
Concept explainers
1. Jamuna Group is evaluating the proposal of a new RMG factory called Jamuna Fabrics. Jamuna Group is renting a premise of 50,000 Square feet in Savar and Jamuna Fabrics is planning to use 10,000 Square feet from this facility. The rest of the premise is currently being used by another RMG factory of Jamuna Group called Jamuna Exclusive Fabrics. The Jamuna Exclusive Fabrics has already started its production. For Jamuna Fabrics, the total capital cost is USD 40,000 and is

Step by stepSolved in 2 steps

- Woodland Furniture (WF) is a firm producing wooden furniture for household uses. WG is now considering constructing a new production facility in Indonesia. The existing production facility will be closed if the project is to go ahead. The facility will be built on a piece of land located in the forest that WF has just purchased at $10 million for the purpose. The land is expected to be worth $2 million at the end of the project. WF uses a ten-year planning horizon for all of its capital budgeting decisions. The production facility will be constructed at a cost of $12 million. It will be depreciated at its full costs on a straight-line basis over its estimated useful life of 10 years, and its salvage value is $4 million. Machinery will also be purchased at a cost of $6 million. The machinery will also be depreciated at its full costs on a straight-line basis over its estimated useful life of 10 years. Its salvage value is $500,000. In addition, an initial investment of $2 million…arrow_forwardMansukharrow_forward* It is Proposed to supply cloud with a maximum demand of 400 mw and loud fuctor of 75% choice is to be made from a thermal Power Plant, a hydraulic Power plant and a nuclear Power Plant, calculate the overall cost per kwh in case of each scheme. us given below: cost 1. Capital cost per mw installed Thermal Power plant RS. 5 crore 2. Interest 3. depreciation 4. operating cost (including Fuel) Per kwh 5. Transmission and distribution Cost Per kwh 8% 7% 50 Paise 3 Paisearrow_forward
- A real-estate development firm, Peterson and Johnson, is considering five possible development projects. Using units of millions of dollars, the following table shows the estimated long-run profit (net present value) that each project would generate, as well as the amount of investment required to undertake the project. Project 1 Project 2 Project 3 Project 4 Project 5 Estimated profit ($million) 1 1.8 1.6 0.8 1.4 Capital Required for Project ($million) Capital Available ($million) Project 1 Project 2 Project 3 Project 4 Project 5 Capital 6 12 10 4 8 20 Click here for the Excel Data File The owners of the firm, Dave Peterson and Ron Johnson, have raised $20 million of investment capital for these projects. Dave and Ron now want to select the combination of projects that will maximize their total estimated long-run profit (net present value) without investing more than $20 million. Formulate and solve this model on a spreadsheet. Determine the combination of…arrow_forwardBlossom, Inc., is considering investing in a new production line for eye drops. Other than investing in the equipment, the company needs to increase its cash and cash equivalents by $11,000, increase the level of inventory by $31,000, increase accounts receivable by $26,000, and increase accounts payable by $6,000 at the beginning of the project. Blossom will recover these changes in working capital at the end of the project 6 years later. Assume the appropriate discount rate is 8 percent. What are the present values of the relevant investment cash flows? (Do not round intermediate calculations. Round answer to 2 decimal places, e.g. 5,275.25.) Present value $arrow_forwardIsaac Industries must choose between a gas-powered and an electric-powered forklift truck for moving materials in its factory. The firm will choose only one because both forklifts perform the same function. (They are mutually exclusive investments.) The electric-powered truck will cost more but will be less expensive to operate; it will cost $22,000, whereas the gas-powered truck will cost $17,500. The cost of capital that applies to both investments is 18%. The life for both types of truck is estimated to be six years, during which time the net cash flows for the electric-powered truck will be $7,290 per year, and those for the gas-powered truck will be $6,000 per year. Annual net cash flows include depreciation expenses. Calculate the NPV and IRR for each type of truck and decide which to recommend. Compute the NPV for each truck. Compute the IRR for each truck. Compute the crossover rate. Compute the payback period for each truck. Compute the profitability index for each truck.arrow_forward
- An investor is planning to establish a new business to grow and produce tiger prawns in Northern Australia. The development proposal is for 20 hectares (ha) of ponds for prawn production at a total capital cost of $10,000,000 (including land purchase, new infrastructure and new ponds). You judge the ponds to be capable of producing a gross margin per pond hectare of $50,000 starting in year 2 (no income or variable costs in year 1). You expect the annual overheads of running this prawn farm would be $100,000 which will start from year 1. The initial capital investment of land, infrastructure and ponds will maintain their purchase value in real terms over the life of the project. New investment in machinery of $1,000,000 is also required to be spent straight away upon development starting and will have a salvage value in year 5 of 50 per cent of original purchase price. The required real rate of return of the investor is 6 per cent per annum. All figures shown are real terms, and are…arrow_forwardBauer Industries is an automobile manufacturer. Management is currently evaluating a proposal to build a plant that will manufacture lightweight trucks. Bauer plans to use a cost of capital of 11.7% to evaluate this project. Based on extensive research, it has prepared the following incremental free cash flow projections (in millions of dollars): a. For this base-case scenario, what is the NPV of the plant to manufacture lightweight trucks? b. Based on input from the marketing department, Bauer is uncertain about its revenue forecast. In particular, management would like to examine the sensitivity of the NPV to the revenue assumptions. What is the NPV of this project if revenues are 8% higher than forecast? What is the NPV if revenues are 8% lower than forecast? c. Rather than assuming that cash flows for this project are constant, management would like to explore the sensitivity of its analysis to possible growth in revenues and operating expenses. Specifically, management would like…arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education





