5. The internal rate of return (IRR). (Do not round intermediate calculations. Round your final answer to 1 decimal place (i.e. 0.123 = 12.3%).) 6. The modified internal rate of return (MIRR). (Do not round intermediate calculations. Round your final answer to 1 decimal place (i.e. 0.123 = 12.3%).)
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Bob Jensen Incorporated purchased a $650,000 machine to manufacture specialty taps for electrical equipment. Jensen expects to sell all it can manufacture in the next 10 years. The machine is expected to have a 10-year useful life with no salvage value. Jensen uses straight-line depreciation. The net
5. The
6. The modified internal rate of return (MIRR). (Do not round intermediate calculations. Round your final answer to 1 decimal place (i.e. 0.123 = 12.3%).) (In conjunction with this requirement, you might want to consult either of the following two references: MIRR Function and/or IRR in Excel.)
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- The Scampini Supplies Company recently purchased a new delivery truck. The new truck cost $22,500, and it is expected to generate net after-tax operating cash flows, including depreciation, of $6,250 per year. The truck has a 5-year expected life. The expected salvage values after tax adjustments for the truck are given here. The company’s cost of capital is 10%. Should the firm operate the truck until the end of its 5-year physical life? If not, then what is its optimal economic life? Would the introduction of salvage values, in addition to operating cash flows, ever reduce the expected NPV and/or IRR of a project?Bob Jensen Incorporated purchased a $650,000 machine to manufacture specialty taps for electrical equipment. Jensen expects to sell all it can manufacture in the next 10 years. The machine is expected to have a 10-year useful life with no salvage value. Jensen uses straight-line depreciation. The net cash inflow is expected to be $150,000 each year for 10 years. Jensen uses a 12% discount rate in evaluating capital investments. Assume, for simplicity, that MACRS depreciation rules do not apply. Using Excel (including built-in functions for NPV, IRR, and MIRR), compute the following for the above-referenced investment: 1. The payback period, under the assumption that cash inflows occur evenly throughout the year. (Do not round intermediate calculations. Round your final answer to 1 decimal place.) 2. The accounting (book) rate of return based on (a) initial investment, and (b) average investment. (Round your final answers to 1 decimal place (i.e. 0.123 = 12.3%).) 3. The net present…Bob Jensen Incorporated purchased a $650,000 machine to manufacture specialty taps for electrical equipment. Jensen expects to sell all it can manufacture in the next 10 years. The machine is expected to have a 10-year useful life with no salvage value. Jensen uses straight-line depreciation. The net cash inflow is expected to be $150,000 each year for 10 years. Jensen uses a 12% discount rate in evaluating capital investments. Assume, for simplicity, that MACRS depreciation rules do not apply. Using Excel (including built-in functions for NPV, IRR, and MIRR), compute the following for the above-referenced investment: 4. The present value payback period, in years, of the proposed investment under the assumption that cash inflows occur evenly throughout the year. (Note: because of this assumption, the present value calculations will be approximate, not exact.) To calculate present value amounts, use the appropriate factors from Appendix C, Table 1.(Do not round intermediate…
- Bob Jensen Incorporated purchased a $450,000 machine to manufacture specialty taps for electrical equipment. Jensen expects to sell all it can manufacture in the next 10 years. The machine is expected to have a 10-year useful life with no salvage value. Jensen uses straight-line depreciation. The net cash inflow is expected to be $104,000 each year for 10 years. Jensen uses a 12% discount rate in evaluating capital investments. Assume, for simplicity, that MACRS depreciation rules do not apply. Required: Using Excel (including built-in functions for NPV, IRR, and MIRR), compute the following for the above-referenced investment: 1. The internal rate of return (IRR). (Do not round intermediate calculations. Round your final answer to 1 decimal place (i.e. 0.123 = 12.3%).) 2. The modified internal rate of return (MIRR). (Do not round intermediate calculations. Round your final answer to 1 decimal place (i.e. 0.123 = 12.3%).) (In conjunction with this requirement, you might want to consult…Bob Jensen Incorporated purchased a $450,000 machine to manufacture specialty taps for electrical equipment. Jensen expects to sell all it can manufacture in the next 10 years. The machine is expected to have a 10-year useful life with no salvage value. Jensen uses straight-line depreciation. The net cash inflow is expected to be $104,000 each year for 10 years. Jensen uses a 12% discount rate in evaluating capital investments. Assume, for simplicity, that MACRS depreciation rules do not apply. Required: Using Excel (including built-in functions for NPV, IRR, and MIRR), compute the following for the above-referenced investment: 1. The net present value (NPV) of the proposed investment under the assumption that cash inflows occur at year-end. (Do not round intermediate calculations. Round your final answer to nearest whole dollar amount.) 2. The present value payback period, in years, of the proposed investment under the assumption that cash inflows occur evenly throughout the year.…Bob Jensen Incorporated purchased a $450,000 machine to manufacture specialty taps for electrical equipment. Jensen expects to sell all it can manufacture in the next 10 years. The machine is expected to have a 10-year useful life with no salvage value. Jensen uses straight-line depreciation. The net cash inflow is expected to be $104,000 each year for 10 years. Jensen uses a 12% discount rate in evaluating capital investments. Assume, for simplicity, that MACRS depreciation rules do not apply. Required: Using Excel (including built-in functions for NPV, IRR, and MIRR), compute the following for the above-referenced investment: 1. The payback period, under the assumption that cash inflows occur evenly throughout the year. (Do not round intermediate calculations. Round your final answer to 1 decimal place.) 2. The accounting (book) rate of return based on (a) initial investment, and (b) average investment. (Round your final answers to 1 decimal place (i.e. 0.123 = 12.3%).) 3. The net…
- Bob Jensen Inc. purchased a $580,000 machine to manufacture specialty taps for electrical equipment. Jensen expects to sell all it can manufacture in the next 10 years. The machine is expected to have a 10-year useful life with no salvage value. Jensen uses straight-line depreciation. Jensen uses a 10% discount rate in evaluating capital investments, the investment is subject to taxes, and the projected pretax operating cash inflows are as follows: Year Pretax Cash Inflow 1 $ 58,000 2 71,000 3 107,000 4 178,000 5 214,000 6 268,000 7 241,000 8 214,000 9 107,000 10 71,000 Jensen has been paying 25% for combined federal, state, and local income taxes, a rate that is not expected to change during the period of this investment. The firm uses straight-line depreciation. Assume, for simplicity, that MACRS depreciation rules do not apply. Required: Using Excel, compute the following…Bob Jensen Inc. purchased a $580,000 machine to manufacture specialty taps for electrical equipment. Jensen expects to sell all it can manufacture in the next 10 years. The machine is expected to have a 10-year useful life with no salvage value. Jensen uses straight-line depreciation. Jensen uses a 10% discount rate in evaluating capital investments, the investment is subject to taxes, and the projected pretax operating cash inflows are as follows: Year Pretax Cash Inflow 1 $ 58,000 2 71,000 3 107,000 4 178,000 5 214,000 6 268,000 7 241,000 8 214,000 9 107,000 10 71,000 Jensen has been paying 25% for combined federal, state, and local income taxes, a rate that is not expected to change during the period of this investment. The firm uses straight-line depreciation. Assume, for simplicity, that MACRS depreciation rules do not apply. Required: Using Excel, compute the following for…The Cliney Co. is considering investing $40,000 in a piece of new equipment. If the project is accepted, it would generate cash revenues of $15,000 per year and cash costs of $5,000 per year for the next 10 years. The equipment is expected to be sold for $8,000 at the end of year 10. Assume Cliney uses straight-line depreciation to compute depreciation expense for all purposes. What is the net cash inflow in year 10? Assume Cliney has a 35% tax rate. a. $6,800 b. $8,000 c. $10,000 d. $15,000 e. None of the above
- Armor Investment Company is considering the acquisition of a heavily depreciated building on 10 acres of land. It expects to rent the building as a storage facility and expects to collect cash flows equal to $102,200 next year. However, because depreciation is expected to increase, Armor expects cash flows to decline at a rate of 4 percent per year indefinitely. Armor expects to earn an IRR on investment return (r) at 13 percent. Required: a. What is the value of this property? b. Assume that after five years the building could be demolished and the land could be redeveloped with a strip retail improvement. The latter would produce NOI of $204,400 per year, grow at 3 percent per year, and cost $1 million to build. Investors currently earn a 10 percent IRR on such investments. What is the profit to be earned?Armor Investment Company is considering the acquisition of a heavily depreciated building on 10 acres of land. It expects to rent the building as a storage facility and expects to collect cash flows equal to $100,000 next year. However, because depreciation is expected to increase, Armor expects cash flows to decline at a rate of 4 percent per year indefinitely. Armor expects to earn an IRR on investment return (r) at 13 percent.a. What is the value of this property?b. Assume that after 5 years the building could be demolished and the land could be redeveloped with a strip retail improvement. The latter would produce NOI of $200,000 per year, growing at 3 percent per year, and cost $1 million to build. Investors currently earn a 10 percent IRR on such investments. How would this affect your estimate of value in (a)?A corporation is considering purchasing a new plant asset. The asset will cost $30,000. The corporation requires a 10% return on similar investments. The corporation plans to use the asse for 4 years and then sell it for the salvage value. The estimated salvage value of the asset in 4 years is $5,000. The corporation estimates that if purchased the new asset will provide addition net cash flows of $9,000 each year for 4 years (assume the cash flows occur at the end of the year): Calculate the net present value (you must include the calculation in order to receive credit) Should the business purchase the asset?
