answer as soon as possible (b)Over the past 8 years, PQR Sdn Bhd has placed varying sums of money into a specialcapital accumulation fand. The company sells compost produced by garbage-to-compost plants in Malaysia and Indonesia. Figure Q2(b) is the cash flow diagramrepresent the value of funding.(1)RM 1,0002 3RM 3,00045 6RM 1,500Figure Q2(b)Determine the amount in the account (year 8) using a nominal interestmethod with an interest rate of 10% per year, compounded semi-annually.CON

We can determine the value of the fund in 8 years by using the Future Value formula for each of the…

Answered: (1) RM 1,000 1 2 RM 3,000 6 F-? RM…

(1) RM 1,000 1 2 RM 3,000 6 F-? RM 1,500 Figure Q2(b) Determine the amount in the account (year 8) using a nominal interest method with an interest rate of 10% per year, compounded semi-annually.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 7E

See similar textbooks

Similar questions

You are hired as consultant to Onesie Company to assist the company in evaluating two projects. Onesie's WACC is at 12%. The initial investment and estimated cash flows of the two projects are: PROJECT Y Year 0- $100,000 Year 1 - $65,000 Year 2- $30,000 Year 3- $30,000 Year 5- $10,000 PROJECT Y Year 0- $100,000 Year 1 - $35,000 Year 2- $35,000 Year 3- $35,000 Year 5- $35,000 a. compute the NPV, IRR, and Discounted Payback of both projects. b. If the projects are independent from each other, which one will you recommend to onesie? Why?
2. The company is setting aside funds to acquire a property for its new warehouse. The company needs P74,735 to make the down payment. The company deposits P5,000/month in the fund account which pays 1% per month. As the financial manager you have been tasked to determine how long it will take to accumulate enough funds to acquire the property?
ABC International is evaluating a project in Buffalo. The project will create the following cash flows: Year Cash Flow 0 -$1,160,000 1 $335,000 2 $400,000 3 $295,000 4 $250,000 All cash flow will occur in Buffalo and expressed in dollars. In an attempt to improve its economy, the Buffalo government declared that all cash flows created by a foreign company are blocked and must be re-invested with the government for one year. This re-investment of these funds is at 4%. If the company uses a required return at 7%, What is the NPV? and What is the IRR on this project.
2- Bell Manufacturing Inc. is considering the replacement of one of its old drill presses. Three alternative replacement presses are under consideration. The relevant cash flows associated with each are shown in the following table. The firm’s cost of capital is 15%. Machine A Machine B Machine CInitial Investment 85,000 $ 60,000 $ 130,000 $Year Cash Inflows1 18,000 $ 12,000 $ 50,000 $2 18,000 14,000 30,0003 18,000 16,000 20,0004 18,000 18,000 20,0005 18,000 20,000 20,0006 18,000 25,000 30,0007 18,000 ----- 40,0008 18,000 ----- 50,000 a. Calculate the net present value (NPV) of each press. b. Using NPV, evaluate the acceptability of each press. c. Rank the presses from best to worst using NPV. d. Calculate the profitability index (PI) for each press. e. Rank the presses from best to worst using PI.
2- Bell Manufacturing Inc. is considering the replacement of one of its old drill presses. Three alternative replacement presses are under consideration. The relevant cash flows associated with each are shown in the following table. The firm’s cost of capital is 15%. Machine A Machine B Machine CInitial Investment 85,000 $ 60,000 $ 130,000 $Year Cash Inflows1 18,000 $ 12,000 $ 50,000 $2 18,000 14,000 30,0003 18,000 16,000 20,0004 18,000 18,000 20,0005 18,000 20,000 20,0006 18,000 25,000 30,0007 18,000 ----- 40,0008 18,000 ----- 50,000 c. Rank the presses from best to worst using NPV.d. Calculate the profitability index (PI) for each press.e. Rank the presses from best to worst using PI.
3. Kiwanda limited is considering the purchase of a new machine. Two alternatives machines, A and B, which will cost shs 6m and 7m respectively, are available in the market at a cost of 12%. The cash flows after taxation of each machine are as follows;Year Cash flowMachine A Machine Bshs shs1. 600,000 1,800,0002. 1,800,000 2,400,0003. 2,000,000 3,000,0004. 3,000,000 1,800,0005. 2,400,000 1,600,000 Required:a. Compute the net present value of each machine. b. Assume that each machine represent a project. Compute the Internal rate of return the company expects to earn from each of the two projects. c. Comments on the use of the results obtained in (a) and (b) above in selecting between the two projects.
ou are a banker to Livingstone Thompson Limited, a textile manufacturing company. Livingstone Thompson Ltd. is planning to establish a new factory overseas. Livingstone Thompson Ltd. have told you that the factory will run for six years and then be sold to a local entity. The Finance Department of Livingstone Thompson Ltd. has estimated the following yearly cash flows: Year Cash Flow (£) 0 -30,000,000 1 8,000,000 2 8,000,000 3 8,000,000 4 8,000,000 5 8,000,000 6 14,000,000 The Financial Manager of Livingstone Thompson Ltd. has decided that the company’s cost of capital of 15% is an appropriate hurdle rate for this project and informed you who will be providing the finance. Calculate the Internal Rate of Return (IRR)of this project. Record it step by step from beginning till the end result using the IRR formulas, but not formulas on excel.…
Company A has entered into a mudharabah contract with Bank Shari’ah in which the company provides monetary capital of RM1,000,000. Company B who had agreed to invest RM1,000,000. The profit sharing between three of them is 1:1:1 for Company A, Company B and the Bank respectively. Bank Shari’ah entered into another mudharabah contract with Company C to undertake a housing development project. Bank’s contribution in this project was RM2,000,000 and they had agreed on the profit-sharing ratio of 80 : 20 (Bank : Company C). Assume the following results of the venture: Year Profit / (Loss) 1 (750,000) 2 700,000 3 1,500,000 You are required to: i- Determine the profit/loss of the above transactions. Show how profit/loss will be allocated for all parties involved. ii- Prepare accounting entries and T-accounts for URIA and Mudarabah financing.
After paying GH¢ 30,000 for an initial investigation on projects assessments, the finance department of Finger Foods Plc provided the following end-of-year cash flows for the investment projects. Project Initial T0 Outlay ¢000 T1 ¢000 T2 ¢000 T3 ¢000 T4 ¢000 Abo (A) (1,500) (500) 1,200 600 300 Baa (B) (2,000) (1,000) 2,500 2,500 2,500 Cal (C) (1,750) 500 1,100 1,400 1,000 Dok (D) (2,500) 700 900 1,300 300 Eak (E) (1,600) (500) 200 2,800 2,300 You have just been promoted from the position of a Finance Officer to the new rank of A financial Analyst after your MBA programme. As a result, the managing director has written a memorandum to you with the cash flows from the various projects, as shown above, to appraise the projects and advise management on the best decision the company can take to maximize the company's value. The company's cost of capital is 15% and its corporation tax is 30%.…
After paying GH¢ 30,000 for an initial investigation on projects assessments, the finance department of Finger Foods Plc provided the following end-of-year cash flows for the investment projects. Project Initial T0 Outlay ¢000 T1 ¢000 T2 ¢000 T3 ¢000 T4 ¢000 Abo (A) (1,500) (500) 1,200 600 300 Baa (B) (2,000) (1,000) 2,500 2,500 2,500 Cal (C) (1,750) 500 1,100 1,400 1,000 Dok (D) (2,500) 700 900 1,300 300 Eak (E) (1,600) (500) 200 2,800 2,300 You have just been promoted from the position of a Finance Officer to the new rank of A financial Analyst after your MBA programme. As a result, the managing director has written a memorandum to you with the cash flows from the various projects, as shown above, to appraise the projects and advise management on the best decision the company can take to maximize the company's value. The company's cost of capital is 15% and its corporation tax is 30%.…
he capital investment committee of Iguana Inc. is considering two capital investments. The estimated operating income and net cash flows from each investment are as follows: Year Robotic AssemblerOperating Income Robotic AssemblerNet Cash Flow WarehouseOperating Income WarehouseNet Cash Flow 1 $50,400 $157,000 $106,000 $251,000 2 50,400 157,000 81,000 212,000 3 50,400 157,000 40,000 149,000 4 50,400 157,000 18,000 102,000 5 50,400 157,000 7,000 71,000 Total $252,000 $785,000 $252,000 $785,000 Each project requires an investment of $480,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 10% for purposes of the net present value analysis. Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8…
Prominent Sdn Bhd invested in two projects, project Alpha and project Beta. The projects areindependent of each other. The following schedule shows the cash flows for each project. Year Project Alpha Project Beta 0 -10,000 -10,000 1 5,000 1,000 2 4,000 2,000 3 2,000 2,000 4 2,000 3,000 5 1,000 6,000 The following schedule shows the profit for each project. Year Project Alpha Project Beta 0 0 0 1 2,000 1,000 2 2,000 1,000 3 2,000 2,000 4 2,000 2,000 5 2,000 4,000 The discount rate is 10%.Questions:a) Appraise the projects using the Accounting Rate of Return. b) Appraise the projects using the Payback Period. c) Appraise the projects using the Net Present Value. Note: Please state all relevant formulas in your appraisal