Hubrey Home Inc. is considering a new three-year expansion project that requires an initial fixed asset investment of $4million. The fixed asset falls into Class 10 for tax purposes (CCA rate of 30% per year), and at the end of the three years can besold for a salvage value equal to its UCC. The project is estimated to generate $2,660,000 in annual sales, with costs of$843,000. If the tax rate is 35%, what is the OCF for each year of this project? (Enter the answers in dollars. Do not roundyour intermediate calculations. Round the final answers to 2 decimal places. Omit $ sign in your response.)OCF1OCF20CF3$ 1391050$ 1538050$ 1430950

The operating cash flow shows how well a company can produce cash through ongoing operations. It…

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what is the OCF for each year of this project? (

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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How should the $70,000 be allocated to each alternative to maximize annual return? What is the annual return?
b. If the cost of capital for this project is 14%, what is your estimate of the value of the new project?
Assuming monetary benefits of a construction project at $50,000 per year, one-time costs (initial investment) of $15,000, recurring costs of $35,000 per year, a discount rate of 10 per cent, and a 4-year time horizon, calculate the net present value (NPV) of an information system's costs and benefits. Calculate the overall return on investment (ROI) of the project. During which year does break-even occur? Use the NPV template provided (modify to suit your answer) and clearly display the NPV, ROI, and year in which payback occurs. Write a paragraph explaining whether you would recommend investing in this project based on your ﬁnancial analysis. Explain your answer referring to the NPV, ROI and payback for this project. Discount Rate (10%) Year 0 - 1.0000 Year 1 - .9091 Year 2 - .8264 Year 3 - .7513 Year 4 - .6830
A project has an initial cost of $61,450, expected net cash inflows of $11,000 per year for 10 years, and a cost of capital of 8%. What is the project's MIRR? Round your answer to two decimal places.
An rrsp is now worth $229,000 after contributions of $3000 at the beginning of every six months for 22 years. What effective rate or return has the plan earned? effecive rate of return is ____?
Perform a financial analysis for a project. Assume that the projected costs and benefits for this project are spread over 6 years as follows. Estimated costs are $1,100,000 in Year 0, and $50,000 each year in Years 1, 2, 3, 4, 5 and 6. Estimated benefits are $0 in Year 0, and $450,000 each year in Years 1, 2, 3, 4, 5 and 6. Use a 15% discount rate. Suppose the required payback period and discounted payback period are both 3 years. (1) Calculate the payback period (based on the original cash flows without discounting), and evaluate the project based on the payback method. (2) Calculate the discounted payback period (based on discounted cash flows), and evaluate the project based on the discounted payback method. (3) Evaluate the project using the NPV method, and explain whether you would recommend investing in this project.
What is the payback period for project E? Data Table - X years (Round to one decimal place.) (Click on the following icon in order to copy its contents into a spreadsheet) Cash Flow Cost Cash flow year 1 Cash flow year 2 Cash flow year 3 Cash flow year 4 Cash flow year 5 Cash flow year 6 $46,000 $100,000 $20,000 $9,200 $9,200 $10,000 $9,200 $40,000 $9,200 $30,000 $9,200 $0 $9,200 $0 Print Done
(c) Compute the annual rate of return for each project. (Hint: Use average annual net income in your computation.) (Round answers to 2 decimal places, e.g. 10.50%.) Annual rate of return Project Bono % Project Edge % Project Clayton %
Keane & Co plc is considering two possible investments. The company requires an Accounting Rate of Return of 12% and payback within 2 years. It has a cost of capital of 12%. Forecast sales and production units Year 1 Year 2 Year 3 Year 4 Contribution per unit Fixed cost per year Initial investment Residual (scrap) value Accounting Rate of Return Internal Rate Return Discount factors at 12% are: Year 1 Year 2 Year 3 Year 4 Year 5 0.893 0.797 0.712 0.636 0.567 Project J 60,000 110,000 80,000 50,000 £40 £800,000 £7,600,000 £300,000 9.5% 8% Project K 30,000 24,000 20,000 12,000 £120 £700,000 £5,500,000 £150,000 19% 18%
(4) Evaluate the ROI.
9) A project has an initial cost of $65,000, expected net cash inflows of $11,000 per year for 9 years, and a cost of capital of 13%. What is the project's payback period? Round your answer to two decimal places. _____years
Net Present Value-Unequal Lives Project 1 requires an original investment of $65,200. The project will yield cash flows of $14,000 per year for 5 years. Project 2 has a computed net present value of $15,700 over a three-year life. Project 1 could be sold at the end of three years for a price of $65,000. Use the Present Value of $1 at Compound Interest and the Present Value of an Annuity of $1 at Compound Interest tables shown below. Present Value of $1 at Compound Interest 10% 0.909 0.826 0.751 0.683 Year 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 6% 10 0.943 0.890 0.840 0.792 0.747 0.705 0.665 0.627 0.592 0.558 2.673 3.465 4.212 4.917 5.582 6.210 0.621 0.564 0.513 0.467 0.424 0.386 Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 0.943 0.870 1.833 1.626 2.283 2.855 6.802 7.360 0.909 1.736 2.487 3.170 3.791 4.355 4.868 12% 5.335 5.759 6.145 0.893 0.797 0.712 0.636 0.567 0.507 0.452 0.404 0.361 0.322 0.893 1.690 2.402 3.037 3.605 4.111 4.564 4.968 15% 5.328…

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