Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is15%. After careful study. Oakmont estimated the following costs and revenues for the new product:Cost of equipment neededWorking capital neededOverhaul of the equipment in two yearsSalvage value of the equipment in four yearsAnnual revenues and costs:Sales revenues$ 145,000$ 63,000$ 9,500$ 13,500$ 280,000$ 135,000Variable expensesFixed out-of-pocket operating costs$ 73,000When the project concludes in four years the working capital will be released for investment elsewhere within the company.Click here to view Exhibit 128-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables.Required:Calculate the net present value of this investment opportunity. (Round your final answer to the nearest whole dollar amount.)Net present value

NPV (Net Present Value) is a financial metric used to evaluate the profitability of an investment by…

Answered: Oakmont Company has an opportunity to…

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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Required information [The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project that would require a $2,800,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 14%. The project would provide net operating income in each of five years as follows: Sales Variable expenses Contribution margin $ 2,845,000 1,109,000 1,736,000 Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs $ 799,000 Depreciation 560,000 Total fixed expenses 1,359,000 $ 377,000 Net operating income Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using table. 6. What is the project's internal rate of return? Project's internal rate of return %
Factor Company is planning to add a new product to its line. To manufacture this product, the company needs to buy a new machine at a $491,000 cost with an expected four-year life and a $20,000 salvage value Additional annual information for this new product line follows PV of $. EX of St. PVA of Stand EVA of $ (Use appropriate factors) from the tables provided) Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation Machinery 1. Determine income and net cash flow for each year of this machine's life. 2. Compute this machine's payback period, assuming that cash flows occur evenly throughout each year 3. Compute net present value for this machine using a discount rate of 7% Complete this question by entering your answers in the tabs below. Required 1 Required 2 year 4 Required 3 Compute net present value for this machine using a discount rate of 7%. (Do not round intermediate calculations. Negative amounts should be entered with a minus sign.…
Required information [The following information applies to the questions displayed below] Cardinal Company is considering a five-year project that would require a $2,975,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 14%. The project would provide net operating income in each of five years as follows: Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of- pocket costs $ 735,000 595,000 2. What are the project's annual net cash inflows? $ 2,735,000 1,000,000 1,735,000 Depreciation Total fixed expenses Net operating income Click here to view Exhibit 7B-1 and Exhibit 7B-2. to determine the appropriate discount factor(s) using table. 1,330,000 $ 405,000
Required information [The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project that would require a $2,975,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 14%. The project would provide net operating income in each of five years as follows: Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out- of-pocket costs Depreciation Total fixed expenses Net operating income $ 735,000 595,000 $ 2,735,000 1,000,000 1,735,000 1,330,000 $ 405,000 Click here to view Exhibit 148-1 and Exhibit 148-2. to determine the appropriate discount factor(s) using table. O Higher O Lower O Same 10. If the equipment had a salvage value of $300,000 at the end of five years, would you expect the project's payback period to be higher, lower, or the same?
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is 18% and it estimated the following costs and revenues for the new product: Cost of equipment needed Working capital needed Overhaul of the equipment in two years. Salvage value of the equipment in four years Annual revenues and costs: Sales revenues $ 220,000 $ 81,000 $ 7,500 $ 10,500 $ 370,000 $ 180,000 $ 82,000 Variable expenses Fixed out-of-pocket operating costs When the project concludes in four years, the working capital will be released for investment elsewhere within the company. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: Calculate the net present value of this investment opportunity. Note: Round your final answer to the nearest whole dollar amount. Net present value
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is 17%. After careful study, Oakmont estimated the following costs and revenues for the new product: Cost of equipment needed Working capital needed Overhaul of the equipment in two years Salvage value of the equipment in four years Annual revenues and costs: Sales revenues $ 155,000 $ 65,000 $ 9,000 $ 14,500 $ 300,000 Variable expenses $ 145,000 Fixed out-of-pocket operating costs $ 75,000 When the project concludes in four years the working capital will be released for investment elsewhere within the company. Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using tables. Net present value Required: Calculate the net present value of this investment opportunity. Note: Round your final answer to the nearest whole dollar amount.
B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs $240,000 and has a 12-year life and no salvage value. The expected annual income for each year from this equipment follows. Sales of new product $ 150,000 Expenses Materials, labor, and overhead (except depreciation) 80,000 Depreciation—Equipment 20,000 Selling, general, and administrative expenses 15,000 Income $ 35,000 (a) Compute the annual net cash flow.(b) Compute the payback period.(c) Compute the accounting rate of return for this equipment.
Required information [The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project that would require a $2,810,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 16%. The project would provide net operating income in each of five years as follows: Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs Depreciation Total fixed expenses Net operating income $782,000 562,000 Simple rate of return $2,847,000 1,121,000 1,726,000 Click here to view Exhibit 128-1 and Exhibit 128-2, to determine the appropriate discount factor(s) using table. % 1,344,000 $ 382,000 15. Assume a postaudit showed that all estimates (including total sales) were exactly correct except for the variable expense ratio. which actually turned out to be 45%. What was the project's actual simple rate of return? (Round your answer to 2…
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is 15%. After careful study, Oakmont estimated the following costs and revenues for the new product: Cost of equipment needed Working capital needed Overhaul of the equipment in two years Salvage value of the equipment in four years Annual revenues and costs: Sales revenues Variable expenses Fixed out-of-pocket operating costs $ 130,000 $ 60,000 8,000 $ 12,000 $ When the project concludes in four years the working capital will be released for investment elsewhere within the company. $250,000 $ 120,000 $ 70,000 Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables. $ Required: Calculate the net present value of this investment opportunity. (Round discount factor(s) to 3 decimal places.) Net present value 3
Stranger Things Corporation is planning to add a new product to its line. To package this product, the company needs to buy a new machine at a cost of $518,000 cost with an expected four-year life and $15,000 salvage value. Additional annual information for this new product line follows: Sales of new product Cost of Goods Sold (does not include depreciation) Selling, general, and administrative expenses (does not include depreciation) Required: (1) Determine income and net cash flow for each year of this machine's life. $ 1,750,000 1,248,000 (2) Compute this machine's payback period, assuming that cash flows occur evenly throughout each year. 315,000 (3) Compute net present value for this machine using a discount rate of 5%. Use the Present Value Tables below.
Saved Cardinal Company is considering a project that would require a $2,765,000 investment in equipment with a useful life of five years. At the end of five years, the project would terminate and the equipment would be sold for its salvage value of $200,000. The company's discount rate is 12%. The project would provide net operating income each year as follows: Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs Depreciation Total fixed expenses $2,861,000 1,101,000 1,760,000 $ 705,000 513,000 03:08:19 1,218,000 $ 542,000 Net operating income Required: What is the project's payback period? (Round your answer to 2 decimal places.) Project's payback period years
B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs $144,000 and has a 12-year life and no salvage value. The expected annual income for each year from this equipment follows. Sales of new product $ 90,000 Expenses Materials, labor, and overhead (except depreciation) 48,000 Depreciation—Equipment 12,000 Selling, general, and administrative expenses 9,000 Income $ 21,000 (a) Compute the annual net cash flow.(b) Compute the payback period.(c) Compute the accounting rate of return for this equipment. I could not include an image for "C" please answer seperately

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