty shop. The cost of the investment is $180,000. She estimates that thereturn from owning her own shop will be $40,000 per year. She estimates that the shop will have a useful life of 6 years.c. Barker Company calculated the NPV of a project and found it to be $63,900. The project's life was estimated to be 8 years. The requiredrate of return used for the NPV calculation was 10%. The project was expected to produce annual after-tax cash flows of $135,000.Required:1. Compute the NPV for Campbell Manufacturing, assuming a discount rate of 12%. If required, round all present value calculations to thenearest dollar. Use the minus sign to indicate a negative NPV.-637,894 VShould the company buy the new welding system?No v2. Conceptual Connection: Assuming a required rate of return of 8%, calculate the NPV for Evee Cardenas' investment. Round to thenearest dollar. If required, round all present value calculations to the nearest dollar. Use the minus sign to indicate a negative NPV.$4Should she invest?Yes vWhat if the estimated return was $135,000 per year? Calculate the new NPV for Evee Cardenas' investment. Would this affect the decision?What does this tell you about your analysis? Round to the nearest dollar.$444,089 VThe shop should now Vbe purchased. This reveals that the decision to accept or reject in this case is affected by differences inestimated cash flow v3. What was the required investment for Barker Company's project? Round to the nearest dollar. If required, round all present valuecalculations to the nearest dollar.656,316 VFeedbackV Check My WorkNet Present Value (NPV): NPV = P - IThe difference between the present value of future cash flows and the initial investment outlay.

The present value represents the current value of a future stream of cashflows. The net present…

Net Present Value and Competing Projects For discount factors use Exhibit 12B.1 and Exhibit 12B.2. Spiro Hospital is investigating the possibility of investing in new dialysis equipment. Two local manufacturers of this equipment are being considered as sources of the equipment. After-tax cash inflows for the two competing projects are as follows: Year Puro Equipment Briggs Equipment 1 $320,000 $120,000 280,000 120,000 3 240,000 320,000 4 160,000 400,000 5 120,000 440,000 Both projects require an initial investment of $560,000. In both cases, assume that the equipment has a life of 5 years with no salvage v Required: Round present value calculations and your final answers to the nearest dollar. 1. Assuming a discount rate of 12%, compute the net present value of each piece of equipment. Puro equipment: Briggs equipment: 2. A third option has surfaced for equipment purchased from an out-of-state supplier. The cost is also $560,000, but this equipment will produce even cash flows over its 5-year life. What must the annual cash flow be for this equipment to be selected over the other two? As a 12% discount rate. X per year

Net Present Value and Competing Projects For discount factors use Exhibit 12B.1 and Exhibit 12B.2. Spiro Hospital is investigating the possibility of investing in new dialysis equipment. Two local manufacturers of this equipment are being considered as sources of the equipment. After-tax cash inflows for the two competing projects are as follows: Year Puro Equipment Briggs Equipment 1 $320,000 $120,000 280,000 120,000 3 240,000 320,000 4 160,000 400,000 5 120,000 440,000 Both projects require an initial investment of $560,000. In both cases, assume that the equipment has a life of 5 years with no salvage v Required: Round present value calculations and your final answers to the nearest dollar. 1. Assuming a discount rate of 12%, compute the net present value of each piece of equipment. Puro equipment: Briggs equipment: 2. A third option has surfaced for equipment purchased from an out-of-state supplier. The cost is also $560,000, but this equipment will produce even cash flows over its 5-year life. What must the annual cash flow be for this equipment to be selected over the other two? As a 12% discount rate. X per year

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 1E: A firm has the opportunity to invest in a project having an initial outlay of $20,000. Net cash...

See similar textbooks

Similar questions

A cost-cutting project will decrease costs by $64300 a year. The annual depreciation will be $14,250 and the tax rate is 24 percent. What is the operating cash flow for this project? Mugle Choce O O $52136 $48,70 $45.296 $11.964 $1,804
A rural community/company is considering an investment in a cottage industry for which the net cash flows have been estimated as follows: i) What is the NPV if the discount rate is 10%? ii) Using discount rates of 10% and 14% calculate the IRR? iii) Is this project acceptable?
comment on the following table
Determine whether the following contract described below is worthwhile ofundertaking after taxes if at the end of the 3-year of ownership the contract, you expect to sellboth depreciable equipment and land. Use present worth analysis under MARR = 8% andeffective tax rate.
7
A process plant making 5000kg /day of a product selling for $1.75 per kg has annual directproduction costs of $2 million at 100 percent capacity and other fixed costs of $700,000. What isthe fixed charge per kg at the break-even point? If the selling price of the product is increased by10 percent, what is the dollar increase in net profit at full capacity if the income tax rate is 35percent of gross earnings?
Solve all this question......you will not solve all questions then I will give you down?? upvote...
PLS HELP ASAP ON BOTH
Calculate the payback period
Romantis Question Completion Status: Moving to another question will save this response. Question 10 Determine the net present worth of the cash flow shown in figure C if the interest i = 7% O-428 42 Ob.1403.39 0c-42) Ⓒd20.42 $100 $50 $70 $70 $70 $70
Need answers,ASAP 4. a sediment control project in nueva vizcaya requires an initial investment of 145,000, has a salvage value of 22,000 after six years, incurs annual expenses of 10,000, and provides annual revenue of 18,000. using a marr of 10%, determine the aw of this project.
Marco has an asset valued $100 now. There is a 20% depreciation rate. Landing the asset is possible, at 10% rate of return. See the following Figure: Temps restant 0:25:53 Consumption later ($) 39 26 110 80 0 0 FF (store grain; 20% losses) FF (lend at 10%) Marco's IC (medium utility) 65 68 Consumption now ($) MRS MRT Marco's IC (low utility) Marco's endowment 100 Say if the following statements are correct. Veuillez choisir au moins une réponse. a. By doing nothing, Marco can consume $68 now, and $80 later O b. By lending $65, Marco can consume