不NPV for varying costs of capital LePew Cosmetics is evaluating a new fragrance-mixing machine. The machine requires an initial investment of $320,000and will generate cash inflows of $61,850 per year for 8 years. If the cost of capital is 13%, calculate the net present value (NPV) and indicate whether toaccept or reject the machine.The NPV of the project is $ (Round to the nearest cent.)Should this project be accepted? (Select the best answer below.)No○ Yes

Initial Investment = ii = $320,000Cash Flow = cf = $61,850 Time = t = 8Cost of Capital = r = 13%

Answered: NPV for varying costs of capital LePew…

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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Using NPV to make capital investment decisions Holmes Industries is deciding whether to automate one phase of its production process. The manufacturing equipment has a six-year life and will cost $910,000. Projected net cash inflows are as follows: Requirements Compute this project’s NPV using Holmes’s 14% hurdle rate. Should Holmes invest in the equipment? Holmes could refurbish the equipment at the end of six years for $104,000. The refurbished equipment could be used one more year, providing $77,000 of net cash inflows in year 7. Additionally, the refurbished equipment would have a $55,000 residual value at the end of year 7. Should Holmes invest in the equipment and refurbish it after six years? (Hint: In addition to your answer to Requirement 1, discount the additional cash outflow and inflows back to the present value.)
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Bensington Glass Co. is considering the expansion of it spandrel glass business line. They plan to convert an unused space of their warehouse into additional manufacturing space. They estimate the initial investment will be $9,350,000 and expect the new production to create additional cash flows of $4,105,000 in year's one through ten. If Bensington Glass uses a discount rate of 15%, what is the project's discounted payback period? O 4.16 2.99 2.28 3.25
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Bruno's Lunch Counter is expanding and expects operating cash flows of $27,900 a year for 4 years as a result. This expansion requires $66,000 in new fixed assets. These assets will be worthless at the end of the project. In addition, the project requires $4,200 of net working capital throughout the life of the project. What is the net present value of this expansion project at a required rate of return of 10 percent? Multiple Choice $27,493 $22,439 $26,046 $21,108 $24,309
Calculate the net present value of each project (project A and B)
Dry-Sand Company is considering investing in a new project. The project will need an initial investment of $3,000,000 and will generate $1,800,000 (after-tax) cash flows for three years. Calculate the MIRR (modified internal rate of return) for the project if the cost of capital is 13%. 18.62% 23.43% 26.91% 28.72%
(Net present value calculation) Dowling Sportswear is considering building a new factory to produce aluminum baseball bats. This project would require an initial cash outlay of $6,000,000 and would generate annual net cash inflows of $1,100,000 per year for 9 years. Calculate the project's NPV using a discount rate of 5 percent. If the discount rate is 5 percent, then the project's NPV is $___________________(Round to the nearest dollar.)
Question: Big Steve's, maker of swizzle sticks, is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $105,000 and will generate net cash inflows of $19,000 per year for 8 years. a. What is the project's NPV using a discount rate of 8 percent? Should the project be accepted? Why or why not? b. What is the project's NPV using a discount rate of 17 percent? Should the project be accepted? Why or why not? c. What is this project's internal rate of return? Should the project be accepted? Why or why not?
a
Management of Daniel Jackson, a confectioner, is considering purchasing a new jelly bean-making machine at a cost of $256,144. They project that the cash flows from this investment will be $102,150 for the next seven years. If the appropriate discount rate is 14 percent, what is the IRR that Daniel Jackson management can expect on this project? (Do not round discount factors. Round other intermediate calculations to 0 decimal places e.g. 15 and final answer to 2 decimal places, e.g. 5.25%.)

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