Sheffield had an incredible year in its landscaping business. With extra cash available, the company is considering one of two possible investments: 1. 2. An additional trailer, to allow for more flexibility in planning and working different jobs simultaneously. A third truck that would allow for additional jobs, but this option would also require an additional worker and the costs associated with hiring, payroll taxes, etc. Financial information for each option is as follows. Initial investment Net annual cash inflow Years of useful life Salvage value Tax rate Required rate of return (a) Option 1 $29,800 $10,400 IRR 4 Option 1 $- 20% 9% Option 2 $41,000 % $10,400 5 $2,100 Calculate the IRR for both investment options. (Round answers to 2 decimal places, eg. 15.25%) 20% 9% Option 2 % SUPPORT

Sheffield had an incredible year in its landscaping business. With extra cash available, the company is considering one of two possible investments: 1. 2. An additional trailer, to allow for more flexibility in planning and working different jobs simultaneously. A third truck that would allow for additional jobs, but this option would also require an additional worker and the costs associated with hiring, payroll taxes, etc. Financial information for each option is as follows. Initial investment Net annual cash inflow Years of useful life Salvage value Tax rate Required rate of return (a) Option 1 $29,800 $10,400 IRR 4 Option 1 $- 20% 9% Option 2 $41,000 % $10,400 5 $2,100 Calculate the IRR for both investment options. (Round answers to 2 decimal places, eg. 15.25%) 20% 9% Option 2 % SUPPORT

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

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You work for an outdoor play structure manufacturing company and are trying to decide between the following two projects: (Click on the following icon in order to copy its contents into a spreadsheet.) Year-End Cash Flows ($ thousands) 1 19 39 Project Playhouse Fort You can undertake only one project. If your cost of capital is 8%, use the incremental IRR rule to make the correct decision. 0 - 27 - 78 2 20 50 IRR 28.2% 8.9% The incremental IRR is %. (Round to two decimal places.) With the incremental IRR at - 1.23% and the cost of capital of 8%, you should undertake the ▼ (Select from the drop-down menu.)
Assume that you are thinking about starting your own small business. You have made the following estimates regarding this opportunity: You can rent a location for your business at a cost of $36, 000 per year. The equipment costs incurred to start the business would total $250,000. The equipment would have a 5-year useful life and a salvage value of S 25,000. Your company's estimated sales per year would equal $350,000 and its variable cost of goods sold would be 30% of sales. Other operating costs would include $56, 000 per year in salaries, S4, 000 per year for insurance, $25, 000 per year for utilities, and a 3% sales commission. The payback period for this investment opportunity is closest to: Multiple Choice 4.08 years, 2.20 years. 3.80 years. 3.08 years.
r
You work for an outdoor play structure manufacturing company and are trying to decide between the following two projects: (Click on the following icon in order to copy its contents into a spreadsheet.) Project Playhouse Fort Year-End Cash Flows ($ thousands) 1 2 18 IRR 33.8% 13.2% 52 You can undertake only one project. If your cost of capital is 7%, use the incremental IRR rule to make the correct decision. 0 -25 -75 The incremental IRR is%. (Round to two decimal places.) 20 39 Save OL
1. The manager in a canned food processing plant is trying to decide between two labeling machines. Assume an interest rate of 6%. Use annual cash flow analysis to determine which machine should be chosen. First cost Maintenance and operating costs Annual benefit Salvage value Useful life, in years Machine A $15,000 1,600 8,000 3,000 6 Machine B $25,000 400 13,000 6,000 10
Gardner Denver Company is considering the purchase of a new piece of factory equipment that will cost $402,240 and will generate $120,000 per year for 5 years. Calculate the IRR for this piece of equipment. Present value and future values table: https://openstax.org/books/principles-managerial-accounting/pages/time-value-of-money ________%
vaibhav
Assume that you are thinking about starting your own small business. You have made the following estimates regarding this opportunity: • You can rent a location for your business at a cost of $36,000 per year. The equipment costs incurred to start the business would total $250,000. The equipment would have a 5-year useful life and a salvage value of $25,000 Your company's estimated sales per year would equal $350,000 and its variable cost of goods sold would be 30% of sales. • Other operating costs would include $58,000 per year in salaries, $4,000 per year for insurance, $25,000 per year for utilities, and a 3% sales commission The simple rate of return for this investment opportunity is closest to: Multiple Choice 22.0% 19.0% 26.6% 15.7%
IMPORTANT: PLEASE SAVE ALL YOUR HAND CALCULATIONS IN A FILE SO THAT YOU CAN SUBMIT THEM IF REQUIRED BY THE LECTURER. You are considering investing RM62000 in new equipment. You estimate that the net cash flows will be RM11000 during the first year, but will increase by RM2500 per year the next year and each year thereafter. The equipment is estimated to have a 8-year service life and a net salvage value of RM5200 at that time. Assume MARR of 7%. a Calculate the annual capital cost CR (ownership cost) for the equipment. b.Determine the equivalent annual revenue. c.Is this a wise investment? Y/N. Submit Format: 7882 Format: 36630 Format: A
A manufacturer of automated optical inspection devices is deciding on a project to increase the productivity of the manufacturing processes. The estimated costs for the two feasible alternatives being compared are shown below. Use the internal rate of return (IRR) method to determine which alternative should be selected if the analysis period is 8 years and the company's MARR is 4% per year. Alternative M N Initial costs $30,000 $45,000 Net annual cash flow $4,500 $7,000 Life in years 8 8 (a) IRR of base alternative = (b) IRR of incremental cash flow = (c) Choose Alternative
Solve for the rate of return and Explain
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