Problem 24-5B Payback period, break-even time, and net present value A1 P1 P3 Aster Company is considering an investment in technology to improve its operations. The investment costs $800,000 and yields the following net cash flows. Management requires a 10% return on its investments. Net cash flows Required 1. Determine the payback period for this investment. 2. Determine the break-even time for this investment. 3. Determine the net present value for this investment. Year 1 $300,000 Year 2 $350,000 Year 3 $400,000 Year 4 $450,000

Problem 24-5B Payback period, break-even time, and net present value A1 P1 P3 Aster Company is considering an investment in technology to improve its operations. The investment costs $800,000 and yields the following net cash flows. Management requires a 10% return on its investments. Net cash flows Required 1. Determine the payback period for this investment. 2. Determine the break-even time for this investment. 3. Determine the net present value for this investment. Year 1 $300,000 Year 2 $350,000 Year 3 $400,000 Year 4 $450,000

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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QUESTION 34 Advanced Products is considering the purchase of a computer-aided manufacturing system that requires an initial investment of $1,750,000 and is expected to provide an increase in net income of $200,000 and average annual cash benefits and savings of $250,000 each year for the next 10 years. Their current cost of capital is 10%. Following are selected factors from tables for 10 years at 10%: FV of $1 FVOA PV of $1 PVOA 2.59374 15.93742 0.38554 6.14457 Required: Compute the net present value of the investment $0 $750,000 $(213,857.50) $1,000,000
Ashvin
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Problem 10-3 Sensitivity Analysis (LO2) A project currently generates sales of $5.3 million, variable costs equal to 50% of sales, and fixed costs of $2.1 million. The firm's tax rate is 35% What are the effects of the following changes on after-tax profits and cash flows? a. Sales increase from $5.3 million to $8.3 million (Round your answers to 3 decimal places. Enter your answers in millions of dollars) After-tax profits After-tax cash flow by by After tax profits After-tax cash flow b. Variable costs increase to 59% of sales (Round your answers to 3 decimal places. Enter your answers in millions of dollars.) milion million bry by million million
Exercise 24-20A (Algo) IRR for investment using Excel LO P4 OptiLux is considering investing in an automated manufacturing system. The system requires an initial investment of $5.0 million, has a 20-year life, and will have zero salvage value. If the system is implemented, the company will save $780,000 per year in direct labor costs. The company requires a 12% return from its investments. Using Excel, compute the internal rate of return for the proposed investment. (Round your answer to 2 decimal places.) Internal rate of return
a
Problem 10.05 Your answer is partially correct. Try again. Sheridan Incorporated management is considering investing in two alternative production systems. The systems are mutually exclusive, and the cost of the new equipment and the resulting cash flows are shown in the accompanying table. The firm uses a 8 percent discount rate for production system projects. Year System 1 System 2 -$14,800 -$46,900 1 14,800 34,900 2 14,800 34,900 14,800 34,900 Calculate NPV. (Enter negative amounts using negative sign, e.g. -45.25. Do not round discount factors. Round answers to 2 decimal places, e.g. 15.25.) 38082.31 77802.20 NPV of System 1 is $ and NPV of System 2 is $
Ch 25 Pro. 2 Please give me step by step instructions to calculate the answer. Average Rate of Return—Cost Savings Master Fab Inc. is considering an investment in equipment that will replace direct labor. The equipment has a cost of $99,000 with a $9,000 residual value and a 10-year life. The equipment will replace one employee who has an average wage of $22,950 per year. In addition, the equipment will have operating and energy costs of $4,770 per year. Determine the average rate of return on the equipment, giving effect to straight-line depreciation on the investment. If required, round to the nearest whole percent.__________________ % Liz C
Exercise 16-36 Payback Period; Uneven Cash Flows (Section 3) (LO 16-1, 16-6, 16-8) Allegience Insurance Company's management is considering an advertising program that would require an initial expenditure of $165,500 and bring in additional sales over the next five years. The projected additional sales revenue in year 1 is $75,000, with associated expenses of $25,000. The additional sales revenue and expenses from the advertising program are projected to increase by 10 percent each year. Allegience's tax rate is 40 percent. (Hint: The $165,500 advertising cost is an expense.) Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) Required: 1. Compute the payback period for the advertising program. 2. Calculate the advertising program's net present value, assuming an after-tax hurdle rate of 10 percent. (Round your intermediate and final answers to the nearest whole dollar.) 1. Payback period years 2. Net present value
Subject: accounting
Exercise 10-10A (Algo) Using the internal rate of return to compare investment opportunities LO 10-3 Velma and Keota (V&K) is a partnership that owns a small company. It is considering two alternative investment opportunitles. The first Investment opportunity will have a five-year useful life, will cost $9,869.02, and will generate expected cash inflows of $3,300 per year. The second investment is expected to have a useful life of three years, will cost $8,703.98, and will generate expected cash inflows of $3.500 per year. Assume that V&K has the funds available to accept only one of the opportunities. (PV.of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required o. Calculate the internal rate of return of each investment opportunity. (Do not round intermediate calculations.) b. Based on the internal rates of return, which opportunity should V&K select? Internal Rate of Return a First investment Second investmont bV&K should select the

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