Problem 12-6 Spreadsheet Problem: Project Cash Flows (LG12-3)KADS, Incorporated has spent $500,000 on research to develop a new computer game. The firm is planning to spend $300,000 on amachine to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated using bonusdepreciated; they total $60,000. The machine has an expected life of three years, a $85,000 estimated resale value, and falls underthe MACRS seven-year class life. Revenue from the new game is expected to be $700,000 per year, with costs of $350,000 per year.The firm has a tax rate of 21 percent, has an opportunity cost of capital of 11 percent, and expects net working capital to increase by$150,000 at the beginning of the project.What will the cash flows for this project be?Note: Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.YearFCF023

KADS, Incorporated's effort to create a new computer game raises a number of financial concerns that…

Answered: Problem 12-6 Spreadsheet Problem:…

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter9: Capital Budgeting Techniques

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Problem 12PROB

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Problem 12-6 Spreadsheet Problem: Project Cash Flows (LG12-3) KADS, Incorporated has spent $430,000 on research to develop a new computer game. The firm is planning to spend $230,000 on a machine to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated using bonus depreciated; they total $53,000. The machine has an expected life of three years, a $78,000 estimated resale value, and falls under the MACRS seven-year class life. Revenue from the new game is expected to be $630,000 per year, with costs of $280,000 per year. The firm has a tax rate of 21 percent, has an opportunity cost of capital of 12 percent, and expects net working capital to increase by $115,000 at the beginning of the project. What will the cash flows for this project be? Note: Negative amounts should be indicated by a minus sign. Round your answers to decimal places. Answer is complete but not entirely correct. FCF Year 0 1 2 $ (398,000.00) S 284,992.55 $ 291,054.41…
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Question z You are working as a finance manager for Fire Fox Transport Ltd. The company is considering to invest in one of the two following projects to buy a new equipment for their storage which is expected to boost the company’s revenue. Each equipment will last 5 years and have no salvage value at the end. The company’s required rate of return for all investment projects is 9.5%. The cash flows of the projects are provided below. Equipment 1 Equipment 2 Cost $157,000 $182,000 Future Cash Flows Year 1 Year 2 Year 3 Year 4 Year 5 67 000 82 000 78 000 64 000 56 000 83 000 94 000 80 000 77 000 73 000 Required: a) Identify which option of equipment should the company accept based on Net Present Value (NPV) method? b) Identify which option of equipment should the company accept based on discounted pay back method if the payback criterion is maximum 3…
Gallant Sports s considering the purchase of a new rock-climbing facility. The company estimates that the construction will require an initial outlay of $350,000. Other cash flows are estimated as follows: Assuming the company limits its analysis to four years due to economic uncertainties, determine the net present value of the rock-climbing facility. Should the company develop the facility if the required rate of return is 6%?
Hh1. Account
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Basic Concepts Sato Company is considering an investment in equipment that is capable of producing more efficiently than the current technology. The outlay required is $2,200,000. The equipment is expected to last five years and will have no salvage value. The expected cash flows associated with the project are as follows: Year Cash Revenues Cash Expenses 1 $2,940,000 $2,280,000 2 2,940,000 2,280,000 3 2,940,000 2,280,000 4 2,940,000 2,280,000 5 2,940,000 2,280,000 The present value tables provided in Exhibit 19B.1 and Exhibit 19B.2 must be used to solve the following problems. Required: 1. Compute the project's payback period. If required, round your answer to two decimal places.fill in the blank 1 years 2. Compute the project's accounting rate of return. Enter your answer as a whole percentage value (for example, 16% should be entered as "16" in the answer box).fill in the blank 2 % 3. Compute the project's net present value, assuming a required rate of return of 10…
what will the cash flows be for this project? the year 0 amount is correct! -414,000-Year 0 KADS, Incorporated has spent $440,000 on research to develop a new computer game. The firm is planning to spend $240,000 on a machine to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated using bonus depreciated; they total $54,000. The machine has an expected life of three years, a $79,000 estimated resale value, and falls under the MACRS seven-year class life. Revenue from the new game is expected to be $640,000 per year, with costs of $290,000 per year. The firm has a tax rate of 21 percent, has an opportunity cost of capital of 11 percent, and expects net working capital to increase by $120,000 at the beginning of the project. What will the cash flows for this project be? Note: Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. FCF Year 0 (414,000.00) 2 3
Question 1 Booth Company wants to buy a numerically controlled (NC) machine to be used in producing specially machined parts for manufacturers of tractors. The outlay required is $960,000. The NC equipment will last 5 years with no expected salvage value. The expected after-tax cash flows associated with the project follow: Year Cash Revenues Cash Expenses 1 $1,275,000 $900,000 1,475,000 1,015,000 3 1,650,000 1,200,000 4 1,358,000 1,118,000 5 1,550,000 1,225,000 Required: A. Compute the payback period for the NC equipment. B. Compute the NC equipment's ARR. C. Compute the investment's NPV, assuming a required rate of return of 10%. D. Compute the investment's IRR.
NPV A clinic is considering the possibility of two new purchases: new MRI equipment and new biopsy equipment. Each project requires an investment of $421,900. The expected life for each is five years with no expected salvage value. The net cash inflows associated with the two independent projects are as follows: Year MRI Equipment Biopsy Equipment 1 $208,000 $55,000 2 107,000 58,000 3 165,000 95,000 4 96,000 182,000 5 52,000 272,000 The present value tables provided in Exhibit 19B.1 and Exhibit 19B.2 must be used to solve the following problems. Required: Compute the net present value of each project, assuming a required rate of 8 percent. If the NPV is negative, enter your answer as a negative value. NPV MRI equipment $fill in the blank Biopsy equipment $fill in the blank
412 Follow the format shown in Exhibit 12B.1 and Exhibit 12B.2 as you complete the requirement below. Blaylock Company wants to buy a numerically controlled (NC) machine to be used in producing specially machined parts for manufacturers of trenching machines. The outlay required is $654,842. The NC equipment will last five years with no expected salvage value. The expected after-tax cash flows associated with the project follow: Year Cash Revenues Cash Expenses 1 $1,200,000 $1,000,000 2 1,200,000 1,000,000 3 1,200,000 1,000,000 4 1,200,000 1,000,000 5 1,200,000 1,000,000 Required: Compute the Investment's Internal Rate of return. Enter as a percent. If required, round your answer to the nearest whole percent.IRR = %
1 Applecross Dental Services is investigating expanding its operations by acquiring additional teeth cleaning equipment. The equipment would cost $146,000 and management has estimated that it would result in net cash inflows of $14,400 per year. The equipment would have a 15-year useful life with an expected salvage value of $14,200. (Ignore income taxes.) Required: 1. Compute the equipment's IRR. (Hint: Use Microsoft Excel to calculate the discount factor(s).) (Do not round intermediate calculations and round your final answer to 1 decimal place.) Internal rate of return % 2-a. Assume that instead of $14,400, the salvage value in 15 years for the new equipment will be $0. Compute the IRR under this new assumption. (Do not round intermediate calculations and round your final answer to 1 decimal place.) Internal rate of retum % 2-b. This part of the question is not part of your Connect assignment.

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