Woodard Company wants to buy a numerically controlled (NC) machine to be used in producing specially machined parts for manufacturers of trenching machines. The outlay required is $800,000. The NC equipment will last five years with no expected salvage value. The expected after-tax cash flows associated with the project follow: Year Cash Revenues Cash Expenses 1 2 3 4 5 Required: $1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 $1,100,000 1,100,000 1,100,000 1,100,000 X 1,100,000 Compute the investment's Net Present Value, assuming a required rate of return of 8 percent. Round present value calculations and your final answer to the nearest dollar. NPV =
Q: Bensington Glass Co. is considering the expansion of it spandrel glass business line. They plan to…
A: Discounted payback period can be computed using the following formula,
Q: Reference is made to the 2022 Balance Sheet of Tram-Ropes limited. Tram-Ropes Limited Balance…
A: The cost of capital refers to the cost a company incurs in order to obtain financing for its…
Q: Below are four cases that you will have to solve using Excel spreadsheets. 1st case The company…
A: IRR refers to the rate or profit generated by the business in order to recover all the costs…
Q: The GAP Inc. discloses the following schedule to its fiscal 2018 (ended February 2, 2019)…
A: When trying to account for the time value of money, present value, or PV, is a concept in finance…
Q: Explain why it is important to understand different institutions when they start/while doing…
A: Effective international commercial endeavors necessitate a deep comprehension of the various…
Q: For the given cash flows, suppose the firm uses the NPV decision rule. Year 0 1 2 3 Cash Flow -$…
A: NPV can be calculated by following function in excel=NPV(rate,value1,[value2],…) + Initial…
Q: A beauty product company is developing a new fragrance named Happy Forever. There is a probability…
A: Expected annual sales = Sum of (Probability * Sales) in all scenarios
Q: All else being equal, which of the following factors is most likely to lead to an increase of the…
A: Additional funds needed (AFN) is the amount of cash needed for all capital expenditures and net…
Q: At times firms will need to decide if they want to continue to use their current equipment or…
A: The net present value is the difference between the present value of future cash flows and the…
Q: Current Attempt in Progress Your answer is partially correct. Wildhorse Corporation, an amusement…
A: Net present value refers to the method of capital budgeting used for estimating the viability of the…
Q: ere are some important figures from the budget of Nashville Nougats, Incorporated, for the second…
A: Cash budget is prepared to determine estimated cash receipts and payments for a specified future…
Q: As part of their investment strategy, the Carringtons have decided to put $100,000 into stock market…
A: A financial instrument called an expected payoff matrix shows the possible outcomes and…
Q: e 13-year, $1,000 par value bonds of Waco Industries pay 8 percent interest annually. The market…
A: Price of bond is the present value of coupon payments plus present value of the par value of bond…
Q: You need to estimate the value of Laputa Aviation. You have the following forecasts (in millions of…
A: WACC is the rate that a business has to pay to each of its security holders in order to fund its…
Q: A homeowner could take out a 15-year mortgage at a 5.5 percent annual rate on a $195,000 mortgage…
A: Amortization of a loan refers to the regular and equal instalments spread over the period of the…
Q: You want to save for a new car so you make payments of $573 at the end of every month into the bank.…
A: Monthly Payment = mp = $573Annual Payment = ap = $1620Number of Monthly Payment = mn = 7 * 12 =…
Q: Consider two loans with one-year maturities and id and a(n) 8.4% loan with a 4.5% (no-interest) comp…
A: Effective annual rate refers to the interest rate that is being charged by the lender to the…
Q: What is the beta for a firm with 40% equity and 60% debt if a similar firm with 55% equity and 45%…
A: Beta is a measure of the risk of the company It is a function of the leverage and the type of…
Q: Stuart Company is considering investing in two new vans that are expected to generate combined cash…
A: Capital budgeting is a process of allocating the company's capital to a project that generates and…
Q: An LBO purchases a business for $250,000,000, 80% of which is debt. In 7 years, the LBO sells it for…
A: To calculate the internal rate of return (IRR) of the investment, we need to consider the initial…
Q: x-month call options with strike prices of $34.9 and $52.3 cost $9.6 and $3.4, respectively. What is…
A: In bull call spread , there is simultaneous buy and sell of call option with different strike prices…
Q: For each of the following, compute the present value: (Your answers should be positive values.)…
A: Present Value = Future Value / (1 + Interest Rate)^time
Q: a. If EBIT is $625,000, what is the EPS for each plan? Note: Do not round intermediate calculations…
A: Earnings per share (EPS) shows how much of a company's profits are distributed to each outstanding…
Q: An investor is trying to decide between a muni paying 6.20 percent or an equivalent taxable…
A: The objective of this question is to find out the minimum marginal tax rate at which an investor…
Q: deducted from year-end asset values. What is your rate of return on the fund if you sell your shares…
A: The rate of return is used to gauge an investment's profitability. It determines the gain or loss on…
Q: You want to form a bond portfolio that pays $100 every six months, for the next year. That is, $100…
A: First we need to calculate the semi annual coupon payment of Bond B : Semi Annual coupon payment =…
Q: The function f(x) = 600 represents the rate of flow of money in dollars per year. Assume a 10-year…
A:
Q: A task force of capital budgeting analysts at Morrison Limited collected the following data…
A: Capital budgeting is a strategic financial planning process that involves evaluating and selecting…
Q: eBook A project has annual cash flows of $7,500 for the next 10 years and then $6,500 each year for…
A: NPV makes it possible to compare various investment opportunities. Given that it is anticipated to…
Q: 25. A loan of R15,000 is charged at an annual interest rate of 8%, compounded monthly. If the loan…
A: Future value is that amount which will be require to paid at some specified period of time. It…
Q: Currently Forever Flowers Inc. has a capital structure. consisting of 25% debt and 75 y, equity.…
A: The WACC of a company is the average return that the company provides to all its stakeholders. It is…
Q: 0.3 probability. Calculate Neal's expected ROE, standard daration, and coefficient of variation for…
A: Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…
Q: You own a portfolio equally invested in a risk - free asset and two stocks (If one of the stocks has…
A: Market Beta=11=1/3∗0+1/3∗1.16+1/3∗Betaofotherstock.1=0+0.3867+1/3∗Betaofotherstock.
Q: uary 31, 2022 you purchased a newly issued 5.6% coupon bond issued by the Dana Corporation for…
A: Price of bond is the present value of the coupon payments plus present value of the par value of the…
Q: You observe the following quoted money market rates: Spot exchange rate 95-day Forward exchange rate…
A: The global market where currencies are traded is known as foreign exchange currency, or forex or FX.…
Q: Brad decides to purchase a $295,000$house. He wants to finance the entire balance. He has received…
A: A loan is a type of financial agreement whereby a lender gives a borrower a certain amount of money,…
Q: An asset costs $780,000 and will be depreciated in a straight-line manner over its three- year life.…
A: Lease payments:Lease payments are a type of payment made by a lessee to a lessor for the use of an…
Q: The dean of the School of Fine Arts is trying to decide whether to purchase a copy machine to place…
A: Variables in the question:Incremental cash inflows per year=$19500n=3 yearsSalvage value=NilRequired…
Q: Express the level payment amount of the second perpetuity, P, as a function of the annual effective…
A: Effective interest rate for a perpetuity paying every two years, r = (1 + i)2 - 1Effective interest…
Q: Tiger Towers, Inc. is considering an expansion of their existing business, student apartments. The…
A: Here,Value of Land $ 1,000,000.00No.of Office Suites20Revenue per Suites $…
Q: You are given the following information about a portfolio you are to manage. For the long term, you…
A: Expected Drop in Index= (4250-4500)/4500= -5.56%
Q: After researching the competitors of EJH Enterprises, you determine that most comparable firms have…
A: P/E ratio means price earnings ratio.It is calculated as follows:-P/E ratio =
Q: Jacob Arrell Corporation has sales revenue of $9,500,000. The company's fixed costs total…
A: There is ratio called combined leverage which is the ratio of % change in EPS with respect to %…
Q: The cash flows and Net salvage value of Project Y is given the following table: Year Cash flows…
A: The economic life of the project or an asset can be found by finding the NPV (which is one of the…
Q: a. For this base-case scenario, what is the NPV of the plant to manufacture lightweight tractors? b.…
A: Net present value is determined by deducting the initial investment from the current value of cash…
Q: down by 25%. The continuously compounded risk - free interest rate is 5%. Calculate the price of an…
A: An option is an agreement between two parties granting one the opportunity to buy or sell a security…
Q: D) inverted 4. Ali is saving for a downpayment to buy a house. He deposits a fixed amount every…
A: Down payment is out of pocket cash money paid for the purchase of a vehicle or home and it is a…
Q: Suppose you think WW stock is going to appreciate substantially in value over the next six months.…
A: Buying the call option means you are bullish on stock and will be benfitting if share price move…
Q: You are interested in a stock that just paid an annual dividend of $3.60. The corporate management…
A: Dividends refer to the earnings of the company that are distributed to the shareholders during a…
Q: Note: Where discount factors are required, use only the present value tables (Appendix 1 and 2)…
A: Capital budgeting is a strategic financial planning process used by companies to evaluate and select…
AA
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 1 images
- Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided manufacturing system. The annual net cash benefits and savings associated with the system are described as follows: The system will cost 9,000,000 and last 10 years. The companys cost of capital is 12 percent. Required: 1. Calculate the payback period for the system. Assume that the company has a policy of only accepting projects with a payback of five years or less. Would the system be acquired? 2. Calculate the NPV and IRR for the project. Should the system be purchasedeven if it does not meet the payback criterion? 3. The project manager reviewed the projected cash flows and pointed out that two items had been missed. First, the system would have a salvage value, net of any tax effects, of 1,000,000 at the end of 10 years. Second, the increased quality and delivery performance would allow the company to increase its market share by 20 percent. This would produce an additional annual net benefit of 300,000. Recalculate the payback period, NPV, and IRR given this new information. (For the IRR computation, initially ignore salvage value.) Does the decision change? Suppose that the salvage value is only half what is projected. Does this make a difference in the outcome? Does salvage value have any real bearing on the companys decision?Austins cell phone manufacturer wants to upgrade their product mix to encompass an exciting new feature on their cell phone. This would require a new high-tech machine. You are excited about his new project and are recommending the purchase to your board of directors. Here is the information you have compiled in order to complete this recommendation: According to the information, the project will last 10 years and require an initial investment of $800,000, depreciated with straight-line over the life of the project until the final value is zero. The firms tax rate is 30% and the required rate of return is 12%. You believe that the variable cost and sales volume may be as much as 10% higher or lower than the initial estimate. Your boss understands the risks but asks you to explain the alternatives in a brief memo to the board, Write a memo to the Board of Directors objectively weighing out the pros and cons of this project and make your recommendation(s).Gardner Denver Company is considering the purchase of a new piece of factory equipment that will cost $420,000 and will generate $95,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further Instructions on internal rate of return in Excel, see Appendix C.
- Payback, Accounting Rate of Return, Net Present Value, Internal Rate of Return Follow the format shown in Exhibit 12B.1 and Exhibit 12B.2 as you complete the requirement below. Blaylock Company wants to buy a numerically controlled (NC) machine to be used in producing specially machined parts for manufacturers of trenching machines. The outlay required is $730,671. The NC equipment will last five years with no expected salvage value. The expected after-tax cash flows associated with the project follow: Year Cash Revenues Cash Expenses 1 $1,300,000 $1,000,000 1,300,000 1,000,000 1,000,000 1,000,000 1,000,000 2 3 4 5 1,300,000 1,300,000 1,300,000 Required: Compute the Investment's Internal Rate of return. Enter as a percent. If required, round your answer to the nearest whole percent. IRR = %Payback, Accounting Rate of Return, Net Present Value, Internal Rate of Return Follow the format shown in Exhibit 12B.1 and Exhibit 12B.2 as you complete the requirement below. Blaylock Company wants to buy a numerically controlled (NC) machine to be used in producing specially machined parts for manufacturers of trenching machines. The outlay required is $800,000. The NC equipment will last five years with no expected salvage value. The expected after-tax cash flows associated with the project follow: Year Cash Revenues Cash Expenses 1 $1,600,000 $1,200,000 2 1,600,000 1,200,000 3 1,600,000 1,200,000 4 1,600,000 1,200,000 5 1,600,000 1,200,000 Required: Compute the investment's Net Present Value, assuming a required rate of return of 8 percent. Round present value calculations and your final answer to the nearest dollar.NPV = $fill in the blank 1Payback, Accounting Rate of Return, Net Present valde, Internal Rate of Retum Follow the format shown in Exhibit 12B.1 and Exhibit 12B.2 as you complete the requirements below. Woodard Company wants to buy a numerically controlled (NC) machine to be used in producing specially machined parts for manufacturers of tractors. The outlay required is $460,800. The NC equipment will last 5 years with no expected salvage value. The expected after-tax cash flows associated with the project follow: Year 1 2 3 4 5 Required: Cash Revenues $612,000 612,000 612,000 612,000 612,000 Cash Expenses $432,000 432,000 432,000 432,000 432,000 1. Compute the payback period for the NC equipment. Round your answer to two decimal places. 2.56 ✓ years Check My Work 2. Compute the NC equipment's ARR. Round the percentage to one decimal place. Assume straight-line depreciation. 19.1 ✓ % 3. Compute the investment's NPV, assuming required rate of return of 10%. Round present value calculations and your final answer…
- Payback, Accounting Rate of Return, Net Present Value, Internal Rate of Return Follow the format shown in Exhibit 12B.1 and Exhibit 12B.2 as you complete the requirements below. Blaylock Company wants to buy a numerically controlled (NC) machine to be used in producing specially machined parts for manufacturers of tractors. The outlay required is $384,000. The NC equipment will last 5 years with no expected salvage value. The expected after-tax cash flows associated with the project follow: Year Cash Revenues Cash Expenses 1 $510,000 $360,000 2 510,000 360,000 3 510,000 360,000 4 510,000 360,000 5 510,000 360,000 Required: 1. Compute the payback period for the NC equipment. Round your answer to two decimal places.fill in the blank 1 years 2. Compute the NC equipment's ARR. Round the percentage to one decimal place. Assume straight-line depreciation.fill in the blank 2 % 3. Compute the investment's NPV, assuming a required rate of return of…Please view the following video before answering this question. Video Example 4.3 Click here to access the TVM Factor Table Calculator Consider a palletizer at a bottling plant that has a first cost of $141,000, operating and maintenance costs of $16,500 per year, and an estimated net salvage value of $23,500 at the end of 33 years. Assume an interest rate of 6.00%. What is the present equivalent cost of the investment if the planning horizon is 33 years? O $387,900 O $362,900 O $372,363 O $423,400Payback, Accounting Rate of Return, Net Present Value, Internal Rate ofReturnBlaylock Company wants to buy a numerically controlled (NC) machineto be used in producing specially machined parts for manufacturers oftractors. The outlay required is $384,000. The NC equipment will last 5years with no expected salvage value. The expected after-tax cash flowsassociated with the project follow: Required:Compute the payback period for the NC equipment.Compute the NC equipment's ARR. Round the percentage to one decimalplace.Compute the investment's NPV, assuming a required rate of return of10%.Compute the investment's IRR.
- A firm is trying to decide which of two machines to purchase as described in in the table below. Using the interest rate 9% or 0.09, use present worth analysis to determine which machine, if either, should be purchased. Show all your work. Machine: A - B First Cost: $800 - $600 Annual Net Benefit: $130 - $230 Salvage Value: $40 - $20 Usefil Life (years): 9 - 3Find the expected EUAW from the financial data provided in the table for new equipment. Because of the uncertainty of technology being used in this equipment, it has not been possible to get the initial cost accurately. The annual benefit, however, is estimated to be $25,000 with a possible equipment life of 5 years. The salvage value is expected to be 10% of the initial cost. MARR = 8%. First Cost, $ $60,000 $80,000 $100,000 $120,000 Probability 0.25 0.35 0.30 0.10 Choices: A. $3957 B. $2977 C. $4628 D. $5157 Determine the associated risk measure in this equipment investmest in terms of standard deviation. A. $6,123 B. $4437.80 C. $8,523 D. $4,923Payback, Accounting Rate of Return, Net Present Value, Internal Rate of Return Blaylock Company wants to buy a numerically controlled (NC) machine to be used in producing specially machined parts for manufacturers of trenching machines. The outlay required is $700,000. The NC equipment will last five years with no expected salvage value. The expected after-tax cash flows associated with the project follow: Year Cash Revenues Cash Expenses 1 $1,300,000 $1,100,000 2 1,300,000 1,100,000 3 1,300,000 1,100,000 4 1,300,000 1,100,000 5 1,300,000 1,100,000 Required: Compute the investment's Net Present Value, assuming a required rate of return of 10 percent. Round present value calculations and your final answer to the nearest dollar.NPV = $fill in the blank 1