The plant holds an inventory of 250, has accounts receivable outstanding of 100, and accounts payable outstanding of 100. There will be immediate, one-time reductions of inventory and accounts payable by 20%. What is the working capital?

The plant holds an inventory of 250, has accounts receivable outstanding of 100, and accounts payable outstanding of 100. There will be immediate, one-time reductions of inventory and accounts payable by 20%. What is the working capital?

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 fixed capital investment of P12M is required for a production plant and an estimated working capital of P3M. Annual Depreciation is estimated to be 15% of the capital investment. Determine the rate of return on the total investment and the length of time to recover it if the annual profit is P2.8M.
A project requires an initial investment in equipment of $96,600 and then requires an initial investment in working capital of $14,400 (at t= 0). You expect the project to produce sales revenue of $131,000 per year for three years. You estimate manufacturing costs at 60 percent of revenues. (Assume all revenues and costs occur at year-end [i.e., t= 1, t= 2, and t=3]). The equipment depreciates using straight-line depreciation over three years. At the end of the project, the firm can sell the equipment for $12,420 and recover the investment in net working capital. The corporate tax rate is 21 percent and the cost of capital is 15 percent. Calculate the NPV of the project. Multiple Choice O O O $4,679 -$3,574 $13,573
A new project would require an immediate increase in raw materials in the amount $6,000. The firm expects that accounts payable will automatically increase $2,000. How much must the firm expect its investment in net working capital to increase if they accept this project?
A fixed capital investment of 10,000,000 is required for a proposed manufacturing plant and estimated to be 10% of the fixed capital investment. Determine the rate of return on the total investment if annual revenue is 2.5M
A factory costs $980,000. You reckon that it will produce an inflow after operating costs of $188,000 a year for 10 years. a. If the opportunity cost of capital is 12%, what is the net present value of the factory? (Do not round intermediate calculations. Round your answer to 2 decimal places. b. What will the factory be worth at the end of six years? ( 2 decimal places.
A factory costs $810,000. You reckon that it will produce an inflow after operating costs of $171,000 a year for 11 years. a. If the opportunity cost of capital is 7%, what is the net present value of the factory?
A factory costs $970,000. You reckon that it will produce an inflow after operating costs of $187,000 a year for 15 years. a. If the opportunity cost of capital is 11%, what is the net present value of the factory? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What will the factory be worth at the end of eight years? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
A project requires an initial investment in equipment of $90,000 and then requires an investment in working capital of $10,000 at the beginning (t = 0). The project is expected to produce sales revenues of $120,000 for three years. Manufacturing costs are estimated to be 60% of the revenues.The assets are depreciated using straight-line depreciation. At the end of the project, the firm can sell the equipment for $10,000. The corporate tax rate is 30% and the cost of capital is 15%. Calculate the NPV of the project. A. 8443 C. –2735B. 3840 D. None of the above
The following cash flows represent the potential annual savings associated with two different types of production processes, each of which requires an investment of $22,000: Assuming that the interest rate is 15%, complete the following tasks:(a) Determine the equivalent annual savings for each process.(b) Determine the hourly savings for each process, assuming 2,000 hours ofoperation per year.(c) Determine which process should be selected.
A plant to provide the company’s present needs can be constructed for P 2,800,000 with an annual operating disbursement of P 600,000. It is expected that at the end of 5 years, the production requirements could be doubled, which necessitate the addition of an extension costing P 2,400,000. The disbursement after 5 years will be likewise double. Another plan is to provide the entire expected capacity can be constructed for P 4,000,000 and its operating disbursement will be P 640,000 when operating on half capacity (for the first five years) and P 900,000 on full capacity. The plants are predicted to have indeterminately long life. The required rate of return is 20%. What would you recommend?
A project requires an increase in inventories, accounts payable, and accounts receivable of $105,000, $70,000, and $80,000, respectively. If opportunity cost of capital is 4% and the project has a life of 9 years, and the working capital investments will be recovered at the end of the life of the project, what is the effect on the NPV of the project? Enter your answer rounded to two decimal places. Enter your response below. Number
Acme Inc. has invested $50,000 in a new assembly line. Products produced by the new assembly line are sold for $100 per unit. Fixed annual costs are $10,000 while variable annual costs are $10 per unit. The assembly line will remain in operation for 10 years, after which it will be sold for $15,000. The company has a MARR of 15%. What is the minimum annual production volume required to generate a profit?

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