Proposals L and K each cost $600,000, have 6-year lives, and haveexpected total cash inflows of $720,000. Proposal L is expected toprovide equal annual net cash flows of $170,000, while the net cashflows for Proposal K are as follows:Year 1$250,000Year 2200,000Year 3100,000Year 450,000Year 5100,000Year 620,000$720,000Determine the cash payback period for each proposal. Round youranswers to two decimal places.Proposal LyearsProposal Kyears

Calculate the payback period as follows: Cash payback period = Initial investment/ Net cash inflows…

Answered: Proposals L and K each cost $600,000,…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The following are the cash flows of two independent projects: Year Project A Project B 0 $ (270 ) $ (270 ) 1 150 170 2 150 170 3 150 170 4 150 a. If the opportunity cost of capital is 12%, calculate the NPV for both projects. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Proposals L and K each cost $500,000, have 6-year lives, and have expected total cash flows of $750,000. Proposal L is expected to provide equal annual net cash flows of $125,000, while the net cash flows for Proposal K are as follows: Year 1 $250,000 Year 2 200,000 Year 3 100,000 Year 4 90,000 Year 5 60,000 Year 6 50,000 $750,000 Determine the cash payback period for each proposal. Round your Proposal K answer to one decimal place. Cash Payback Period Proposal L fill in the blank 1 years Proposal K fill in the blank 2 years
For year 6, a project requires Accounts Receivable of $121,000; Inventory of $51,000; and Accounts Payable of $107,000. Each of these will return to zero in year 7. What year 7 incremental cash flow reflects the change in NWC? Enter your answer in dollars and be sure to use a negative sign (-) if the answer is a cash outflow. X -65,000
For each of the following problems, (a) draw the cash flow diagram; (b) present clean and clear manual solutions to the problem; (c) highlight the final answer (only the final answer as required by the problem) by enclosing it within a box. The future worth in year 8 of an arithmetic gradient cash flow series for years 1 through 8 is $800,000. If the gradient increase each year is $5,000, determine the cash flow in year 1 at an interest rate of 10% per year.
Company is evaluating two projects, Project A and Project B. The initial investment on both the projects are $25,000. Both have equal lives. The Project A will generate cash flows of $20,000 and $35,000 in year 2 and year 3. The Project B will generate $15,000 in yea- 1, $22,000 year-2, and $25,000 in year-3. Compute the incremental (B-A) IRR. а. -21.38% b. 56.80% с. 21.38% d. -24.75%
Phoenix Company is considering investments in projects C1 and C2. Both require an initial investment of $222,000 and would yield the following annual net cash flows. (PV of $1. EV of $1. PVA of $1, and EVA of $1) Note: Use appropriate factor(s) from the tables provided. Net cash flows Year 1 Year 2 Year 3 Totals Project C1 $ 10,000 106,000 166,000 $ 282,000 Project C2 $ 94,000 94,000 94,000 $ 282,000 a. The company requires a 12% return from its investments. Compute net present values using factors from Table B.1 in Appendix B to determine which projects, if any, should be accepted. b. Using the answer from part a, is the internal rate of return higher or lower than 12% for (i) Project C1 and (ii) Project C2? Hint: It is not necessary to compute IRR to answer this question. Complete this question by entering your answers in the tabs below. Required A Required B The company requires a 12% return from its investments. Compute net present values using factors from Table B.1 in Appendix B…
A project has an initial cash outflow of $40,500 and produces cash inflows of $16,450, $17,800, and $16842 for Years 1 through 3, respectively. What is the NPV at a discount rate of 12.4 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Munabhai
The cash flows associated with a Death Valley County arroyo improvement project are as follows: initial cost $650,000; life 20 years; annual maintenance cost $150,000 per year; benefits $600,000 per year; disbenefits $190,000 per year. The discount rate is 6% per year. Determine if the project is justified using (a) the conventional B/C ratio, and (b) the modified B/C ratio.
One project with initial cost of 29350 is expedited to generate cash flows of 7200 9300 9400 8300 and 8000 over each of the next five years respectively. What is the projects playback period?
Play Club is a famous Club which is in Grand Baie, the management is considering which, if any, of four independent projects to undertake. The forecast cash flows for each project are listed below; receipts arise at the end of each year. Net cash flows(‘000) Project Immediate outlay Year 1 Year 2 Year 3 Chak -2,500 +1,000 +1,000 +1,000 Chop -1,000 +100 +1400 0 Chol -1,000 +800 +600 0 Chov -4,000 0 0 +5,000 The company faces a perfect capital market, in which the interest rate for the projects risk level is 10% REQUIRED: Using the NPV (Net Present Value) decision rule, indicate which projects the company should accept. State clearly the reasons for your decisions. Estimate the (IRR) Internal Rate of Return of projects Chop and Chol. Would it be valid to choose between projects Chop and Chol on the basis of their…
IF THE TOTAL CASH INFLOWS FOR 5 YEARS IS $540,000.00, (WITH A HIGHEST INFLOW OF $150,000.) COMPUTE FOR THE PAYBACK RECIPROCAL IF THE INVESTMENT IS SET AT $ 300,000.00. 0.55 0.36 1.8 0.50 2.78

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