Sohar Metal Company is considering three proposals for long term investment. Due to limitation on capital, the company can accept only one out three projects. The following information is available relating to : Aluminium Alloys Plant Steel Plant (100,000) 60,000 50,000 40,000 30,000 25,000 10,000 Plant Initial investment (RO) | Operating Profit before depreciation year 1 Operating Profit before depreciation year 2 |Operating Profit before depreciation year 3 Operating Profit before depreciation year 4 Operating Profit before depreciation year 5 | Scrap value at the end of 5 years (100,000) 54,000 46,000 40,000 36,000 25,000 10,000 (100,000) 50,000 50,000 40,000 30,000 30,000 5,000 The company's standard payback period is 2 years and standard ARR is 12%. The cost of capital is 10%? You are required to evaluate the above three projects based on following evaluation techniques: (i) (ii) (ii) Accounting Rate of Return (ARR) Payback Period (PBP) Net Present Value (NPV)

Sohar Metal Company is considering three proposals for long term investment. Due to limitation on capital, the company can accept only one out three projects. The following information is available relating to : Aluminium Alloys Plant Steel Plant (100,000) 60,000 50,000 40,000 30,000 25,000 10,000 Plant Initial investment (RO) | Operating Profit before depreciation year 1 Operating Profit before depreciation year 2 |Operating Profit before depreciation year 3 Operating Profit before depreciation year 4 Operating Profit before depreciation year 5 | Scrap value at the end of 5 years (100,000) 54,000 46,000 40,000 36,000 25,000 10,000 (100,000) 50,000 50,000 40,000 30,000 30,000 5,000 The company's standard payback period is 2 years and standard ARR is 12%. The cost of capital is 10%? You are required to evaluate the above three projects based on following evaluation techniques: (i) (ii) (ii) Accounting Rate of Return (ARR) Payback Period (PBP) Net Present Value (NPV)

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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A firm is evaluating an investment proposal to instal new milling machines. The project requires an initial investment of R 50000. The equipment has a lifespan of 5 years and no salvage value. The company operates under a tax rate of 55% and utilizes straight line depreciation. The estimated annual profits before depreciation from the investment are as follows: Year 1: 10000, Year 2: 11000, Year 3: 14000, Year 5: 15000 and year 5 R 25000. Compute the payback period and the Net Present Value at 10% discount rate, profit after tax for each year and the cash inflow for each year.
Not in Excel sheet
Continental Railroad Company is evaluating three capital investment proposals by using the net present value method. Relevant data related to the proposals are summarized as follows: Line Item Description Maintenance Equipment Ramp Facilities Computer Network Amount to be invested $551,372 $327,621 $172,660 Annual net cash flows: Year 1 277,000 186,000 125,000 Year 2 258,000 167,000 86,000 Year 3 235,000 149,000 63,000 Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 Required: 1. Assuming that the desired rate of return is 20%, prepare a net present value analysis for each proposal. Use the present value of $1 table above. If required,…
Mansukh
Kindly solve the last three questions: iv, v, vi only
Egy Company is considering three capital expenditure projects. Relevant data for the projects are as follows Project Investment 22A $243.300 23A 274.200 24A 280,500 Project 22A Annual Income is constant over the life of the project. Each project is expected to have zero salvage value at the end of the project. Iggy Company uses the straight-line method of depreciation Click here to view the factor table (a) 23A Annual Income $16.860 Determine the internal rate of return for each project. (Round answers O decimal places, eg: 13%. For calculation purposes, use 5 decimal places as displayed in the factor table provided) 24A 20,730 15,700 (b) Life of Project 6 years 9 years 7 years Internal Rate of Return If Iggy Company's required rate of return is 11%, which projects are acceptable The following project(s) are acceptable
Please answer do not image format
Management of TSC, Inc. is evaluating a new $79,000 investment with the following estimated cash flows: Year Cash Flow 1 $ 13,000 2 29,000 3 47,000 4 61,000 The firm’s cost of capital is 14 percent and the project will require that the firm spend $25,000 to terminate the project. Use Appendix B to answer the question. Use a minus sign to enter a negative value, if any. Round your answer to the nearest dollar. The NPV of the investment is $ . Should the firm make the investment? The firm make the investment.
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