The Net Present Value for each project and its acceptability. Introduction: The difference over the present value of cash inflows and the present value of cash outflows over a time period is known as the Net Present value.

Question

You plan to purchase a $200,000 house using either a 30-year mortgage obtained from your local savings bank with a rate of 7.25 percent, or a 15-year mortgage with a rate of 6.50 percent. You will make a down payment of 20 percent of the purchase price. Calculate the amount of interest and, separately, principal paid on each mortgage. What is the difference in interest paid? Calculate your monthly payments on the two mortgages. What is the difference in the monthly payment on the two mortgages?

Answer 1

Question

Chapter 10, Problem 10.23P

a)

Summary Introduction

To determine:

The Net Present Value for each project and its acceptability.

Introduction:

The difference over the present value of cash inflows and the present value of cash outflows over a time period is known as the Net Present value.

b)

Summary Introduction

To determine:

The Internal rate of return for each of the project.

Introduction:

Internal Rate of Return is a measure used in the capital budgeting which estimates the profitability of potential investments. IRR is computed as a discount rate, which makes the net present value of all cash flows from an investment as zero.

c)

Summary Introduction

To determine:

The Net Present Value profiles for each project.

Introduction:

The difference between the present value of cash inflows and the present value of cash outflows over a period of time is known as the Net Present value.

NPV=CF1(1+r)1+CF2(1+r)2+CF3(1+r)3+CF4(1+r)4−I0 (1)

NPV profile is a graphic representation of the NPV of a project at different discount rates.

d)

Summary Introduction

To determine:

Evaluate the projects based on the NPV, IRR and NPV profile values.

Introduction:

The difference over the present value of cash inflows and the present value of cash outflows over a period is known as the Net Present value. Internal Rate of Return is a measure used in the capital budgeting which estimates the profitability of potential investments.

IRR is computed as a discount rate that makes the net present value of all cash flows from an investment as zero. NPV profile is a graphic representation of the NPV of a project at different discount rates.

e)

Summary Introduction

To determine:

The pattern of cash inflows to the projects.

Introduction:

The difference between the present value of cash inflows and the present value of cash outflows over a period of time is known as the Net Present value.

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You plan to purchase a $200,000 house using either a 30-year mortgage obtained from your local savings bank with a rate of 7.25 percent, or a 15-year mortgage with a rate of 6.50 percent. You will make a down payment of 20 percent of the purchase price. Calculate the amount of interest and, separately, principal paid on each mortgage. What is the difference in interest paid? Calculate your monthly payments on the two mortgages. What is the difference in the monthly payment on the two mortgages?

Problem 2-21 Financial Statements Use the following information for Ingersoll, Incorporated. Assume the tax rate is 23 percent. 2020 2021 Sales Depreciation $ 19,073 $17,436 1,811 1,886 Cost of goods sold 4,729 4,857 Other expenses 1,021 899 Interest 870 1,001 Cash 6,292 6,916 Accounts receivable 8,190 9,877 Short-term notes payable 1,320 1,297 Long-term debt 20,770 25,011 Net fixed assets 51,218 54,723 Accounts payable 4,624 5,094 Inventory 14,538 15,438 1,700 1,768 Dividends Prepare a balance sheet for this company for 2020 and 2021. (Do not round intermediate calculations.) Cash Assets Accounts receivable Inventory INGERSOLL, INCORPORATED Balance Sheet as of December 31 2020 2021 $ 6,292 $ 6,916 8,190 9,877 14,538 15,438 Drov 14 of 20 Ne

Problem 6-35 Financial Break-Even Analysis The technique for calculating a bid price can be extended to many other types of problems. Answer the following questions using the same technique as setting a bid price; that is, set the project NPV to zero and solve for the variable in question. Martin Enterprises needs someone to supply it with 152,000 cartons of machine screws per year to support its manufacturing needs over the next five years, and you've decided to bid on the contract. It will cost $1,920,000 to install the equipment necessary to start production; you'll depreciate this cost straight-line to zero over the project's life. You estimate that, in five years, this equipment can be salvaged for $162,000. Your fixed production costs will be $277,000 per year, and your variable production costs should be $10.60 per carton. You also need an initial investment in net working capital of $142,000. The tax rate is 22 percent and you require a return of 12 percent on your investment.…

Answer 2

Question

Chapter 10, Problem 10.23P

a)

Summary Introduction

To determine:

The Net Present Value for each project and its acceptability.

Introduction:

The difference over the present value of cash inflows and the present value of cash outflows over a time period is known as the Net Present value.

b)

Summary Introduction

To determine:

The Internal rate of return for each of the project.

Introduction:

Internal Rate of Return is a measure used in the capital budgeting which estimates the profitability of potential investments. IRR is computed as a discount rate, which makes the net present value of all cash flows from an investment as zero.

c)

Summary Introduction

To determine:

The Net Present Value profiles for each project.

Introduction:

The difference between the present value of cash inflows and the present value of cash outflows over a period of time is known as the Net Present value.

NPV=CF1(1+r)1+CF2(1+r)2+CF3(1+r)3+CF4(1+r)4−I0 (1)

NPV profile is a graphic representation of the NPV of a project at different discount rates.

d)

Summary Introduction

To determine:

Evaluate the projects based on the NPV, IRR and NPV profile values.

Introduction:

The difference over the present value of cash inflows and the present value of cash outflows over a period is known as the Net Present value. Internal Rate of Return is a measure used in the capital budgeting which estimates the profitability of potential investments.

IRR is computed as a discount rate that makes the net present value of all cash flows from an investment as zero. NPV profile is a graphic representation of the NPV of a project at different discount rates.

e)

Summary Introduction

To determine:

The pattern of cash inflows to the projects.

Introduction:

The difference between the present value of cash inflows and the present value of cash outflows over a period of time is known as the Net Present value.

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Answer 3

Question

Chapter 10, Problem 10.23P

a)

Summary Introduction

To determine:

The Net Present Value for each project and its acceptability.

Introduction:

The difference over the present value of cash inflows and the present value of cash outflows over a time period is known as the Net Present value.

b)

Summary Introduction

To determine:

The Internal rate of return for each of the project.

Introduction:

Internal Rate of Return is a measure used in the capital budgeting which estimates the profitability of potential investments. IRR is computed as a discount rate, which makes the net present value of all cash flows from an investment as zero.

c)

Summary Introduction

To determine:

The Net Present Value profiles for each project.

Introduction:

The difference between the present value of cash inflows and the present value of cash outflows over a period of time is known as the Net Present value.

NPV=CF1(1+r)1+CF2(1+r)2+CF3(1+r)3+CF4(1+r)4−I0 (1)

NPV profile is a graphic representation of the NPV of a project at different discount rates.

d)

Summary Introduction

To determine:

Evaluate the projects based on the NPV, IRR and NPV profile values.

Introduction:

The difference over the present value of cash inflows and the present value of cash outflows over a period is known as the Net Present value. Internal Rate of Return is a measure used in the capital budgeting which estimates the profitability of potential investments.

IRR is computed as a discount rate that makes the net present value of all cash flows from an investment as zero. NPV profile is a graphic representation of the NPV of a project at different discount rates.

e)

Summary Introduction

To determine:

The pattern of cash inflows to the projects.

Introduction:

The difference between the present value of cash inflows and the present value of cash outflows over a period of time is known as the Net Present value.

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Answer 4

Question

Chapter 10, Problem 10.23P

a)

Summary Introduction

To determine:

The Net Present Value for each project and its acceptability.

Introduction:

The difference over the present value of cash inflows and the present value of cash outflows over a time period is known as the Net Present value.

b)

Summary Introduction

To determine:

The Internal rate of return for each of the project.

Introduction:

Internal Rate of Return is a measure used in the capital budgeting which estimates the profitability of potential investments. IRR is computed as a discount rate, which makes the net present value of all cash flows from an investment as zero.

c)

Summary Introduction

To determine:

The Net Present Value profiles for each project.

Introduction:

The difference between the present value of cash inflows and the present value of cash outflows over a period of time is known as the Net Present value.

NPV=CF1(1+r)1+CF2(1+r)2+CF3(1+r)3+CF4(1+r)4−I0 (1)

NPV profile is a graphic representation of the NPV of a project at different discount rates.

d)

Summary Introduction

To determine:

Evaluate the projects based on the NPV, IRR and NPV profile values.

Introduction:

The difference over the present value of cash inflows and the present value of cash outflows over a period is known as the Net Present value. Internal Rate of Return is a measure used in the capital budgeting which estimates the profitability of potential investments.

IRR is computed as a discount rate that makes the net present value of all cash flows from an investment as zero. NPV profile is a graphic representation of the NPV of a project at different discount rates.

e)

Summary Introduction

To determine:

The pattern of cash inflows to the projects.

Introduction:

The difference between the present value of cash inflows and the present value of cash outflows over a period of time is known as the Net Present value.

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Answer 5

Chapter 10, Problem 10.23P

a)

Summary Introduction

To determine:

The Net Present Value for each project and its acceptability.

Introduction:

The difference over the present value of cash inflows and the present value of cash outflows over a time period is known as the Net Present value.

b)

Summary Introduction

To determine:

The Internal rate of return for each of the project.

Introduction:

Internal Rate of Return is a measure used in the capital budgeting which estimates the profitability of potential investments. IRR is computed as a discount rate, which makes the net present value of all cash flows from an investment as zero.

c)

Summary Introduction

To determine:

The Net Present Value profiles for each project.

Introduction:

The difference between the present value of cash inflows and the present value of cash outflows over a period of time is known as the Net Present value.

NPV=CF1(1+r)1+CF2(1+r)2+CF3(1+r)3+CF4(1+r)4−I0 (1)

NPV profile is a graphic representation of the NPV of a project at different discount rates.

d)

Summary Introduction

To determine:

Evaluate the projects based on the NPV, IRR and NPV profile values.

Introduction:

The difference over the present value of cash inflows and the present value of cash outflows over a period is known as the Net Present value. Internal Rate of Return is a measure used in the capital budgeting which estimates the profitability of potential investments.

IRR is computed as a discount rate that makes the net present value of all cash flows from an investment as zero. NPV profile is a graphic representation of the NPV of a project at different discount rates.

e)

Summary Introduction

To determine:

The pattern of cash inflows to the projects.

Introduction:

The difference between the present value of cash inflows and the present value of cash outflows over a period of time is known as the Net Present value.

Answer 6

Chapter 10, Problem 10.23P

a)

Summary Introduction

To determine:

The Net Present Value for each project and its acceptability.

Introduction:

The difference over the present value of cash inflows and the present value of cash outflows over a time period is known as the Net Present value.

Answer 7

Chapter 10, Problem 10.23P

a)

Summary Introduction

To determine:

The Net Present Value for each project and its acceptability.

Introduction:

The difference over the present value of cash inflows and the present value of cash outflows over a time period is known as the Net Present value.

Answer 8

b)

Summary Introduction

To determine:

The Internal rate of return for each of the project.

Introduction:

Internal Rate of Return is a measure used in the capital budgeting which estimates the profitability of potential investments. IRR is computed as a discount rate, which makes the net present value of all cash flows from an investment as zero.

Answer 9

b)

Summary Introduction

To determine:

The Internal rate of return for each of the project.

Introduction:

Internal Rate of Return is a measure used in the capital budgeting which estimates the profitability of potential investments. IRR is computed as a discount rate, which makes the net present value of all cash flows from an investment as zero.

Answer 10

c)

Summary Introduction

To determine:

The Net Present Value profiles for each project.

Introduction:

The difference between the present value of cash inflows and the present value of cash outflows over a period of time is known as the Net Present value.

NPV=CF1(1+r)1+CF2(1+r)2+CF3(1+r)3+CF4(1+r)4−I0 (1)

NPV profile is a graphic representation of the NPV of a project at different discount rates.

Answer 11

c)

Summary Introduction

To determine:

The Net Present Value profiles for each project.

Introduction:

The difference between the present value of cash inflows and the present value of cash outflows over a period of time is known as the Net Present value.

NPV=CF1(1+r)1+CF2(1+r)2+CF3(1+r)3+CF4(1+r)4−I0 (1)

NPV profile is a graphic representation of the NPV of a project at different discount rates.

Answer 12

d)

Summary Introduction

To determine:

Evaluate the projects based on the NPV, IRR and NPV profile values.

Introduction:

The difference over the present value of cash inflows and the present value of cash outflows over a period is known as the Net Present value. Internal Rate of Return is a measure used in the capital budgeting which estimates the profitability of potential investments.

IRR is computed as a discount rate that makes the net present value of all cash flows from an investment as zero. NPV profile is a graphic representation of the NPV of a project at different discount rates.

Answer 13

d)

Summary Introduction

To determine:

Evaluate the projects based on the NPV, IRR and NPV profile values.

Introduction:

The difference over the present value of cash inflows and the present value of cash outflows over a period is known as the Net Present value. Internal Rate of Return is a measure used in the capital budgeting which estimates the profitability of potential investments.

IRR is computed as a discount rate that makes the net present value of all cash flows from an investment as zero. NPV profile is a graphic representation of the NPV of a project at different discount rates.

Answer 14

e)

Summary Introduction

To determine:

The pattern of cash inflows to the projects.

Introduction:

The difference between the present value of cash inflows and the present value of cash outflows over a period of time is known as the Net Present value.

Answer 15

e)

Summary Introduction

To determine:

The pattern of cash inflows to the projects.

Introduction:

The difference between the present value of cash inflows and the present value of cash outflows over a period of time is known as the Net Present value.

Answer 16

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Ch. 10.1 - What is the financial managers goal in selecting...Ch. 10.2 - What is the payback period? How is it calculated?Ch. 10.2 - What weaknesses are commonly associated with the...Ch. 10.3 - How is the net present value (NPV) calculated for...Ch. 10.3 - Prob. 10.5RQ Ch. 10.3 - Prob. 10.6RQ Ch. 10.4 - Prob. 10.8RQ Ch. 10.4 - Prob. 10.9RQ Ch. 10.4 - Prob. 10.10RQ Ch. 10.5 - How is a net present value profile used to compare...

The Net Present Value for each project and its acceptability. Introduction: The difference over the present value of cash inflows and the present value of cash outflows over a time period is known as the Net Present value.

Solution Summary: The author explains the Net Present Value for each project and its acceptability.

Concept explainers

To determine:

The Net Present Value for each project and its acceptability.

Introduction:

The difference over the present value of cash inflows and the present value of cash outflows over a time period is known as the Net Present value.

To determine:

The pattern of cash inflows to the projects.

Introduction:

The difference between the present value of cash inflows and the present value of cash outflows over a period of time is known as the Net Present value.

Chapter 10 Solutions

The Net Present Value for each project and its acceptability. Introduction: The difference over the present value of cash inflows and the present value of cash outflows over a time period is known as the Net Present value.

Solution Summary: The author explains the Net Present Value for each project and its acceptability.

Concept explainers

To determine: The Net Present Value for each project and its acceptability. Introduction: The difference over the present value of cash inflows and the present value of cash outflows over a time period is known as the Net Present value.

To determine: The pattern of cash inflows to the projects. Introduction: The difference between the present value of cash inflows and the present value of cash outflows over a period of time is known as the Net Present value.

Chapter 10 Solutions

To determine:

The Net Present Value for each project and its acceptability.

Introduction:

The difference over the present value of cash inflows and the present value of cash outflows over a time period is known as the Net Present value.

To determine:

The pattern of cash inflows to the projects.

Introduction:

The difference between the present value of cash inflows and the present value of cash outflows over a period of time is known as the Net Present value.