3.1 Calculate the number of athletic scholarships Midwest University can offer each year. 3.2 Suppose the total budget for next year is reduced by 22%. Fixed costs are to remain the same. Calculate the number of athletic scholarships that Midwest can offer next year. 3.3 As in 3.2 above, assume a budget reduction of 22% and the same fixed costs. If Midwest wanted to offer the same number of athletic scholarships as it did in 3.1, calcul

3.1 Calculate the number of athletic scholarships Midwest University can offer each year. 3.2 Suppose the total budget for next year is reduced by 22%. Fixed costs are to remain the same. Calculate the number of athletic scholarships that Midwest can offer next year. 3.3 As in 3.2 above, assume a budget reduction of 22% and the same fixed costs. If Midwest wanted to offer the same number of athletic scholarships as it did in 3.1, calcul

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter9: Capital Budgeting Techniques

Section: Chapter Questions

Problem 7PROB

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R2 your department manager has proposed in the capital budget for 2016 that the organization acquire an upgrade for a piece of equipment that will reduce the labor requirements for the department by an estimated 175,000 annually. The cost of the upgrade will be 200,000 and will require annual maintenance cost of 60,000. The organization uses a 10% discount rate and requires a positive cumulative net present value by the end of the second year of such an investment. Using the discounted cash flow method, determine whether the investment will meet the organizations criteria Capital cost ________ Annual operating cost______ Annual benefit______ Cumulative net present value_____ Does this investment meet the organizations investment criteria at a 10%discount rate?
Capital Budget Methods The private buildings company wants to invest in one of the following two projects because of the lack of funds to invest in both (the case of the money technicians) if you know that each of the projects costs 200 thousand dinars, and the cost of capital in the company 9% as the director of the company wishes a recovery period of 7 years, if the net cash flows in the interior of the two projects as follows: End of the year Cash flows inward Project A Project B 1 20000 25000 2 40000 25000 3 60000 25000 4 20000 25000 5 40000 25000 What is required is: Calculate the recovery period, the discounted recovery period for each project, which project you choose, and why?
b. Project B costs $5,000 and will generate after-tax cash inflows of $500 in year 1; $1,200 in year 2; $2,000 in year 3; $2,500 in year 4; and $2,000 in year 5. What is the payback period (in years) for this investment assuming that the cash inflows occur evenly throughout the year? (Round your answer to 2 decimal places.) c. Project C costs $5,000 and will generate net cash inflows of $2,500 before taxes each year for 5 years. The firm uses straight-line depreciation with no salvage value and is subject to a 25% tax rate. What is the payback period under the assumption that all cash inflows occur evenly throughout the year? (Round your answer to 2 decimal places.) d. Project D costs $5,000 and will generate sales of $4,000 each year for 5 years. The cash expenditures will be $1,500 per year. The firm uses straight-line depreciation with an estimated salvage value of $500 and has a tax rate of 25%. (1) What is the accounting (book) rate of return based on the original investment?…
(Capital budgeting) 33. An investment that costs $80,000 will provide a return of $20,000 per year for each of the next five years. Ignoring taxes, what is the net present value of the investment if the required rate of return in 14 percent?A. ($20,000)B. $21,552C. ($11,338)D. $68,662 34. A proposed project will cost $600,000 and will provide returns of $150,000 in Year 1, $300,000 in Year 2, and $500,000 in Year 3. There will not be any cash flows associated with the project after Year 3. If taxes are ignored, and the company’s hurdle rate is 15%, what is the net present value of the project?A. $86,020B. $23,013C. $66,373D. $50,000
Q: Semper pump company has a permanent funding requirement of $135,000 in operating asset and seasonal funding requirement that vary between $0 and $990,000 and average $101,250. If simper can borrow short-term funds at 6.25% and long term funds at 8%, and if it can earn 5% on the investment of any surplus balances, than determine the total annual cost under i) aggressive strategy ii) conservative strategy
eBook A firm with a 13% WACC is evaluating two projects for this year's capital budget. After-tax cash flows, including depreciation, are as follows: 0 1 2 3 4 5 Project M -$3,000 $1,000 $1,000 $1,000 $1,000 $1,000 Project N -$9,000 $2,800 $2,800 $2,800 $2,800 $2,800 Calculate NPV for each project. Do not round intermediate calculations. Round your answers to the nearest cent.Project M: $ Project N: $ Calculate IRR for each project. Do not round intermediate calculations. Round your answers to two decimal places.Project M: %Project N: % Calculate MIRR for each project. Do not round intermediate calculations. Round your answers to two decimal places.Project M: %Project N: % Calculate payback for each project. Do not round intermediate calculations. Round your answers to two decimal places.Project M: yearsProject N: years Calculate discounted payback for each project. Do not round…
Aa.14 Allegience Insurance Company’s management is considering an advertising program that would require an initial expenditure of $177,085 and bring in additional sales over the next five years. The projected additional sales revenue in year 1 is $82,000, with associated expenses of $28,500. The additional sales revenue and expenses from the advertising program are projected to increase by 10 percent each year. Allegience’s tax rate is 30 percent. (Hint: The $177,085 advertising cost is an expense.)Required:1. Compute the payback period for the advertising program.2. Calculate the advertising program’s net present value, assuming an after-tax hurdle rate of 10 percent. (Round your intermediate calculations and final answer to the nearest whole dollar.)
Title 5) A firm has a capital budget of $30,000 and is considering three possible independent projects.... Description 5) A firm has a capital budget of $30,000 and is considering three possible independent projects. Project A has a present outlay of $12,000 and yields $4, 281 per annum for 5 years. Project B has a present outlay of $10,000 and yields $4,184 per annum for 5 years. Project C has a present outlay of $17,000 and yields $5,802 per annum for 10 years. Funds which are not allocated to one of the projects can be placed in a bank deposit where they will earn 15%. (a) Identify six combinations of project investments and a bank deposit which exhaust the budget. (b) Which of the above combinations should the firm choose: (i) When the reinvestment rate is 15%? (ii) When the reinvestment rate is 20%? Explain your answer and show your calculations (spreadsheet printout is acceptable as long as entries are clearly labeled).
Problem 6 - Shirt Corporation is considering purchasing equipment that costs $60,000 and is expected to provide the following cash inflows over its five-year useful life: Year Cash Inflow 1 $18,000 2 $22,000 3 $24,000 4 $16,000 5 $ 9,000 Calculate the payback period for this investment.
Title PROJECTS WITH UNEQUAL LIVES Wisconsin Dairy Inc. is deciding on its capital budget for the upcoming... Description PROJECTS WITH UNEQUAL LIVES Wisconsin Dairy Inc. is deciding on its capital budget for the upcoming year. Among the projects being considered are two machines, W and WW. W costs $500,000 and will produce expected after-tax cash flows of $300,000 during the next 2 years. WW also costs $500,000, but it will produce after-tax cash flows of $165,000 during the next 4 years. Both projects have a 10% WACC. a. If the projects are independent and not repeatable, which project(s) should the company accept? b. If the projects are mutually exclusive but are not repeatable, which project should the company
Basic Capital Budgeting Techniques Answer each independent question, (a) through (e).a. Project A costs $5,000 and will generate annual after-tax net cash inflows of $1,800 for 5 years.What is the payback period (in years, rounded to 2 decimal places) for this investment under theassumption that the cash inflows occur evenly throughout the year?b. Project B costs $5,000 and will generate after-tax cash inflows of $500 in year 1, $1,200 in year2, $2,000 in year 3, $2,500 in year 4, and $2,000 in year 5. What is the payback period (in years,rounded to 2 decimal places) for this investment assuming that the cash inflows occur evenlythroughout the year?c. Project C costs $5,000 and will generate net cash inflows of $2,500 before taxes each year for 5years. The firm uses straight-line depreciation with no salvage value and is subject to a 25% taxrate. What is the payback period (in years, and rounded to 2 decimal places) under the assumptionthat all cash inflows occur evenly throughout the…
Part 1 Please calculate the payback period, IRR, MIRR, NPV, and PI for the following two mutually exclusive projects. The required rate of return is 15% and the target payback is 4 years. Explain which project is preferable under each of the four capital budgeting methods mentioned above: Table 1 Cash flows for two mutually exclusive projects Year Investment A Investment B 0 -$5,000,000 -5,000,000 1 $1,500,000 $1,250,000 2 $1,500,000 $1,250,000 3 $1,500,000 $1,250,000 4 $1,500,000 $1,250,000 5 $1,500,000 $1,250,000 6 $1,500,000 $1,250,000 7 $2,000,000 $1,250,000 8 0 $1,600,000 Part 2 Please study the following capital budgeting project and then provide explanations for the questions outlined below: You have been hired as a consultant for Pristine Urban-Tech Zither, Inc. (PUTZ), manufacturers of fine zithers. The market for zithers is growing quickly. The company bought some land three years ago…