Question 10 Your company has been presented with an opportunity to invest in a project. The facts on the project are presented below Investment Required Annual Gross Income Annual Operating Costs Salvage Value $60,000,000 $14,000,000 $5,500,000 The project is expected to operate ten years. If your management expects to make MARR of 10% on its investments, then 1-The Net income is $ 8.5 v million. 2-The present worth of the cash flow at i= 6% is $ 3-The is equal to v %. 4-Would you recommend this project?

Question 10 Your company has been presented with an opportunity to invest in a project. The facts on the project are presented below Investment Required Annual Gross Income Annual Operating Costs Salvage Value $60,000,000 $14,000,000 $5,500,000 The project is expected to operate ten years. If your management expects to make MARR of 10% on its investments, then 1-The Net income is $ 8.5 v million. 2-The present worth of the cash flow at i= 6% is $ 3-The is equal to v %. 4-Would you recommend this project?

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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Problem 10.12 Hathaway, Inc., a resort company, is refurbishing one of its hotels at a cost of $7,188,472. Management expects that this will lead to aditional cash flows of $1,692,339 for the next six years. What is the IRR of this project? If the appropriate cost of capital is 12 percent, should Hathway go ahead with this project? (Round answer to 2 decimal places, e.g. 5.25%.) The IRR of this project is The firm should the project Click if you wol reject Show Work for this question: Open Show Work аcсept
Q 1- Nadec company is considering investment in one of two mutually exclusive projects, P and Q. The following is the data about the two projects. Project Initial investment Project life Annual cash inflow The standard deviation of cash inflow Overall cost of capital for the firm Risk-free rate of return CV of cash inflow for the firm P $10,000 5 years $4,000 $2000 12% 6% 30% Q $10,000 5 years $3,800 1,330 12% 6% 30% A- Compute the current net present value for the projects. B- Consider the risk and evaluate the projects using risk-adjusted discount rates following the six steps you have learned. C- Which project is recommended to the management to choose and why? D- Can the risk-adjusted discount rate be calculated using the CAPM?
QUESTION 10 A project will produce operating cash flows of $57,000 a year for 3 years. During the life of the project, inventory will be lowered by $10,000 and accounts receivable will increase by $20,000. Accounts payable will decrease by $5,000. The project requires the purchase of equipment at an initial cost of $90,000. The equipment will be salvaged at the end of the project creating a $17,000 after-tax cash inflow. At the end of the project, net working capital will return to its normal level. What is the net present value of this project given a required return of 12%? $48,772.08 $54,681.35 $56,209.19 $42,908.17 $44,141.41
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Question 5 Bunnings Ltd is considering to invest in one of the two following projects to buy a new equipment. 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 8%. The cash flows of the projects are provided below. Equipment 1 Equipment 2 Cost $186,000 $195,000 Future Cash Flows Year 1 Year 2 Year 3 Year 4 Year 5 86 000 93 000 83 000 75 000 55 000 97 000 84 000 86 000 75 000 63 000 Required: Identify which option of equipment should the company accept based on Profitability Index? Identify which option of equipment should the company accept based on discounted pay back method if the payback criterion is maximum 2 years?
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ANSWER PART C PLEASE Mett Co. is planning to develop a new product. A year after the launch of the product, itcan generate additional cash flows for the company of either £250,000, £110,000,£90,000 or £50,000, with all four scenarios equally likely. The project requires an initialinvestment of £90,000. The company’s beta is 0.65, its cost of capital is 6%, and the riskfree rate is 3%. Assume perfect capital markets. a) What is the Net Present Value (NPV) of the project? b) Suppose that the project is sold to investors as an all-equity firm to raise funds forthe initial investment. The cash flows of the project will be distributed to equityholders in one year. How much money can be raised in this way – that is, what isthe initial market value of the unlevered equity? Explain your answer c) Suppose the initial £90,000 is raised by borrowing at the risk-free interest rateinstead of issuing equity. What are the cash flows to equity and debt holders, andwhat is the initial value of the…
QUESTION 7 A company is considering to invest in a project that is expected to yield the following cash flows; the firm's required rate of return from the project is 10%. Initial Outflow = $200,000 Cash Flow Year 1 = $80,000 Cash Flow Year 4 = $160,000 Cash Flow Year 5 = $120,000 What is the project's NPV? O 50,310.77 O 49,689.85 O 56,519.98 O 42,859.72 O 36,029.58
Question 3 A company has $20 million available to invest in new projects. There are three independent projects that it is considering. The after-tax cash flows of the projects are as follows: Project ABC Year 0 cash flow (20 million) (10 million) (10 million) Year 1 cash flow 20 million 8 million 6 million Year 2 cash flow 10 million 7 million 10 million Calculate the IRR, PI and NPV of each of the two-year projects and recommend which project(s) the company should invest in (and why). The company's cost of capital is 12%.
11. I need help with finance home work question A company is considering a 7-year project. At the beginning of the project, a cash outflow in the amount of $340,000 would be required. The company expects the project would generate cash inflows in the amount of $70,000 at the end of each of the project's 7 years. Assume the company requires a return of 8%. What NPV does the company expect for this project?
| All techniques Rieger International is evaluating the feasibility of investing $109,000 in a piece of equipment that has a 5-year life. The firm has estimated the cash inflows associated with the proposal as shown in the following table: firm has a cost of capital of 11%. The a. Calculate the payback period for the proposed investment. b. Calculate the discounted payback period for the proposed investment. c. Calculate the net present value (NPV) for the proposed investment. d. Calculate the probability index for the proposed investment. e. Calculate the internal rate of return (IRR) for the proposed investment. Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Year (t) 1 GAW N 2 3 4 5 Print Cash inflows (CF₂) $35,000 $20,000 $30,000 $35,000 $40,000 Done X ces.)