Your firm is contemplating the purchase of a new $530,000 computer - based order entry system. The system will be depreciated straight line to zero over its five-year life. It will be worth $50,000 at the end of that time. You will save $310, 000 before taxes per year in order processing costs, and you will be able to reduce working capital by $65,000 (this is a one- time reduction). If the tax rate is 25 percent, what is the IRR for this project?
Q: what is the time zero or right now value of $400 perpetuity due an interest rate of 7.5%
A: Variable in the question:Perpetuity =$400Interest rate-7.5%Present value of a perpetuity can be…
Q: Rosh Corporation is planning to issue bonds with a face value of $840,000 and a coupon rate of 6…
A: Introduction:Interest is semiannally hence Period will be considered 8 instead of 4 (4*2 = 8).If…
Q: Miller's Hardware plans on saving $40,000, $50,000, and $58,000 at the end of each year for the next…
A: The FV of an investment refers to the combined value of the investment's cash flows at a future date…
Q: What is the primary advantage of owning mutual funds over individual securities? Mutual funds offer…
A: In mutual fund money is collected from large number of investors and collected money is invested in…
Q: Which of the following is / are true? I: The board of directors has the power to act on behalf of…
A: I. True: In most corporations, the board of directors is elected by the shareholders and holds the…
Q: Greta has risk aversion of A = 5 when applied to return on wealth over a one-year horizon. She is…
A:
Q: Dog Up! Franks is looking at a new sausage system with an installed cost of $470,000. This cost will…
A: NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…
Q: Hadley took a 6 day backpacking trip. The number of miles walked each day are shown below. Day Miles…
A: Percentage is a number that is a fraction of 100. Hence it is a ratio but expressed as a fraction of…
Q: Your parents will retire in 22 years. They currently have $220,000 saved, and they think they will…
A: The objective of this question is to find out the annual interest rate that the parents need to earn…
Q: Suppose the call money rate is 6.8 percent, and you pay a spread of 1.9 percent over that. You buy…
A: A margin account refers to an account used for purchasing securities where the investor has to pay…
Q: Determine the interest rate on this loan, if the payments begin one year after the loan is signed…
A: Present value illustrates the current value of a sum of money that will be received or paid in the…
Q: (Related to Checkpoint 5.6) (Solving for ) You are considering investing in a security that will pay…
A: Discount rate (r) = 10% or 0.1Number of years (n) = 31Future Value (FV) = $4,000
Q: nearest cent. a. An initial $800 compounded for 1 year at 9%. $ b. An initial $800 compounded for…
A: Option AOption BPresent value$800$800Interest rate9%9%Number of years12Option COption DFuture…
Q: Calculate the total cost, total depreciation, and annual depreciation (in $) for the following…
A: Total cost = Cost + Shipping charges + Setup chargesTotal depreciation = Total cost - salvage…
Q: Kuipers, Inc. 2018 statement of comprehensive income ($ in millions) Net sales Less: Cost of goods…
A: DPS (Dividend per share) is the ratio that can hep investors in determining the amount of dividend…
Q: QUESTION 6 You would like to have $49215 in 10 years. If the rate is 9.51%, how much do you have to…
A: given data:> Number of years = 10 years> Interest rate (rate) = 9.51%> Future value(FV)…
Q: Jack Corporation has a profit margin of 9.70 percent, total asset turnover of 1.50, an ROF of 18.62…
A: ROE=18.62Profit margin=9.70Assets turnover=1.50How much is debt-equity ratio.
Q: A company has just sold a product with the following payment plan: $75, 000 today, $50, 000 at the…
A: Present value = Future value x PVFPVF or present value factor = 1/(1+i)^twherei = interest rate =…
Q: Pls do requirenments for a thumbs up ;)
A: a Zero coupon bondcoupon bondActual gain10.74%9.87%Predicted gain10.72%10.29% b Zero coupon…
Q: to maturity of 5.26%, and is priced at $1,170.43. How many years till the bond matures? Answer in…
A: Bonds can trade at a premium, at par, or at a discount, depending on the market conditions for…
Q: How large must each of the six payments be?
A: The time value of money recognizes the idea that the value of an amount of money today differs from…
Q: Which TWO of the following statements are correct when preparing consolidated financial…
A: The objective of the question is to identify the correct statements regarding the preparation of…
Q: Alibaba stock does not pay a dividend. If the required return on the stock is 10.64% and the stock…
A: The stock price in year 1 can be found by using following formula:
Q: What are the Modified Duration and Macaulay Duration of the following bond? Coupon Rate = 8%…
A: Duration of bond shows the weighted period required to recover all cash flows from the bond. It is…
Q: Myca Corporation has a project with the following cash flows. What is the value of1. the cash flows…
A: The present value of cash flows refers to the value of future cash flows discounted to the present…
Q: What will your monthly payment be for a car you purchase for $82,000 today where the bank will…
A: The money's present value is its current worth compared to some of its potential future value after…
Q: Amortization schedule with periodic payments. Moulton Motors is advertising the following deal on a…
A: Mortgage payments refer to regular installments made by a borrower to repay a loan taken out to…
Q: If you deposit money today in an account that pays 5.5% annual interest, how long will it take to…
A: Future Value refers to the compounded value of a single cash flow received today or multiple cash…
Q: Assume a stock trades at $109, the volatility of the stock is 21%, and the risk - free interest rate…
A: The term "gamma" in the context of options refers to the sensitivity of the option's delta to…
Q: Baghiben
A: The objective of the question is to determine the change in the value of the Dollar relative to the…
Q: a) What are the standard deviations of stocks A and B? b) Suppose we build a portfolio with the…
A: Standard Deviation= firm-specific deviation * betaFor stock AStandard deviation= 25% * 0.90=…
Q: Timothy is retiring from his job soon at which time his employer will make the following offer: A…
A: Annuity payments:An annuity represents a set of periodic installments made over a specified period…
Q: Local Co. has sales of $10.5 million and cost of sales of $5.5 million. Its selling, general and…
A: Ratio analysis is a financial management technique that allows companies to gain insight into their…
Q: The nominal interest rate is 8% compounded semiannually. What amount will need to be deposited every…
A: TVM refers to the concept that considers the effect of the interest-earning capacity of money, which…
Q: Assume that all interest rates in the economy decline from 8 percent to 7 percent. Which of the…
A: Change in bond price refers to the movement in the price of a bond over a given period of time. It…
Q: Lichen Plc owns a machine that has a carrying value amount of $85,000 at the year-end of 31 March…
A: Impairment loss occurs due to factors such as the underlying asset being technologically obsolete or…
Q: Improvised explosive devices (IEDs) are responsible for many deaths in times of strife and war.…
A: A financial number called Net Present Value (NPV) evaluates the present value of expected cash…
Q: Over the next year, Rush Valley Corp. stock has a 20% chance of returning -4%, a 50% chance of…
A: The Expected Portfolio or the overall rate of return of the Portfolio is the total return which is…
Q: Solve for the unknown number of years in each of the following: (Do not intermediate calculations…
A: Present valueInterest rateFuture value$5708%$1,293$82012%$2,173$18,50018%$343,880$21,60014%$363,176
Q: Consider a $100,000 30-year, fixed-rate mortgage with an annual interest rate of 5.50% and monthly…
A: A mortgage is a type of loan specifically used to finance the purchase of real estate, such as a…
Q: Calculate the amount of owner's equity (in $) and the two leverage ratios for the given company.…
A: Assets: Assets are resources owned by the company that have economic value and are expected to…
Q: At the beginning of his current tax year, David invests $12,400 in original issue U.S. Treasury…
A: Bond investment = $12,400Face value = $10,000Maturity = 15 yearsInterest payment = $520Yield =…
Q: In 2021, a basketball player signed a contract reported to be worth $72.4 million. The contract was…
A: Payment for year 2021 = p1 = $10.2 millionPayment for year 2022 = p2 = $11.3 millionPayment for year…
Q: Queen Savings is attempting to determine its liquidity requirements for the month of September.…
A: Liquidity requirement:Liquidity requirements refer to a business or individual's financial cushion…
Q: Consider that you are 30 years old and have just changed to a new job. You have $91,000 in the…
A: The future worth of the amount that will be deposited today and the monthly contribution at given…
Q: You borrow $280,000; the annual loan payments are $24,871.68 for 30 years. What interest rate are…
A: Interest rate is the rate of return earned by the lender on the money lend.It can be calculated by…
Q: How long will it take $800 to double if it earns the following rates? Compounding occurs once a…
A: The objective of the question is to find out how long it will take for an investment of $800 to…
Q: Esfandairi Enterprises is considering a new three-year expansion project that requires an initial…
A: Initial investment = $2,430,000Annual sales = $2,770,000Cost = $1,790,000Tax rate = 24%Required…
Q: 1. If you want to have $500,000 when you retire and you put $85,000 in your retirement account right…
A: The NPER function can be used in the excel sheet to determine the number of years that needs to be…
Q: Your father is 50 years old and will retire in 10 years. He expects to live for 25 years after he…
A: Fixed retirement income $ 35,000.00Years left for retirement10Years after retirement25Inflation…
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 2 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?Caduceus Company is considering the purchase of a new piece of factory equipment that will cost $565,000 and will generate $135,000 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.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.
- Shao Airlines is considering the purchase of two alternative planes. Plane A has an expected life of 5 years, will cost $100 million, and will produce net cash flows of $30 million per year. Plane B has a life of 10 years, will cost $132 million, and will produce net cash flows of $25 million per year. Shao plans to serve the route for only 10 years. Inflation in operating costs, airplane costs, and fares are expected to be zero, and the company’s cost of capital is 12%. By how much would the value of the company increase if it accepted the better project (plane)? What is the equivalent annual annuity for each plane?Each of the following scenarios is independent. All cash flows are after-tax cash flows. Required: 1. Patz Corporation is considering the purchase of a computer-aided manufacturing system. The cash benefits will be 800,000 per year. The system costs 4,000,000 and will last eight years. Compute the NPV assuming a discount rate of 10 percent. Should the company buy the new system? 2. Sterling Wetzel has just invested 270,000 in a restaurant specializing in German food. He expects to receive 43,470 per year for the next eight years. His cost of capital is 5.5 percent. Compute the internal rate of return. Did Sterling make a good decision?Mason, Inc., is considering the purchase of a patent that has a cost of $85000 and an estimated revenue producing lite of 4 years. Mason has a required rate of return that is 12% and a cost of capital of 11%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?
- Talbot Industries is considering launching a new product. The new manufacturing equipment will cost $17 million, and production and sales will require an initial $5 million investment in net operating working capital. The company’s tax rate is 25%. What is the initial investment outlay? The company spent and expensed $150,000 on research related to the new product last year. What is the initial investment outlay? Rather than build a new manufacturing facility, the company plans to install the equipment in a building it owns but is not now using. The building could be sold for $1.5 million after taxes and real estate commissions. What is the initial investment outlay?Manzer Enterprises is considering two independent investments: A new automated materials handling system that costs 900,000 and will produce net cash inflows of 300,000 at the end of each year for the next four years. A computer-aided manufacturing system that costs 775,000 and will produce labor savings of 400,000 and 500,000 at the end of the first year and second year, respectively. Manzer has a cost of capital of 8 percent. Required: 1. Calculate the IRR for the first investment and determine if it is acceptable or not. 2. Calculate the IRR of the second investment and comment on its acceptability. Use 12 percent as the first guess. 3. What if the cash flows for the first investment are 250,000 instead of 300,000?The Rodriguez Company is considering an average-risk investment in a mineral water spring project that has an initial after-tax cost of 170,000. The project will produce 1,000 cases of mineral water per year indefinitely, starting at Year 1. The Year-1 sales price will be 138 per case, and the Year-1 cost per case will be 105. The firm is taxed at a rate of 25%. Both prices and costs are expected to rise after Year 1 at a rate of 6% per year due to inflation. The firm uses only equity, and it has a cost of capital of 15%. Assume that cash flows consist only of after-tax profits because the spring has an indefinite life and will not be depreciated. a. What is the present value of future cash flows? (Hint: The project is a growing perpetuity, so you must use the constant growth formula to find its NPV.) What is the NPV? b. Suppose that the company had forgotten to include future inflation. What would they have incorrectly calculated as the projects NPV?
- Your firm is contemplating the purchase of a new $1,200,000 computer- based order entry system. The system will be depreciated straight-line to zero over its 10 (ten-) year life. It will be worth $100,000 at the end of that time. You will save $400,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $120,000 (this is a 1 (one) time reduction). If the tax rate is 25 percent and discount rate is 10%, what is the NPV for this project?Your firm is contemplating the purchase of a new $575,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $60,000 at the end of that time. You will save $176,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $80,000 (this is a one-time reduction). If the tax rate is 23 percent, what is the IRR for this project?Your firm is contemplating the purchase of a new $595,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $81,000 at the end of that time. You will save $184,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $96,000 (this is a one-time reduction). If the tax rate is 24 percent, what is the IRR for this project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) IRR %