Project x... Useful life 9years Initial cost : 286000 Annual revenues : 125000 Annual O&M cost: 73000 Salvage value:28600 Project Y Useful life 18years Initial cost: 184000 Annual revenues: 107000 Annual O&M cost:68000 Upgrade cost at the Th7 year :69000 Q1: Draw cash flow of the two projects and recommend one of the projects using Annual Worth method using i:6%.

Project x... Useful life 9years Initial cost : 286000 Annual revenues : 125000 Annual O&M cost: 73000 Salvage value:28600 Project Y Useful life 18years Initial cost: 184000 Annual revenues: 107000 Annual O&M cost:68000 Upgrade cost at the Th7 year :69000 Q1: Draw cash flow of the two projects and recommend one of the projects using Annual Worth method using i:6%.

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

See similar textbooks

Related questions

Q: What is annual worth of the project?

A: Annual Worth Analysis is a method which converts all cash flows to annual value of MARR. This is…

Q: nformation on four investment proposals is provided below: Investment Proposal A B…

A: A financial statistic that measures the desirability of a project is the profitability index, which…

Q: Find present amount or capitalized cost and A values at i= 5% of long-term public project if…

A: Capitalized cost of projects is the present value of the all cost including the initial cost of…

Q: When evaluating the following project, if the required return is 10 percent, what is its NPV? Year…

A: Capital budgeting: Capital budgeting is a financial technique that is used to evaluate long-term and…

Q: A project has the following cash flows: Year ON 3 2 Project Cash Flows -$5,987.00 $2,456.00…

A: YearCash flow0-$5,987.001$2,456.002$2,456.003$2,456.004$2,456.00Cost of capital = 10%

Q: Merill Corp has the following info available about a possible capitol investment. Initial…

A: Given data, Initial Investment = $1,200,000 Annual Net Income = $120,000 Expected Life =8 years…

Q: Swifty Company is considering two capital investment proposals. Estimates regarding each project are…

A: IRR is a rate at which the present value of cash inflows is equal to the present value of cash…

Q: Required information A company that manufactures magnetic flow meters expects to undertake a project…

A: Cash flow refers to the movement of money into or out of a business or financial system, typically…

Q: Required information [The following information applies to the questions displayed below.] Project Y…

A: Given Project Y requires a $350,000 Income $ 56,000 Depreciation-Machinery $ 87500

Q: Information on four Investment proposals is glven below: Investment Proposal A B Investment required…

A: Profitability index = Present value of cash inflow / Present value of cash outflow

Q: Perit Industries has $130,000 to invest. The company is trying to decide between two alternative…

A: Net Present Value is used to evaluate the investment and financing decisions that involve cash flows…

Q: Given the financial data for four mutually exclusive alternatives in the table below, determine the…

A: The incremental rate of return, also known as the internal rate of return (IRR) on an incremental…

Q: The following data concern an investment project (Ignore income taxes.): Investment in equipment…

A: A financial metric called net present value (NPV) is used to assess how profitable a project or…

Q: Initial investment (for two hot air balloons) Useful life Salvage value Annual net income generated…

A: Accounting rate of return = Average annual income / Initial investmentPayback period = Initial…

Q: Prove that it is feasible using 1. ANNUAL WORTH METHOD 2. PAYBACK METHOD Rate of interest = 10%

A: Cash flow diagram

Q: . Leo invested $67 250 into an annuity earning 4.4% compounded semi-annually. How much is he able to…

A: A series of fixed payments that are paid or received at an equal time interval is term as the…

Q: Two projects have the following projected cash flows: Project A Project B Year Cash Flow Cash Flow 0…

A: Based on the table in the image, the future value of Project A at a WACC of 11% is $103,818.We…

Q: Compute the payback statistic for Project A if the appropriate cost of capital is 7 percent and the…

A: Caluclating Discounting Pay Back Period For Project A

Q: The cash flows and Net salvage value of Project Y is given the following table: Year Cash flows…

A: The economic life of the project or an asset can be found by finding the NPV (which is one of the…

Q: Information on four investment proposals is given below. Investment required Present value of cash…

A: Profitability index is computed as = PV of cash inflows / Initial investmentProject is rank based on…

Q: ANO Ltd. is providing the following information: Annual cost of saving Useful life Salvage value…

A: When a project has a zero net present value (NPV), the projected cash inflows precisely balance the…

Q: Compute Project A's accounting rate of return.

A: The accounting rate of return (ARR) formula is helpful in determining the annual percentage rate of…

Q: What is the MIRR of Project PayoffSoon at a WACC of 11.786%? What is the PI of Project PayoffSoon at…

Q: Information on four investment proposals is given below: Investment Proposal A B C D…

A: The Profitability Index (PI) is a financial metric that evaluates the attractiveness of an…

Q: Compute the payback statistic for Project A if the appropriate cost of capital is 7 percent and the…

A: Calculation of Payback Period:The payback period is 2.48 years.The project should be Accepted since…

Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Project x... Useful life 9years
Initial cost : 286000
Annual revenues : 125000
Annual O&M cost: 73000
Salvage value:28600
Project Y Useful life 18years
Initial cost: 184000
Annual revenues: 107000
Annual O&M cost:68000
Upgrade cost at the Th7 year :69000
Q1: Draw cash flow of the two projects and recommend one of the projects using Annual Worth
method using i:6%.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

Step 2

Step 3

Step 4

Step 5

Step 6

Step by step

Solved in 6 steps with 6 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Windsor Company is considering two capital expenditures. Relevant data for the projects are as follows: Project Initial investment Annual cash inflow Life of project Salvage value A $202,003 $41,080 6 years $0 B $306,910 $49,130 9 years $0 Windsor Company uses the straight-line method to depreciate its assets. Calculate the internal rate of return for each project. (For calculation purposes, use 5 decimal places as displayed in the facto provided, e.g. 1.25125. Round answers to O decimal places, e.g. 15%.)
nformation on four investment proposals is given below: Investment Proposal A B C D Investment required $ (900,000) $ (170,000) $ (90,000) $ (1,430,000) Present value of cash inflows 1,263,600 233,400 136,500 1,908,300 Net present value $ 363,600 $ 63,400 $ 46,500 $ 478,300 Life of the project 5 years 7 years 6 years 6 years Required: 1. Compute the profitability index for each investment proposal. (Round your answers to 2 decimal places.) 2. Rank the proposals in terms of preference.
Saved Help Save & Prairie Corporation has provided the following information for a proposed investment project: Discount rate 10% Life of the project 4 years Initial investment cost $23,775 Annual cost savings 7,500 Salvage value 1,500 What is the net present value of the proposed investment project? (Select the answer that is closest to your calculations.) Present value tables are provided below. Present Value of $1 Table (Exhibit 11B-1) (Partial table) Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0.877 0.925 0.907 0.890 0.873 0.857 0.842 0.826 0.812 0.797 0.783 0.769 0.889 0.864 0.840 0.816 0.794 0.772 0.751 0.731 0.712 0.693 0.675 0.855 0.823 0.792 0.763 0.735 0.708 0.683 0.659 0.636 0.613 0.592 0.822 0.784 0.747 0.713 0.681 0.650 0.621 0.593 0.567 0.543 0.519 4. 0.790 0.746 0.705 0.666 0.630 0.596 0.564 0.535 0.507 0.480 0.456 0.760 0.711 0.665 0.623 0.583 0.547 0.513 0.482 0.452 0.425 0.400 0.731 0.677 0.627 0.582 0.540…
Please help me with show all calculation thanku
Consider two air-conditioning systems with the cash flow estimates as given below. Use AW analysis to determine the sensitivity of the economic decision to MARR values of 4%, 6%, and 8% per year. Air-Conditioning System 1 System First cost, $ AOC, $ per year Salvage value, $ New compressor and motor cost at midlife, $ Life, years -10,000 -500 -100 -1,850 8 The annual worth of air-conditioning system 1 when the MARR is 4% is $ The annual worth of air-conditioning system 2 when the MARR is 4% is $ The annual worth of air-conditioning system 1 when the MARR is 6% is $ The annual worth of air-conditioning system 2 when the MARR is 6% is $ The annual worth of air-conditioning system 1 when the MARR is 8% is $ The annual worth of air-conditioning system 2 when the MARR is 8% is $ Air-Conditioning System 2 -14,000 -85 -300 -2,540 12
Required information A company that manufactures magnetic flow meters expects to undertake a project that will have the cash flows estimated. First cost, $. Equipment replacement cost in year 2, $ Annual operating cost, $/year Salvage value, $ Life, years -870,000 -300,000 -920,000 250,000 4 At an interest rate of 10% per year, what is the equivalent annual cost of the project? Find the AW value using tabulated factors. The equivalent annual cost of the project is $-1
4. Analysis of a replacement project At times firms will need to decide if they want to continue to use their current equipment or replace the equipment with newer equipment. The company will need to do replacement analysis to determine which option is the best financial decision for the company. Price Co. is considering replacing an existing piece of equipment. The project involves the following: • The new equipment will have a cost of $2,400,000, and it is eligible for 100% bonus depreciation so it will be fully depreciated at t = 0. • The old machine was purchased before the new tax law, so it is being depreciated on a straight-line basis. It has a book value of $200,000 (at year 0) and four more years of depreciation left ($50,000 per year). • The new equipment will have a salvage value of $0 at the end of the project's life (year 6). The old machine has a current salvage value (at year 0) of $300,000. • Replacing the old machine will require an investment in net operating working…
The following data relates to an investment proposal: Investment in equipment Net annual cash inflow $32,000 5,000 expected Working capital required Salvage value of equipment Life of the project 8,000 2,000 10 years Working capital will be recovered at the end of the project's life. Using an 6% discount rate, the net present value of the project is closest to: $10,380 ($2,084) None of the other answers are correct $5,916 $2,380
I will rate. Solve correctly and show all works.
Compare the Annual Worth of the two systems and identify the better option at MARR = 10% per year: Solar: First cost $1,500,000; AOC $-700,000; Salvage value $100,000; Life of 8 years Geothermal: First cost $2,250,000; AOC $-600,000; Salvage value $50,000; Life of 8 years Select the Geothermal System with a calculated AW of $-1,017,368 Select the Geothermal System with a calculated AW of $-727,591 Select the Solar System with a calculated AW of $-1,238, Select the Solar System with a calculated AW of $-972,416
2. Initial Cost, $ Tabulate the incremental cash flow for the alternatives shown below. Machine B -25,000 Machine A -15,000 Annual operating cost, $/year -1,600 -400 Salvage value, $ 3,000 6,000 Life, years 3 6
Harris Corporation has provided the following data concerning an investment project that it is considering: Initial investment Annual cash flow Salvage value at the end of the project Expected life of the project Discount rate $ 160,000 $ 54,000 $ 11,000 O $67,000 O $160,516 O $516 O $(5,776) 4 15 per year years % Use Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using the tables provided. The net present value of the project is closest to:

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS