The manager of a production system expects to spend $100,000 the first year with amounts increasing by $10,000 each year. Income is expected to be $400,000 the first year, increasing by $50,000 each year. a) Draw cash flow diagrams of expenditures and income separately over a 5 year period at an interest rate of 10% per year. b) Determine the present worth of the company's net cash flow (present worth = present income- present expenditure). Please write formula and show your solution step by step. Use compound interest tables.

The manager of a production system expects to spend $100,000 the first year with amounts increasing by $10,000 each year. Income is expected to be $400,000 the first year, increasing by $50,000 each year. a) Draw cash flow diagrams of expenditures and income separately over a 5 year period at an interest rate of 10% per year. b) Determine the present worth of the company's net cash flow (present worth = present income- present expenditure). Please write formula and show your solution step by step. Use compound interest tables.

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

See similar textbooks

Similar questions

You must type in both the answer and all of your work to receive credit. Use the financial statements and additional data provided by management to calculate the firm's Free Cash Flow for the projected year. • Tax rate = 25% • Plans for the projected year will require $500 of new machinery and equipment • Firm expects next year's dividend to be $260 Acme Products, Inc. Balance Sheets ASSETS Cash Receivables Inventory Property, plant & equipment Total assets LIABILITIES & EQUITY Accounts payables Accrued expenses Long-term debt Common stock Paid-in Capital Retained earnings Total liabilities and equity current yr 400 600 900 2,200 4,100 500 400 1,400 600 200 1,000 4,100 projected yr 500 750 1,125 2,750 Acme Products, Inc. Income Statement Operating expenses 5,125 Depreciation 5,125 Sales (all credit) Cost of Goods Sold Gross Profit Operating income Interest expense 625 Taxable income 500 Taxes (25%) 1,750 Net income 750 250 1,250 projected yr 7,000 4,000 3,000 1,400 400 1,200 100 1,100…
Compute the IRR of a project which will start generating positive cash flows after 2-years of investment for 5-years. The initial investment is $8,000. The first positive cash flow will be $2,000 and it will increase by $500 every year.
The cash flow associated with a strip mining operation is expected to be $200,000 in year 1, $180,000 in year 2, and amounts decreasing by $20,000 annually through year 8. At an interest rate of 12% per year, calculate the equivalent annual cash flow.
Perez Company is considering an investment of $20,957 that provides net cash flows of $6,900 annually for four years. (a) What is the internal rate of return of this investment? (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Round your present value factor to 4 decimals. (b) The hurdle rate is 9%. Should the company invest in this project on the basis of internal rate of return? Complete this question by entering your answers in the tabs below. Required A Required B What is the internal rate of return of this investment? Present value factor Internal rate of return % Required A Required B
A company is considering a $168,000 investment in machinery with the following net cash flows. The company requires a 10% return on its investments. (PV of $1, FV of $1, PVA of $1. and FVA of $1) (Use appropriate factor(s) from the tables provided.) Net Cash Flow (a) Compute the net present value of this investment. (b) Should the machinery be purchased? Year Year 11 Year 2 Year 1 $10,000 Complete this question by entering your answers in the tabs below. Year 3 Year 4 Year 5 Totals Initial investment Net present value Required A Required B Compute the net present value of this investment. (Round your present value factor to 4 decimals. Round your final answers to the nearest whole dollar.) Year 2 $29,000 Net Cash Flows $ 0 Present Value Factor Year 3 $55,000 Present Value of Net Cash Flows $ $ Required A Year, 4 $42,000 0 0 Year 5 $113,000 Required >
A company is considering a $184,000 investment in machinery with the following net cash flows. The company requires a 10% return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Net Cash Flow (a) Compute the net present value of this investment. (b) Should the machinery be purchased? Required A Required B Year 1 $11,000 Year Year 2 $31,000 Complete this question by entering your answers in the tabs below. Year 1 Year 2 Year 3 Net Cash Flows Year 3 $61,000 Compute the net present value of this investment. (Round your present value factor to 4 decimals. Round your final answers to the nearest whole dollar.) Present Value Factor Year 4 $46,000 Present Value of Net Cash Flows Year 5 $123,000
A mail order business will generate cash flows of $9,000 at the end of each of the next 3 years, $19,000 at the end of year 4, $25,000 at the end of year 5 and $45,000 at the end of year 6. Given that other investments of equal risk earn 8% per annum, calculate the present value and future value of this investment
Please use excel and show work
Tennessee Corporation is analyzing a capital expenditure that will involve a cash outlay of $109,332. Estimated cash flows are expected to be $36,000 annually for 4 years. The present value factors for an annuity of $1 for 4 years at interest of 10%, 12%, 14%, and 15% are 3.170, 3.037, 2.914, and 2.855, respectively. The internal rate of return for this investment is a. 12% b. 3% c. 10% d. 9%
Nugent Communication Corp. is investing $8,501,547 in new technologies. The company expects significant benefits in the first three years after installation (as can be seen by the following cash flows), and smaller constant benefits in each of the next four years. Year 1 2 3 4-7 Cash Flows $1,736,907 $4,841,362 $2,794,697 $1,009,125 What is the discounted payback period for the project assuming a discount rate of 10 percent?
Determine the internal rate of return for an equipment that costs $150,000 and would provide positive cash flows of $60,000 , $50,000, $40,000, and $40,000 at the end of each year for the next four years.
What is the present value of a savings account that is expected to pay $1,250 of cash inflow at the end of year 1, $0 cash inflow at the end of year 2 and $1,050 cash inflow at the end of 3rd year given the rate of return 10% in the first and second year and 12% in the third year? Please Show the work

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS