The production machinery of Xaghogh is nearing the end of its useful life and it needs tobe replaced. Forecasts have been made for the initial capital cost, proportional sales incomeand operating costs of the replacement machine, which is expected to have a useful life ofthree years:Initial investmentCash flowsYear1230Sales income$280,000$330,000$390,00023The company appraises capital investment projects using a cost of capital of 10% per annum.What is the NPV of this machine? The Discount factor of 10% is as followsYear DF1.000$500,0000.9090.8260.751Operating costs$100,000$120,000$130,000

Net present value is the difference between the present value of cash flow and initial investment of…

The production machinery of Xaghogh is nearing the end of its useful life an be replaced. Forecasts have been made for the initial capital cost, proportion and operating costs of the replacement machine, which is expected to have a three years: Initial investment Cash flows Year Sales income 1 2 3 $280,000 $330,000 $390.000 $500,000 Operating costs $100,000 $120,000 $120.000

The production machinery of Xaghogh is nearing the end of its useful life an be replaced. Forecasts have been made for the initial capital cost, proportion and operating costs of the replacement machine, which is expected to have a three years: Initial investment Cash flows Year Sales income 1 2 3 $280,000 $330,000 $390.000 $500,000 Operating costs $100,000 $120,000 $120.000

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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Required information A company that manufactures magnetic flow meters expects to undertake a project that will have the cash flows estimated. First cost, $ Equipment replacement cost in year 2, $ Annual operating cost, $/year Salvage value, $ Life, years -880,000 -300,000 -930,000 250,000 14 At an interest rate of 10% per year, what is the equivalent annual cost of the project? Find the AW value using tabulated factors The equivalent annual cost of the project is $- 980,731.95
Accounting Sheridan is contemplating a capital investment of $19100. The cash flows over the project's five year life are projected as follows: Expected Annual Cash Inflows Expected Annual Cash Outflows Year 1 $6300 $1100 2 8100 2100 3 10200 2500 4 11700 3100 15600 2600 The asset will be depreciated using the straight-line method with no expected salvage value. The cash payback period is 2.46 years. 2.45 years. 2.36 years. 3.02 years.
OF CO Cum Oriole Company is considering two capital investment proposals. Estimates regarding each project are provided below: Initial investment Annual net income Net annual cash inflow Estimated useful life Salvage value Periods 5 Project Soup $400000 48000 124000 5 years 0 The company requires a 10% rate of return on all new investments. Present Value of an Annuity of 1 10% 12% 9% 62%. 12.0%, 24% Ⓒ31,0% 11% 3.89 3.791 3.696 3.605 4.486 4.355 4.231 4.111 The annual rate of return for Project Soup is Project Nuts $600000 64000 155000 6 years 0
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3. Becktell Industries has an offer to build a special product for the state highway patrol. The contract will cover a period of 10 years. The projected cash flows associated with the contract are given below: Required: Complete an analysis to calculate the net present value of the above cash flows. Company Required Rate of Return 11% Cost of new equipment 325,000 Working Capital needed 150,000 Net annual cash receipts 80,000 Salvage Value at end 75,000
Cost estimates for a porposed public facility are being evaluated. Initial construction cost is anticipated to be $120,000 and annual maintenance expenses are expected to be $6500 for the first 20 years and $2000 for every year thereafter. The facility is to be used and maintained for an indefinite period of time. Using an interest rate of 10% per year, the capitalized cost of this facility is most nearly? a. $180,000 b. $190,000 c. $200,000 d. $270,000
! Required information [The following information applies to the questions displayed below.] Project Y requires a $331,500 investment for new machinery with a five-year life and no salvage value. The project yields the following annual results. Cash flows occur evenly within each year. (PV of $1, EV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income Project Y $ 400,000 179,200 66,300 29,000 $ 125,500 3. Compute Project Y's accounting rate of return. Project Y Accounting Rate of Return Denominator: Numerator: / Accounting Rate of Return 0
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The Amani Company is planning a $200,000 equipment investment that has an estimated eight-year life with no estimated salvage value. The company has projected the following annual cash flows for the investment. Year Cash Inflows $120,000 $70,000 $60,000 $60,000 $60,000 Total $370,000 1 4. Assuming that the cash inflows occur evenly over the year, what is the payback period for the investment? (Ignore income taxes in this problem.)
A company is considering buying a new machine. Specific details: Initial Investment $400,000 Annual Cash Revenues $375,000 Annual Cash Expense $262,000 Expected Life 5 Years Salvage Value $0 Discount Rate 10% All cash flows are after tax. 1 Prepare a schedule that shows the applicable cash flows and other relevant items for this decision 2 Compute the payback period for the new machine 3 Compute the Accounting Rate of Return (ARR) for the new machine
Reclamation of a gravel pit is expected to begin 9 years from today with estimated end of year costs of 1.5 million dollars each year at the end of years 9, 10, 11 and 12. Part A What amount would the company need to invest or escrow today (time zero) to cover the future liabilities of 1.5 million in years 9, 10, 11, & 12? Other opportunities exist to invest available capital elsewhere and earn 10% per year compounded annually. Part B What amount would your company need to invest each year for the next 8 years (Years 1-8) to pay for the future liabilities of 1.5 million in years 9, 10, 11, & 12? Assume the same nominal 10% interest rate.
Compute the NPV based on the following data Life of project 10.00 year Required Investment 500,000.00 Required Rate of Return 8% Required Working Capital to be released at the end of the project 35,000.00 Salvage value of equipment at end of year 10 12,000.00 Required overhaul in year 5 60,000.00 Annual increase in net income for this project 85,000.00 Year Cash flow 0 1 2 3 4 5 6 7 8 9 10 Net Present Value IRR Should we accept this project:?

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