Hub and Less Inc. needs to maintain 5 percent of next-year's sales in net working capital. Thefirm is considering a 5-year project which will increase sales from their current level of$110,000 to $146,000, $150,000, $159,000, $163,000, and $157,000 for Years 1 to 5 of theproject, respectively. What amount should be included in the project analysis cash flows fornet working capital in the second year (Year 2) of the project?

Working Capital: It is the amount needed to run the daily operations of the business. By reducing…

Answered: project, respectively. What amount…

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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8- Which of the following methods of capital budgeting uses the average annual profits for evaluation of projects? a. Payback period b. Net present value c. Accounting Rate of return d. Internal rate of return
1. Define capital expenditures and provide examples of capital expenditures.2. Cash flows for a particular project should be measured on an incremental basis. What does that mean?3. How does the opportunity cost concept affect capital budgeting cash flow determination?4. What factors should be considered when estimating a new business’ NINV? Is it any different for an asset replacement project. 5. Why is depreciation, a noncash expense, considered when estimating a project’s net cash flows?6. What are the potential tax consequences of selling an old asset in an asset replacement investment decision?
Machinery purchases, initial investments, premium payments, or extra payments after the starting year, are considered with values of initial capital?
What is the NPV of the estimated cash flows for the following project using a Weighted Average Cost of Capital of 7.0%? Year 0 1 2 3 Cash Flow -140 50 70 90 Group of answer choices 47.54 38.63 59.94 70.00 41.34
Why should the cost of capital used in capital budgeting be calculated as a weighted average of the capital component rather than the cost of the specific financing used to fund a particular project? Please explain using the images attached.
In the initial investment of a project you must include the working capital.
An organisation is considering a capital investment in new equipment . • The estimateed cash flows are as follows: • Year Cash flow • $ •0 ( $240000) •1 80000 •2 32000 •3 80000 •4 40000 •5 24000 •Calculate the IRR of the project to assess whether it should be undertaken.
Pls show proper steps correctly with explanation.
Keane & Co plc is considering two possible investments. The company requires an Accounting Rate of Return of 12% and payback within 2 years. It has a cost of capital of 12%. Forecast sales and production units Year 1 Year 2 Year 3 Year 4 Contribution per unit Fixed cost per year Initial investment Residual (scrap) value Accounting Rate of Return Internal Rate Return Discount factors at 12% are: Year 1 Year 2 Year 3 Year 4 Year 5 0.893 0.797 0.712 0.636 0.567 Project J 60,000 110,000 80,000 50,000 £40 £800,000 £7,600,000 £300,000 9.5% 8% Project K 30,000 24,000 20,000 12,000 £120 £700,000 £5,500,000 £150,000 19% 18%
Q1) What is the Free Cash Flow at the end of the year 2? Q2) How much is the capital gain/loss at the end of the project? Q3) What is the amount of Working capital recovered at the end of the project?
To project the appropriate anticipated cash flow for a project, we must put all cash flow knowledge together. This includes of the incremental cash flow. OA) the amount but not the timing B) the timing C) the amount D) both the amount and timing 33
What is the IRR for this project? Year Cash Flow in $ 0 ($1000) 1 400 2 400 3 600

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project, respectively. What amount should be included in the project analysis cash flows for net working capital in the second year (Year 2) of the project?