PQR Ltd. is considering an equipment of $1,680,000, has a life of six year, and depreciation is straight line to zero over the use life of the project. Salvage value of the equipment is zero at the end of the project. Data of sales, price per unit, variable cost per unit and fixed cost is provided in the table below. Sales in units 88,500 $37.50 $20.35 $750,000 Price per unit Variable Cost per unit Fixed Cost Sales units, price, variable cost and fixed cost are all accurate to within +5%. Calculate the net present value (NPV) under the worst case scenario, when the required rate of return is 12% and tax rate is 30%.

PQR Ltd. is considering an equipment of $1,680,000, has a life of six year, and depreciation is straight line to zero over the use life of the project. Salvage value of the equipment is zero at the end of the project. Data of sales, price per unit, variable cost per unit and fixed cost is provided in the table below. Sales in units 88,500 $37.50 $20.35 $750,000 Price per unit Variable Cost per unit Fixed Cost Sales units, price, variable cost and fixed cost are all accurate to within +5%. Calculate the net present value (NPV) under the worst case scenario, when the required rate of return is 12% and tax rate is 30%.

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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Project Y requires a $321,000 investment for new machinery with a four-year life and no salvage value. The project yields the following annual results. Cash flows occur evenly within each year. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income Required: 1. Compute Project Y's annual net cash flows. Annual amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income Net cash flow Project Y $ 380,000 170,240 80,250 27,000 $ 102,510 Income Cash Flow $ 380,000 170,240 80,250 27,000 102,510
Dog Up! Franks is looking at a new sausage system with an installed cost of $685,000. This cost will be depreciated straight-line to zero over the project's 5-year life, at the end of which the sausage system can be scrapped for $91,000. The sausage system will save the firm $195,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $47,000. If the tax rate is 21 percent and the discount rate is 10 percent, what is the NPV of this project? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. NPV
A steel company is trying to decide between two industrial type cranes. Crane A and Crane B are mutually exclusive, and the economics estimates for each are shown below. Crane A Crane B Capital investment Annual expenses Salvage value Life, in years $15,000 $35,000 $5,000 $7,000 $4,000 20 If the MARR is 15%, 1-The present worth of the Crane A Capital investment and Annual expenses over 5 years is 65,295.83 39,765.3 -38,465.4 -14,085.8 Crane A 2-The present worth of Crane B over 20 years is $ 3-The present worth of Crane A over 20 years is $ 105,18.02 53,104.2 -66,296.5 Crane B 28,067.8 114 336.1 55,101.5 61,695.7 -40,6732 4-The recommended alternative is
Manashukh
Consider a four-year project with the following information: Initial fixed asset investment = $560,000; straight-line depreciation to zero over the four-year life; zero salvage value; price = $28; variable costs = $20; fixed costs = $200,000; quantity sold = 86,000 units; tax rate = 35 percent. How sensitive is OCF to changes in quantity sold? (Do not round intermediate calculations and round your answer to 2 decimal places,
Consider a project with the following information: Initial fixed asset investment = $550,000; straight-line depreciation to zero over the 4-year life; zero salvage value; price $54; variable costs = $35; fixed costs = $228,000, quantity sold = 116,000 units; tax rate = 23 percent. How sensitive is OCF to changes in quantity sold? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) AOCFIAQ 9.24
if a company is considering buying a system that costs 450,000 with an estimated 10-year life and a salvage value of 70,000, the estimated operating results with the new machine are, incremental revenue = 180,000, incremental expenses = 123,000 which is made up by, expenses other than depreciation = 85,000, depreciation (straight-line basis) = 38,000, and incremental income = 57,000, and all revenue and expenses other than depreciation use cash, how do I find the annual net cash flow, time of the payback period, return on investment percentage, and the Net present value, discounted at an annual rate of 6% (present value of $1 due in 10 years, discounted at 6%, is 0.558; present value of $1 received annually for 10 years, discounted at 6%, is 7.360)?
ELK, Inc. has compiled this information for a proposed project: sales price = $89 ±3 percent; fixed costs = $21,800 ±1 percent; variable cost per unit = $42.90 ±3 percent; sales quantity = 1,500 units ±5 percent; tax rate = 34 percent; initial investment in fixed assets = $36,500; depreciation method = straight-line to a zero book value over the project's life; project life = 4 years; salvage value of fixed assets = $0; net working capital requirement = $4,800, which will be recouped at the end of the project; discount rate = 12 percent. What is the project's net present value for the pessimistic scenario?
Egy Company is considering three capital expenditure projects. Relevant data for the projects are as follows Project Investment 22A $243.300 23A 274.200 24A 280,500 Project 22A Annual Income is constant over the life of the project. Each project is expected to have zero salvage value at the end of the project. Iggy Company uses the straight-line method of depreciation Click here to view the factor table (a) 23A Annual Income $16.860 Determine the internal rate of return for each project. (Round answers O decimal places, eg: 13%. For calculation purposes, use 5 decimal places as displayed in the factor table provided) 24A 20,730 15,700 (b) Life of Project 6 years 9 years 7 years Internal Rate of Return If Iggy Company's required rate of return is 11%, which projects are acceptable The following project(s) are acceptable
Raghubhai
None
A 5-year project is estimated to cost $700,000 and have no residual value. If the straight-line depreciation method is used and estimated total income is $231,000, determine the average rate of return giving effect to depreciation on the investment. Round your percentage answer to one decimal place (for example, a value of .1048 rounds to 10.5%).fill in the blank 1 %

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