### Investment Analysis for Arkansas Corporation**Overview:**The management of Arkansas Corporation is evaluating the purchase of a new machine, which costs $490,000. The desired rate of return for the company is set at 10%. To assess the viability of this investment, the present value factors for $1 at a compound interest rate of 10% over a span of 1 to 5 years are provided as follows: - Year 1: 0.909- Year 2: 0.826- Year 3: 0.751- Year 4: 0.683- Year 5: 0.621**Financial Data:**To aid in determining the acceptability of this investment, the following financial data has been provided:| Year | Operating Income | Net Cash Flow ||------|------------------|---------------|| 1 | $100,000 | $180,000 || 2 | $40,000 | $120,000 || 3 | $40,000 | $100,000 || 4 | $10,000 | $90,000 || 5 | $10,000 | $120,000 |**Analysis:**The next step is to calculate the net present value (NPV) of this investment. The NPV will provide a clear indication of whether the investment should be undertaken, based on the desired rate of return and the provided financial data. **Conclusion:** The net present value for this investment, based on the aforementioned data, needs to be calculated to finalize the decision. This critical value will illustrate the profitability and financial feasibility of the new machine acquisition.

Here,ParticularsYearDiscount factor at 10%Net CashFlowCash…

Answered: The management of Arkansas Corporation…

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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The management of Nebraska Corporation is considering the purchase of a new machine costing $490,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability: Operating Net Cash Year Income Flow 1 $100,000 $180,000 2 40,000 120,000 40,000 100,000 4 10,000 90,000 10,000 120,000 The average rate of return for this investment is Oa. 10% Оb. 18% Ос. 16% С. Od. 58%
CII, Incorporated, invests $700,000 in a project expected to earn a 9% annual rate of return. The earnings will be reinvested in the project each year until the entire investment is liquidated 11 years later. What will the cash proceeds be when the project is liquidated? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your "FV of a single amount" to 4 decimal places and final answer to the nearest whole dollar.) Present Value X f (FV of a Single Amount) Future Value
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CII, Incorporated, Invests $700,000 in a project expected to earn a 9% annual rate of return. The earnings will be reinvested in the project each year until the entire Investment is liquidated 11 years later. What will the cash proceeds be when the project is liquidated? (PV of $1. FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your "FV of a single amount" to 4 decimal places and final answer to the nearest whole dollar.) Present Value f (FV of a Single Amount) Future Value
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