A company has the following net cash inflows. Today -$7000, Year 1-$15 000, Year 2-$9000, Year 3+ $12 000, Year 4-$3000, Year 5 + $19 000. Compute the net present value if the required rate of return is 7.22% compounded annually.

A company has the following net cash inflows. Today -$7000, Year 1-$15 000, Year 2-$9000, Year 3+ $12 000, Year 4-$3000, Year 5 + $19 000. Compute the net present value if the required rate of return is 7.22% compounded annually.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 16EA: Project B cost $5,000 and will generate after-tax net cash inflows of $500 in year one, $1,200 in...

See similar textbooks

Related questions

Q: An asphalt road requires no upkeep until the end of 2 years when P60,000 will be needed for repairs.…

A: Here, Cost incurred at the end of 2nd year =P60,000 Cost incurred after 2 years and at the end of…

Q: A company expects the cost of equipment maintenance to be $5,000 in year one, $5,500 in year two,…

A: Cost of equipment maintenance in year 1 = $5000 Cost of equipment maintenance in year 2 = $5500…

Q: A series of equal semi-annual payments of $1350 for 3 years is equivalent to what present amount at…

A: The present value of periodic payments considering the interest rate and the period of payment would…

Q: You purchased a zero-coupon bond one year ago for $278.33. The market interest rate is now 8…

A: Data given:: Interest rate = 8% (compounding semiannually) Assumed Par value of bond = $1000…

Q: A $7000, 6.11% bond with semi-annual coupons redeemable at par was purchased 5 years before…

A: Par value = $7000 Coupon rate = 6.11% Semi annual coupon amount = 7000*0.0611/2 = $213.85 Years to…

Q: Calculate the expected accounting rate of return on averag asset, using straight line depreciation…

A: Accounting Rate of Return: The formula for the accounting rate of return helps in determining the…

Q: For the cash flows shown, determine the incremental cash flow between machines B and A for (a) year…

A: Life of A is 3 years and life of B is 4 years. Hence, in year 3, A will be replaced with the first…

Q: 3) You have a financial goal of putting a $10,0000 down payment on a home in 5 years. How much would…

Q: Syntech makes digital cameras for drones. Their basic digital camera uses $80 in variable costs and…

A: The operational earnings are the profits that the company earns by subtracting only its operating…

Q: You are trying to value the stocks of Imaginary Inc. The company is currently involved in a very…

A: Last year EPS = $10 EPS after year 1 = $15 EPS after year 2 = $20 EPS after year 3 = $25 Growth rate…

Q: What can be done by a business to mitigate: Execution risk Technology risk Reputation risk…

A: Risk management Risk management is the identification, evaluation, and prioritization of risks…

Q: Tak wants to save $10 000 for a vacation. He deposits $150 at the end of each month for 4.5 years in…

A: Solved using Financial Calculator PMT = +/- 150 N = 4.5 years *12 months = 54 I/Y = 8.7/12 = 0.725…

Q: you have a 12-year annuity paying $496 quarterly in 10 years when interest is 6.65% compounded…

A: Number of annuity payments = Number of years * time period of Payment = Number of years * Quaterly…

Q: 2014, GoPro spent $27.5 million on capital expenditures, experienced an increase in net working…

A: Unlevered Free cashflw = EBIT - Tax + Depreciation - Change in working Capital - Capital…

Q: A company expects the cost of equipment maintenance to be $5,000 in year one, $5,500 in year two,…

A: Answer - Given, Maintenance Cost = $5000 Gradient G = $500 I = 5%

Q: Stocks A and B have the following probability distributions of expected future returns: Probability…

A: Since question involves multiple subparts , we will answer 1st sub 3 parts for you as per prescribed…

Q: Rose Gardens is looking into raising $500,000. The following are potential opportunities for…

A: The sum provided as a reward to the company's shareholders for taking the risk of putting their…

Q: After describing the main hypothesis made in the black and Scholes model explain the reasons why the…

A: BlackScholes is the price used to determine the fair or theoretical value of a call or put option…

Q: The Rivoli Company has no debt outstanding, and its financial position is given by the following…

A: Intrinsic value of an unleverd firm is the sum of the expected value of the future cash flows of the…

Q: A manufacturing company is planning to install a new CO2 treatment module to the chimneys of its…

A: In the question , it is specifically stated that we can solve by any method of our own choice. Hence…

Q: company is considering a project that has the following cash flow data. What is the project's IRR?…

A: IRR is the rate at which NPV of investment is zero. It is the rate of return the firm will get if…

Q: what is Fragile Express Delivery’s unlevered free cash flow for 2019

A: Unlevered Free Cash Flow: It refers to the cash available for the company before the financial…

Q: What is the annual operation and maintenance costs of owning this vehicle?

A: Time value of money (TVM) is used to measure the value of money at different point of time in the…

Q: A stock's current price is $50. Suppose the two possibilities for its price in a year are $60 and…

A: The binomial option pricing model is a method of finding out the value of options in case of varying…

Q: Logos, stationery, brochures, signs, business cards, buildings, and uniforms are all types of O…

A: The Correct Option is 'Corporate Identity Materials'.

Q: r the following alternatives compute the Delta B/C ratio of Alterna e 11% as MARR. (Remember for our…

A: B/C ratio is the present value of cash flow to the initial investment of the project considering the…

Q: Kyle invests in an account earning 4.5% interest compounded continuously. How long will it take to…

A: Investment (PV) = 100 (Assumed) Required future value (FV) = 100*2 = 200 Interest rate (r) = 4.50%…

Q: Eleanor is switching jobs. She wants to roll over her previous jobs retirement fund of $72,000, Her…

A: The concept of the time value of money states that the same amount of money has more value today…

Q: Kyle wants $20,000 in 4 years. He can invest in a fund that earns 6% and compounds quarterly. How…

A: N - Number of Compounding Periods = 4 Years * 4 quarters = 16 I% - Annual Interest (as a %) = 6%…

Q: of the VLN, every installment payment Group of answer choices A. Reduces the amount you owe on the…

A: Amortization: Amortization means systematic write off the loan balance over the period of loan. At…

Q: Sammy purchased 800 shares of Winn-Dixie at $4.40 per share. Sammy financed 35% of the purchase with…

A: Concept. Annual return is the return that an investment provides during investment tenure. It is…

Q: d. Calculate the variance and standard deviation of the portfolio assuming that the correlation…

A: The variance and standard deviation of a portfolio: The possibility that the actual outcome will be…

Q: Your boss has asked you to look into optimizing the commercial van ownership strategy for your…

A: Data given : Cost price of van = $85,600 Miles per year = 29,500 miles Operating cost per mile =…

Q: A mining investment is more likely to generate revenues of $500,000 per year for the next 10 years…

A: Present worth is value today of future cash flow based on the interest rate and the time period of…

Q: ABC Ltd plans to raise funds using bonds to finance its expansion. It plans to use a zero-coupon…

A: Zero Coupon Bond Face Value $ 40,00,000.00 Yield 8% Time Period 6 Coupon Bond…

Q: X-treme Vitamin Company is considering two investments, both of which cost $20,000. The cash flows…

A: The payback period is the amount of time required to break even, i.e., to recover the initial…

Q: Unit VIII question 12

A: Answer- Working Note - Computation of capital cost of hoist - Particulars Amount Purchase…

Q: Due to growing demand for computer software, the Perry Company has had a very successful year and…

A: GIVEN ÷ EPS = $5.50 Price/earning ratio = 12 FORMULA Share price = EPS × price/earning ratio

Q: You want to save an amount of P100,000 at the end of 10 years. You are given 8% interest compounded…

A: Solved using Financial Calculator FV = 100,000 I/Y = 8/4% = 2% per quarter compound N= 10 *4 = 40…

Q: How much money must be deposited at the end of each year in a savings account that pays 9% per year,…

A: Future value (FV) = P10,000 Interest rate = 9% e = 2.7182818284590452353602874713527 Effective…

Q: $26,000.00 $6,150.00 $2,000.00 $2,510.00 Cost of Goods Sold {A} Equipment {B} Renovations {C} Other…

A: Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…

Q: 1. A television set is for sale at ₱ 13,499 in cash or on installment terms, ₱ 2,500 each month for…

A: When given two repayment options of payment in annuity, one must select the option with lowest…

Q: Assume US dollars and Canadian dollars are at 1SUS = C$1.08. You have C$1,000,000 at your disposal.…

A: The equivalent Mexican Pesos for one million Canadian dollars is $ 483,000,000.

Q: onsider the following information: Probability of State of Economy Rate of Return if St Occurs Stoc…

A: Expected return of the stock depends the return under the probabilistic scenario of the different…

Q: Two firms, No Leverage Inc. and High Leverage Inc. have equal levels of operating risk and differ…

A: Given: Tax rate 40% Particulars No leverage High leverage Equity in capital structure…

Q: Given the following information; Face Value = $50,000 Bond Rate = 4% Coupons per year = 2…

A: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and…

Q: Suppose that you had deposited $125 in a bank account for each of the last 5 years. What annual…

A: Amount deposited per year is $125 Time period is 5 years Amount in account is $758.92 To Find:…

Q: A smart watch is purchased with a down payment of P2,000 and the balance will be paid at P2,500…

A: Monthly payment (P) = P2500 Interest rate = 3% Monthly interest rate (r) = 3%/12 = 0.25% Number of…

Q: Suppose that you invested $100 in a bank account that earned an annual rate of return of 10%. How…

A: Deposited amount (PV) is $100 Annual rate of return (r) is 10% Time period(t) is 10 years To Find:…

Q: 5. On October 25 2015, one Euro traded for 1.106 US dollars, and thus one US dollar traded for 0.942…

A: The equilibrium graph shows the relation between the supply and demand of both the currencies. The…

Question

Please answer with explanation.

I will really upvote.

Thanks

A company has the following net cash inflows. Today -$7000, Year 1-$15 000, Year 2-$9000, Year 3+ $12 000,
Year 4 -$3000, Year 5 + $19 000. Compute the net present value if the required rate of return is 7.22%
compounded annually.
a.
-$7009.89
O b. -$7409.89
O c. $4709.89
d. -$3000.00
e. -$4709.89

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

An investment of 1,000 produces a net cash inflow of 500 in the first year and 750 in the second year. What is the payback period? a. 1.67 years b. 0.50 year c. 2.00 years d. 1.20 years e. Cannot be determined
Chasse Building Supply Inc. reported net cash provided by operating activities of $243,000, capital expenditures of $112,900, cash dividends of $35,800, and average maturities of long-term debt over the next 5 years of $122,300. What is Chasses free cash flow and cash flow adequacy ratio? a. $94,300 and 0.77, respectively c. $130,100 and 1.06, respectively b. $94,300 and 0.82, respectively d. $165,900 and 1.36, respectively
Carter Swimming Pools has $16 million in net operating profit after taxes (NOPAT) in the current year. Carter has $12 million in total net operating assets in the current year and had $10 million in the previous year. What is its free cash flow?
The Berndt Corporation expects to have sales of 12 million. Costs other than depreciation are expected to be 75% of sales, and depreciation is expected to be 1.5 million. All sales revenues will be collected in cash, and costs other than depreciation must be paid for during the year. Berndts federal-plus-state tax rate is 40%. Berndt has no debt. a. Set up an income statement. What is Berndts expected net income? Its expected net cash flow? b. Suppose Congress changed the tax laws so that Berndts depreciation expenses doubled. No changes in operations occurred. What would happen to reported profit and to net cash flow? c. Now suppose that Congress changed the tax laws such that, instead of doubling Berndts depreciation, it was reduced by 50%. How would profit and net cash flow be affected? d. If this were your company, would you prefer Congress to cause your depreciation expense to be doubled or halved? Why?
Brook Corporation’s free cash flow for the current year (FCF0) was $3.00 million. Its investors require a 13% rate of return on (WACC = 13%). What is the estimated value of operations if investors expect FCF to grow at a constant annual rate of (1) −5%, (2) 0%, (3) 5%, or (4) 10%?
Project B cost $5,000 and will generate after-tax net cash inflows of $500 in year one, $1,200 in year two, $2,000 in year three. $2,500 in year four, and $2,000 in year five. What is the NPV using 8% as the discount rate? For further instructions on net present value in Excel, see Appendix C.
Your company is planning to purchase a new log splitter for is lawn and garden business. The new splitter has an initial investment of $180,000. It is expected to generate $25,000 of annual cash flows, provide incremental cash revenues of $150,000, and incur incremental cash expenses of $100,000 annually. What is the payback period and accounting rate of return (ARR)?
Garnette Corp is considering the purchase of a new machine that will cost $342,000 and provide the following cash flows over the next five years: $99,000, $88,000, $92,000. $87,000, and $72,000. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return in Excel. see Appendix C.
Assume San Lucas Corporation in MAD 26-1 assigns the following probabilities to the estimated annual net cash flows: a. Compute the expected value of the annual net cash flows. b. Determine the expected net present value of the equipment, assuming a desired rate of return of 10% and the expected annual net cash flows computed in part (a). Use the present value tables (Exhibits 2 and 5) provided in the chapter in determining your answer. c. Based on your results in parts (a) and (b), should San Lucas Corporation invest in the equipment?
The present value of the following cash flow stream is$7,300 when discounted at 8 percent annually. What is the value of the missing cashflow? Year Cash Flow1 $1,5002 ?3 2,7004 2,900
What is the PRESENT VALUE of a ₱20,000 single payment with annual rate of 12% to be compounded annually that will be received after 5 years? A. ₱11,348.54 B. ₱22,400.00 C. ₱32,000.00 D. ₱35,246.83 Which of the following is an operating cash inflow activities? A. Receipt of loan from bank B. Proceed from sale of fixed assets C. Collection of accounts receivables D. Issued shares of stocks Which part of financial planning is meeting with the heads of other department and get information from them pertaining to the tactics that might be able to develop? A. develop a plan B. gather the relevant data C. establish the objective D. implement the plan Statement 1: Long-term financial planning focuses on big picture, such as capital structure and capital budgeting. Statement 2: Short-term financial planning focuses on ensuring that business has enough cash to pay all its liabilities.…
For the cash flows shown, calculate the equivalent annual worth in years 1 through 4 at an interest rate of 10% per year. Year 0 1 2 3 4 Cash Flow, $ 250,000 275,000 300,000 325,000 375,000