Salsa Company is considering an investment in technology to improve its operations. The investment costs $250,000 and will yieldthe following net cash flows. Management requires a 7% return on Investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Useappropriate factor(s) from the tables provided.)YearNet cash Flow1$ 48,400252,500376,200494,7005125,100Required: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.4. Should management invest in this project based on net present value?Complete this question by entering your answers in the tabs below.Required 1 Required 2 Required 3 Required 4Determine the break-even time for this investment. (Enter cash outflows with a minus sign. Round your break-even timeanswer to 1 decimal place.)1 at 7%YearNet Cash FlowsPresent Value of Present Value of NetCash Flows per YearInitial investment$(250,000)Year 1Year 2Year 3Year 4Year 5CumulativePresent Value ofNet Cash Flows000Break-even time=years

The objective of the question is to evaluate the financial feasibility of a proposed investment by…

Answered: Salsa Company is considering an…

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 two projects a firm is considering: Project B Cash Flow Year 0 1 2 3 4 $2,939.01 Assuming that the relevant cost of capital for both projects is 11%, you should be able to determine the net present value (NPV) and the internal rate of return (IRR) for both project. Assume now that the firm has capital rationing, but knows that its true reinvestment rate is 20%, while its cost of capital is 11 percent. Given this information, determine the modified net present value (MNPV) for Project B. O $2.479.00 O $2.965.10 O$3.479.89 Project A Cash Flow O $4,084.05 ($10,000.00) ($11,000.00) $3,000.00 $5,000.00 $4,000.00 $4,000 00 $5,000.00 $4,000.00 $2,000.00 $2,000.00
Darius Inc. is considering a project that has the following cash flow data. Given WACC = 10%, what is the project's NPV? Year 0 = $-100,000 Year 1 = $45,000 Year 2 = $10,000 Year 3 = $0 Year 4 = $50,000 Year 5 = $15,000 Question 2Answer a. $0 b. $2,321.10 c. $1.20 d. $-7,361.95 e. $-1,230.18 f. $-524.23
1 Moore is considering a $180,000 investment with the following net cash flows. Moore requires a 10% return on its investments. Calculate the NPV and IRR below. In the dropdown box, select whether each indicates whether Moore should accept the investment. 2 3 Year 4 Initial investment 5 1 6 7 8 9 10 11 12 13 14 15 NPV 16 17 IRR 18 19 20 2 4 5 Net Cash Flows (180,000) 60,000 40,000 70,000 125,000 35,000
Gonzalez Company is considering two new projects with the following net cash flows. The company's required rate of return on investments is 10%. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Net Cash Year Project 1 Flows Project 2 Initial investment $ (60,000) $ (60,000) 1. 30,000 35,000 2. 3. 30,000 5,000 20,000 20,000 a. Compute payback period for each project. Based on payback period, which project is preferred? b. Compute net present value for each project. Based on net present value, which project is preferred? Complete this question by entering your answers in the tabs below. Required A Required B Compute net present value for each project. Based on net present value, which project is preferred? (Round your present value factor to 4 decimals. Round your final answers to the nearest whole dollar.) Net Cash Flows Present Value Factor Present Value of Net Cash Flows Project 1 Year 1 Year 2
Salsa Company is considering an investment in technology to improve its operations. The investment costs $241,000 and will yield the following net cash flows. Management requires a 10% return on investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Year Net cash Flow 1 $ 48, 200 2 53,900 3 76, 400 4 95,500 5 126,500 Required: Determine the payback period for this investment. Determine the break - even time for this investment. Determine the net present value for this investment. Should management invest in this project based on net present value?
Ivanhoe Industries management is planning to replace some existing machinery in its plant. The cost of the new equipment and the resulting cash flows are shown in the accompanying table. The firm uses an 18 percent discount rate for projects like this. Should management go ahead with the project? Year Cash Flow 0 -$3,046,900 1 803,710 2 889,200 3 1,247,600 4 1,285,160 5 1,576,500 What is the NPV of this project? - NPV $?
Aster Company is considering an investment in technology to improve its operations. The investment will require an initial outlay of $800,000 and yield the following expected cash flows. Management requires investments to have a payback period of two years, and it requires a 10% return on its investments.
Pet World is considering a project that has the following cash flow data. Year Cash flows 0 -$9,500 1 2 3 4 $2,000 $2,025 $2,050 $2,075 $2,100 If the required rate of the return on similar projects is 3%, the firm should IRR is 5 this project because its accept; 2.31% reject; 2.57% reject; 2.82% reject; 2.08% accept; 3.10%
Three machine alternatives are being evaluated by a company. The annual cash flows for each of these three alternatives are given in the table below (all in dollars). Based on the NPW criterion, rank these three alternatives from most attractive to least attractive assuming a MARR of 7% compounded annually. n Alternative 1 Alternative 2 Alternative 3 ======== 0 -1,400 -2.000 -1,000 1 300 300 400 2 500 600 400 ==================== ==#== 3 500 800 400 4 700 1,000 400 Alternative 1– Alternative 3 – Alternative 2 Alternative 2 – Alternative 3 – Alternative 1 Alternative 3 – Alternative 2 - Alternative 1 O Alternative 3 – Alternative 1- Alternative 2 O O O O
The Caffeine Coffee Company uses the modified internal rate of return. The firm has a cost of capital of 11 percent. The project being analyzed is as follows ($26.000 investment): Use Appendix A and Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. Year Cash Flow $ 12,000 11,000 9,000 What is the modified internal rate of return? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Internal rate of return 11.45%
A company is considering a 10-year capital investment project. The project has annual positive cash flows each year. The accounting manager has calculated the NPV of the same project using three different costs of capital (8%, 10% and 18 %) as discount rates. Select the most logical combination of NPVS from the choices given. Note: You cannot calculate the NPVS nor do you need to. O $(5,743) $3,152 $6,612 O $(5,743) $6,612 $3,152 $3,152 $6,512 $(5,743) O $6,512 $3,152 $(5,743) O None of the above
The management of Peridot Inc. is submitting a proposal to the Board of Directors for a new facility with the following cash flows. Year Cash flow 0 -214 1 52 2 61 3 74 4 82 The company's hurdle rate is 9%. internal rate of return for the proposed project is closest to: A. 10.15%. B. 9.06%. C. 9.00%.

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