9 _0 A 2 Answer 3 4 Bayandor Steel Corp invested $560,000 in a new torch for one of its smelters. At an interest rate of 6% per year, compounded semiannually, what is the minimum 5 semiannual electricity savings required to recover this investment in 10 years? 6 7 Draw CFD, and Enter the Answer in 'B2' Cell above. 8 1 _2 3 _4 4567 B 7 e E LL F G H K Effective annual interest rate m ia = = (1 + )" - 1 r = nominal interest rate per interest period (usually one year) i = effective interest rate per interest period m = number of compounding subperiods per time period M

9 _0 A 2 Answer 3 4 Bayandor Steel Corp invested $560,000 in a new torch for one of its smelters. At an interest rate of 6% per year, compounded semiannually, what is the minimum 5 semiannual electricity savings required to recover this investment in 10 years? 6 7 Draw CFD, and Enter the Answer in 'B2' Cell above. 8 1 _2 3 _4 4567 B 7 e E LL F G H K Effective annual interest rate m ia = = (1 + )" - 1 r = nominal interest rate per interest period (usually one year) i = effective interest rate per interest period m = number of compounding subperiods per time period M

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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2. An electric generator is purchased for P80 000.00, it is expected to be used for five years and then sold for P15 000.00. Annual operating and maintenance costs are estimated at P20 000.00. Using a discount rate of 10%, determine the present worth of the investment. (Ans. — P146 502.00)
Skysong Co. purchased some equipment 3 years ago. The company's required rate of return is 12%, and the net present value of the project was $(1100). Annual cost savings were: $9000 for year 1; 7000 for year 2; and $5000 for year 3. The amount of the initial investment was Present Value PV of an Annuity Year of 1 at 12% of 1 at 12% 1 0.893 0.893 2 0.797 1.690 3 0.712 2.402 A. $17914. B. $18276. C. $16076. D. $15714.
11. Find the capitalized cost of an equipment that costs P55,000.00 if the annual maintenance cost and operational cost is P10,000.00 and money worth 5% per annum. 270,000.00 250,000.00 12. How long in years will it take the money to triple its amount when deposited at the rate of 12% compounded monthly. 9.8 10 8.7 9.2 255,000.00
Richman Co. purchased some equipment 3 years ago. The company's required rate of return is 12%, and the net present value of the project was $(900). Annual cost savings were: $10,000 for year 1; $8,000 for year 2; and $6,000 for year 3. The amount of the initial investment was Present Value PV of an Annuit Year of 1 at 12% of 1 at 12% 1 .893 .893 2 .797 1.690 3 .712 2.402 Select one: a. $20,116. b. $20,478 c. $18,316 d. $20,000 e. $18,678
XYZ company has A piece of new equipment will cost $70,000. The equipment will provide a cost savings of $15,000 per year for ten years, after which it will have a $3,000 salvage value. If the required rate of return is 14%, the equipment's net present value is: a. (8240) b. None of answers are correct c. 9050 d. 23888
V14 Steadman Company is considering an investment in a new machine for an independent five-year project. The machine’s cost is $837,500 with no salvage value at the end of five years. Net cash inflows from the project are expected to be $252,500 annually. Steadman would depreciate the machine using the MACRS schedule, and the machine qualifies as a 5-year asset. Steadman uses a discount rate of 8%, and its tax rate is 30%. Required: 1. Determine the after-tax net income and after-tax cash flows from the investment. Refer to Exhibit 12.4 for the 5-year MACRS deprecation schedule. 2. Determine the NPV of the project. 3. Determine the IRR of the project. 4. Determine the payback period of the project, assuming that cash flows occur evenly in each year. 5. Determine the book (accounting) rate of return using both (a) the initial investment as the denominator and (b) the average book value of the investment as the denominator.
F3. Polycorp Steel Division is considering a proposal to purchase a new machine to produce a new product for a eight-year contract. The new machine will cost $10 million. The firm intends to use $6,000,000 in equity and $4,000,000 in debt to finance the project. The debt will be repaid over eight years in equal annual, end of year payments. The interest rate is 5%pa. The machine has an estimated life of 8 years for accounting and taxation purposes. Installation will cost a further $500,000. Installation costs are capitalised and added to the cost of the machinery for depreciation and investment allowance calculations. The contract will not continue beyond eight years and the equipment has an estimated salvage value at the end of eight years of $800,000. The tax rate is 30 percent and is payable in the year in which profit is earned. An investment allowance of twenty percent on the outlay plus installation costs is available (only in the first year). The after-tax cost of capital is…
Xavier Co. wants to purchase a machine for $37,400 with a four-year life and a $1,100 salvage value. Xavier requires an 8% return on investment. The expected year-end net cash flows are $12,400 in each of the four years. What is the machine's net present value? Periods Present Valueof $1 at 8% Present Value of anAnnuity of $1 at 8% 1 0.9259 0.9259 2 0.8573 1.7833 3 0.7938 2.5771 4 0.7350 3.3121
Two independent situations follow. a. Nelson Co. wants to purchase a piece of heavy equipment in 10 years for $488,667. The corporation currently has $300,000 to invest for this purpose. Determine the rate of return (assuming annual compounding) required to accumulate sufficient funds to acquire the equipment at the end of the 10-year period. b.Apple Inc. decides to pay a one-time bonus of $50,670.80 to its vice president, who is expected to retire within the next few years. Apple can invest $40,000 at 3% , compounded annually. How many years will it take to have the $50,670.80 to pay the bonus?
39. Vita Pharmaceutical Co. is considering four proposals for the expansion of its dietary supplements production facility. The investment requirements and the cash flows for an 8-year period are presented below. P1 P2 P3 P4 Initial Investment P13M P14.5M P15M 15.8M Annual Receipts 1.5M 1.6M 1.7M 2.2M Annual Disbursements 0.7M 0.5M 0.65M 0.7M Salvage Value 1.3M 1.5M 2M 2.5M Determine the best alternative if the company applies a 14% MARR of its investments. (Ans. Consider P4; i2-1=13.27% ; i3-1=5.91% ; i4-1=21.76%)
Charlie Corp. is purchasing new equipment with a cash cost of $100,000 for the assembly line. The manufacturer has offered to accept $22,960 payments at the end of each of the next six years. What is the interest rate that Charlie Corp. will be paying? a. 8%. b. 9%. c. 10%. d. 11%.
7. Intel recently purchased a new office building costing $200 million. The firm financed this purchase at 8.25 percent interest with monthly payments of $1,839,789. How many years will it take the firm to pay off this debt? (Show Work)

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