Vince plans to open a self - serve grooming center in astorefront. The grooming equipment will cost $480,000, to be paid immediately. Vince expects aftertaxcash inflows of $103,000 annually for eight years, afterwhich he plans to scrap the equipment and retire to thebeaches of Nevis. The first cash inflow occurs at the endof the first year. Assume the required return is 13percent. What is the project's PI? (Do not roundintermediate calculations. Round your answer to 3decimal places, e.g., 32.161.)

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Answered: Vince plans to open a self - serve…

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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Your company is planning to purchase a new log splitter for its lawn and garden business. The new splitter has an initial investment of $320,000. It is expected to generate $40,000 of annual cash flows, provide incremental cash revenues of $215,760, and incur incremental cash expenses of $130,000 annually. What is the payback period and accounting rate of return (ARR)? Round your answers to 1 decimal place. Payback period years ARR %
Billabong Tech uses the internal rate of return (IRR) to select projects. Calculate the IRR for each of the following projects and recommend the best project based on this measure. Project T-Shirt requires an initial investment of $26,500 and generates cash inflows of $9,000 per year for 7 years. Project Board Shorts requires an initial investment of $38,333 and produces cash inflows of $12,500 per year for 8 years. The IRR of project T-Shirt is %. (Round to two decimal places.)
You are responsible to manage an IS project with a 4-year horizon. The annal cost of the project is estimated at $40,000 per year, and a one-time costs of $120,000. The annual monetary benefit of the project is estimated at $96,000 per year with a discount rate of 6 percent. a. Calculate the overall return on investment (ROI) of the project. b. Perform a break-even analysis (BEA). At what year does break-even occur?
A proposed bridge on the interstate highway is being considered at the cost of 4 million dollars. It is expected that the bridge will have a life of 30 years. Construction costs will be paid by government agencies. Operation and maintenance costs are estimated to be $250,000 per year. Benefits to the public are estimated to be $900,000 per year. The building of the bridge will result in an estimated cost of $250,000 per year to the general public. The project requires a return of 5%. Determine the benefit/cost (B/C) ratio.
Please answer this problems manually. Thank you
If a garden center is considering the purchase of a new tractor with an initial investment cost of $117,000, and the center expects a return of $31,000 in year one, $22,000 in years two and three, $17,000 in years four and five, and $8,000 in year six and beyond, what is the payback period? fill in the blank 1 years
You can use machine A with an initial investment of $1,000 and a maintenance cost of $7,980 annually for the next five years. Alternatively, you can purchase machine B for $12,000 initial cost today, plus $5,000 annual maintenance with the same 5 years life. At a cost of capital of 15%, you should: Show your Work A. Use machine A and save $600 in equivalent annual annuity. B. Use machine A and save $302 in equivalent annual annuity. C. Use the machine B and save $596 in equivalent annual annuity. D. Buy the machine C and save $600 in equivalent annual annuity. E. Buy machine B and save $596 in equivalent annual annuity.
Please show all your work
Calculate the NPV based upon the following facts: Bob has just completed the development of a better face shield for health workers. The new product is expected to produce annual revenues of $230,000. Bob requires an investment in an advanced 3D Printer costing $30,000. The project has an expected life of 5 years. The 3D printer will have a $20,000 salvage value at the end of 5 years. Working capital is expected to increase by $80,000 which Bob will recover at the end of the products life cycle. Annual operating expenses are estimated at $200,000. The required rate of return is 4%.
You are required to investigate the following project: The initial Investment at n=0 is $100,000. The project life is 10 years. Estimated annual operating cost : 34,000. The required minimum return on the investment :14%. The salvage value 8,000. What is the minimum annual revenues that should be generated to make the project worthwhile? 97842 52758 81921 45716 O O O O
You are working on a bid to build four small apartment buildings a year for the next three years for a local community. This project requires the purchase of $900,000 of equipment which will be depreciated at a CCA rate of 30% over the next three years. The equipment can be sold at the end of the project for $400,000 (ignore any gains or losses). You plan to borrow half of the equipment cost at a rate of 5.5%. You will also need $200,000 in net working capital maintained over the life of the project. The labour costs are expected to be $100,000 per year, fixed costs will be $175,000 a year and the materials will be $140,000 per building per year. Your required rate of return is 12% for this project. Ignoring taxes, what is the minimal amount, that you should bid per building?
Bill Williams has the opportunity to invest in project A that costs $6,900today and promises to pay $2,100, $2,400, $2,400, $2,000 and $1,800over the next 5 years. Or, Bill can invest $6,900 in project B that promises to pay $1,500, $1,500, $1,500, $3,600 and $4,000 over the next 5 years. (Hint: For mixed stream cash inflows, calculate cumulative cash inflows on a year-to-year basis until the initial investment is recovered.) a. How long will it take for Bill to recoup his initial investment in project A? b. How long will it take for Bill to recoup his initial investment in project B? c. Using the payback period, which project should Bill choose? d. Do you see any problems with his choice?

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