Three mutually exclusive earth-moving pieces of equipment are being considered for several large building projects in India over the next five years. The estimated cash flows for each alternative are given below. The construction company's MARR is 12% per year. Which of the three alternatives, if any, should be adopted? Assume repeatability is appropriate for this comparison. Caterpillar Deere Case Capital investment Net annual revenue $22,000 $6,500 $26,400 $16,000 $10,000 $5,200 Salvage value $4,500 $4,500 $3,750 Useful life 4 years 3 years 5 years

Three mutually exclusive earth-moving pieces of equipment are being considered for several large building projects in India over the next five years. The estimated cash flows for each alternative are given below. The construction company's MARR is 12% per year. Which of the three alternatives, if any, should be adopted? Assume repeatability is appropriate for this comparison. Caterpillar Deere Case Capital investment Net annual revenue $22,000 $6,500 $26,400 $16,000 $10,000 $5,200 Salvage value $4,500 $4,500 $3,750 Useful life 4 years 3 years 5 years

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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Strange Manufacturing Co. is purchasing a production facility at a cost of $21 million. The firm expects the project to generate annual cash flows of $7 million annually over the next five years. Its cost of capital is 10%. What is the net present value of this project? O $5,535,507 O $6,535,507 O $6,213,909 O $890,197
Please fully explain
The ABC Resort is redoing its golf course at a cost of $843,000. It expects to generate cash flows of $593,000, $743,000 and $129,000 over the next three years. If the appropriate discount rate for the company is 17.5 percent, what is the NPV of this project (to the nearest dollar)? O a. $279363 O b. $373541 O c. $1965363 O d. $112202
Coffer Company is analyzing two potential investments. Project X Cost of machine Net cash flow: Year 1 Year 2 $ 85,470 Project Y $ 65,000 33,000 33,000 3,000 30,000 Year 3 Year 4 33,000 0 • 30,000 25,000 If the company is using the payback period méthod, and it requires a payback period of three years or less, which project(s) should be selected? Multiple Choice Project Y. Project X. Both X and Y are acceptable projects. Neither X nor Y is an acceptable project.
Maud Dib Intergalactic has a new project available on Arrakis. The cost of the project is $36,000 and it will provide cash flows of $19,800, $25,300, and $24,200 over each of the next three years, respectively. Any cash earned in Arrakis is "blocked" and must be reinvested in the country for one year at an interest of 3.5 percent. The project has a required return of 8.5 percent. What is the project's NPV?
Young Corporation is considering purchasing equipment that costs $50,000 and is expected to provide the following cash inflows over its five-year useful life: Year Cash Inflow $12,000 $16,000 $18,000 $ 4,000 $ 3,000 1 4 What is the payback period of this investment project? (Rounded to the nearest year.)
JS er st un gs Sunland, Inc. management is considering purchasing a new machine at a cost of $4,370,000. They expect this equipment to produce cash flows of $791,390, $796,950, $866,730, $1,116,300, $1,212,360, and $1,300,900 over the next six years. If the appropriate discount rate is 15 percent, what is the NPV of this investment? (Enter negative amounts using negative sign e.g. -45.25. Do not round discount factors. Round other intermediate calculations and final answer to 0 decimal places, e.g. 1,525.) The NPV is tA $
Mobilio Company has hired a consultant to propose a way to increase the company’s revenues. The consultant has evaluated two mutually exclusive projects with the following information provided for each project: Project Tiger Project SharkCapital investment $1,105,000 $625,000Annual cash flows 180,000 105,000Estimated useful life 10 years 10 years Mobilio Company uses a discount rate of 9% to evaluate both projects.Instructions(a) Calculate the net present value of both projects.(b) Calculate the profitability index for each project.(c) Which project should Mobilio accept?
Staple Company is considering two capital investment proposals. Estimates regarding each project are provided below: Project Beans Project Rice Initial investment Annual net income Net annual cash flow Estimated useful life Salvage value Periods 5 6 9% The company requires a 10% rate of return on all new investments. Present Value of an Annuity of 1 11% 12% 3.890 4.486 10% 3.791 $400,000 4.355 20,000 100,000 5 years -0- 3.696 4.231 $600,000 42,000 142,000 6 years -0- The net present value for Project Rice is 3.605 4.111

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