Thunder Corporation, an amusement park, is considering a capital investment in a new exhibit. The exhibit would cost $204,969 and have an estimated useful life of 12 years. It can be sold for $69,200 at the end of that time. (Amusement parks need to rotate exhibits to keep people interested) It is expected to increase net annual cash flows by $26,300. The company's borrowing rate is 8%. Its cost of capital is 10% Click here to view the factor table Calculate the net present value of this project to the company and determine whether the project is acceptable. Of the net present value is negative, use either a negative sign preceding the number eg-45 or parentheses eg (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round present value answer to O decimal places, eg. 125)

Thunder Corporation, an amusement park, is considering a capital investment in a new exhibit. The exhibit would cost $204,969 and have an estimated useful life of 12 years. It can be sold for $69,200 at the end of that time. (Amusement parks need to rotate exhibits to keep people interested) It is expected to increase net annual cash flows by $26,300. The company's borrowing rate is 8%. Its cost of capital is 10% Click here to view the factor table Calculate the net present value of this project to the company and determine whether the project is acceptable. Of the net present value is negative, use either a negative sign preceding the number eg-45 or parentheses eg (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round present value answer to O decimal places, eg. 125)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost $501 million and will operate for 20 years. OpenSeas expects annual cash flows from operating the ship to be $70.7 million and its cost of capital is 12.1%. a. Prepare an NPV profile of the purchase. b. Identify the IRR on the graph. c. Should OpenSeas go ahead with the purchase? d. How far off could OpenSeas's cost of capital estimate be before your purchase decision would change?
Click here to read the eBook: Analysis of an Expansion Project PROJECT CASH FLOW Colsen Communications is trying to estimate the first-year cash flow (at Year 1) for a proposed project. The financial staff has collected the following information on the project: Sales revenues $5 million Operating costs (excluding depreciation) 3.5 million Depreciation 1 million Interest expense 1 million The company has a 40% tax rate, and its WACC is 11%. Write out your answers completely. For example, 13 million should be entered as 13,000,000. What is the project's cash flow for the first year (t = 1)? Round your answer to the nearest dollar.$????? If this project would cannibalize other projects by $0.5 million of cash flow before taxes per year, how would this change your answer to part a? Round your answer to the nearest dollar.The firm's project's cash flow would now be $ .??? Ignore part b. If the tax rate dropped to 35%, how would that change your answer to part a? Round…
Sheridan Corporation, an amusement park, is considering a capital investment in a new exhibit. The exhibit would cost $195,205 and have an estimated useful life of 10 years. It can be sold for $69,500 at the end of that time. (Amusement parks need to rotate exhibits to keep people interested.) It is expected to increase net annual cash flows by $26,700. The company’s borrowing rate is 8%. Its cost of capital is 10%. Click here to view PV table.Calculate the net present value of this project to the company and determine whether the project is acceptable. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round present value answer to 0 decimal places, e.g. 125.) Net present value $enter the net present value in dollars rounded to 0 decimal places The project select an option…
Thunder Corporation, an amusement park, is considering a capital investment in a new exhibit. The exhibit would cost $204,212 and have an estimated useful life of 11 years. It can be sold for $64,700 at the end of that time. (Amusement parks need to rotate exhibits to keep people interested.) It is expected to increase net annual cash flows by $27,400. The company's borrowing rate is 8%. Its cost of capital is 10%. Click here to view the factor table. Calculate the net present value of this project to the company and determine whether the project is acceptable. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round present value answer to O decimal places, e.g. 125.) Net present value $ The project is not acceptable
OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost $499 million and will operate for 20 years. OpenSeas expects annual cash flows from operating the ship to be $69.6 million and its cost of capital is 12.0%. a. Prepare an NPV profile of the purchase. b. Identify the IRR on the graph. c. Should OpenSeas go ahead with the purchase? d. How far off could OpenSeas's cost of capital estimate be before your purchase decision would change? ...
Manama Beverage Company is considering an investment in a project that has rate of return of 20%. The only cash outflow for this project is the initial investment. The project is estimated to have an 8-year life and no salvage value. Cash inflows from this project are expected to be $100,000 per year in each of the 8 years. Manama's discount rate is 16%. What is the net present value of this project? Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. $5,215 $15,464 $50,700 $55,831
Ivanhoe Industries management is planning to replace some existing machinery in its plant. The cost of the new equipment and the resulting cash flows are shown in the accompanying table. The firm uses an 18 percent discount rate for projects like this. Should management go ahead with the project? Year Cash Flow 0 -$3,046,900 1 803,710 2 889,200 3 1,247,600 4 1,285,160 5 1,576,500 What is the NPV of this project? - NPV $?
Hardev
Herky Foods is considering acquisition of a new wrapping machine. By purchasing the machine, Herky will save money on packaging in each of the next 5 years, producing the series of cash inflows shown in the following table: The initial investment is estimated at $1.46 million. Using a 9% discount rate, determine the net present value (NPV) of the machine given its expected operating cash inflows. Based on the project's NPV, should Herky make this investment? The net present value (NPV) of the new wrapping machine is $. (Round to the nearest cent.)
Bensington Glass Co. is considering the expansion of it spandrel glass business line. They plan to convert an unused space of their warehouse into additional manufacturing space. They estimate the initial investment will be $9,350,000 and expect the new production to create additional cash flows of $4,105,000 in year's one through ten. If Bensington Glass uses a discount rate of 15%, what is the project's discounted payback period? O 4.16 2.99 2.28 3.25
Jack Sprat Inc. wants to know if they invest 11,548 in new exercise equipment, plus $2.000 for installation. how long before they will receive their initial invest back from future cash flows? What is the payback period for the initial costs? Projected Cash flows Year 1: 5,000 Year 2: 7,000 Year 3: 4,000 Year 4: 1,000 Post your answer as number of years with 2 decimal places, for example 5.55
LENLEN Company is considering on investing in new automated machinery. The machinery will be used for five years in the project. (Prevailing cost of capital at 10% per annum) The new investment needs a P1,700,000 cash outflow. The estimated cash inflow of income from the investment of machinery for the next five (5) years would be: CASH INFLOWS YEAR 1 P 950,000 750,000 650,000 350,000 150,000 REQUIRED: By applying the following evaluation techniques if the investment economically acceptable. Show your complete solution and Answer it if acceptable or not acceptable from 1 to 4 below: 3. Net Present Value 4. Profitability Index