田Sentinel Company is considering an investment in technology to improve itsoperations. The investment will require an initial outlay of $253,000 and will yield thefollowing expected cash flows. Management requires investments to have a paybackperiod of 3 years, and it requires an 8% return on investments.Period Cash Flow1$47,4002$53,9003$76,9004$95,4005$125,400Required: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.

(C)NPV is the sum of present values of all cash inflows & outflows. The NPV table is as…

Answered: 田 Sentinel Company is considering an…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 1PA: Your company is planning to purchase a new log splitter for is lawn and garden business. The new...

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Fenton, Inc., has established a new strategic plan that calls for new capital investment. The company has a 9.8% required rate of return and an 8.3% cost of capital. Fenton currently has a return of 10% on its other investments. The proposed new investments have equal annual cash inflows expected. Management used a screening procedure of calculating a payback period for potential investments and annual cash flows, and the IRR for the 7 possible investments are displayed in image. Each investment has a 6-year expected useful life and no salvage value. A. Identify which project(s) is/are unacceptable and briefly state the conceptual justification as to why each of your choices is unacceptable. B. Assume Fenton has $330,000 available to spend. Which remaining projects should Fenton invest in and in what order? C. If Fenton was not limited to a spending amount, should they invest in all of the projects given the company is evaluated using return on investment?
Buena Vision Clinic is considering an investment that requires an outlay of 600,000 and promises a net cash inflow one year from now of 810,000. Assume the cost of capital is 10 percent. Required: 1. Break the 810,000 future cash inflow into three components: a. The return of the original investment b. The cost of capital c. The profit earned on the investment 2. Now, compute the present value of the profit earned on the investment. 3. Compute the NPV of the investment. Compare this with the present value of the profit computed in Requirement 2. What does this tell you about the meaning of NPV?
The management of Kawneer North America is considering investing in a new facility and the following cash flows are expected to result from the investment: A. What is the payback period of this uneven cash flow? B. Does your answer change if year 10s cash inflow changes to $500,000?
The management of Ryland International Is considering Investing in a new facility and the following cash flows are expected to result from the investment: A. What Is the payback period of this uneven cash flow? B. Does your answer change if year 6s cash inflow changes to $920,000?
Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated revenue producing life of 4 years. Falkland has a cost of capital of 8%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?
Mason, Inc., is considering the purchase of a patent that has a cost of $85000 and an estimated revenue producing lite of 4 years. Mason has a required rate of return that is 12% and a cost of capital of 11%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?
Assume a company is going to make an investment of $450,000 in a machine and the following are the cash flows that two different products would bring in years one through four. Which of the two options would you choose based on the payback method?
Retsa Company is considering an investment in technology to improve its operations. The investment willrequire an initial outlay of $800,000 and will yield the following expected cash flows. Managementrequires investments to have a payback period of two years, and it requires a 10% return on its investments. Period 1 Period 2 Period 3 Period 4Cash flow. . $450,000 $400,000 $350,000 $300,000 Required1. Determine the payback period for this investment. (Round the answer to one decimal.)2. Determine the break-even time for this investment. (Round the answer to one decimal.)3. Determine the net present value for this investment.Analysis Component4. Should management invest in this project? Explain.
Lenitnes Company is considering an investment in technology to improve its operations. The investment will require an initial outlay of $250,000 and will yield the following expected cash flows. Management requires a 10% return on its investments. Period 1 Period 2 Period 3 Period 4 Period 5 Cash flow. . $125,000 $94,000 $75,000 $52,000 $47,000 Required 1. Determine the payback period for this investment. (Round the answer to one decimal.) 2. Determine the break-even time for this investment. (Round the answer to one decimal.) 3. Determine the net present value for this investment. Analysis Component 4. Should management invest in this project?
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.
Perez Company is considering an investment of $30,485 that provides net cash flows of $9,000 annually for four years. (a) What is the internal rate of return of this investment? b) The hurdle rate is 6%. Should the company invest in this project on the basis of internal rate of return?
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?

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