A manufacturer is considering investing in a new production line that requires an initial capital investment of £79,000. Once in operation, the production line is expected to generate the following net earnings at the end of the years stated: YEAR 1 2 3 4 EARNINGS £15,500 £17,200 £19,500 £12,700 Furthermore, exactly mid-year during the second year there will be a further one-off maintenance cost amounting to £1,600. Then at the end of the planned 4-year service it is expected that the company will be able to sell the machinery for £41,000. Calculate, to the nearest 0.01%, the annual internal rate of return the manufacturer can expect to earn from this investment.
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PLEASE, WRITE THE SOLUTIONS ON PAPER, EXPLAINING THE ENTIRE PROCESS, THE ONLY AND CORRECT SOLUTIONS IS i* = 9.5% pa ---> NPV(9%) = 81.7971 - 80.406 = 1.3911 AND NPV (10%) = 79.6342 - 80.3869 = - 0.7526 ---> i = 9.65% pa
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- A manufacturer is considering investing in a new production line that requires an initial capital investment of £79,000. Once in operation, the production line is expected to generate the following net earnings at the end of the years stated: YEAR 1 2 3 4 EARNINGS £15,500 £17,200 £19,500 £12,700 Furthermore, exactly mid-year during the second year there will be a further one-off maintenance cost amounting to £1,600. Then at the end of the planned 4-year service it is expected that the company will be able to sell the machinery for £41,000. Calculate, to the nearest 0.01%, the annual internal rate of return the manufacturer can expect to earn from this investment.Kumi Ltd is considering an investment in a project, which requires an immediate payment of GHS15,000, followed by a further investment of GHS5,400 at the end of the first year. The subsequent return phase net cash inflows are expected to arise at the end of the following years: Year 1 2 3 4 5 Cash inflow (GHS) 6,500 7,750 5,750 4,750 3,750 You are required to estimate the internal rate of return of this project assuming the company’s cost of capital is 16%.The Chum Company is considering the production of a new product line which will require an investment of P 3 000 000 with P 200 000 salvage value. The investment will have a useful life of ten years during which annual cash inflows before income tax of P 1 400 000 are expected. The income tax rate is 40%. Required: Annual net income Average return on investment Average return on average investment
- Salalah Methanol Co. has bought some new machinery at a cost of 1250000 OMR. The impact of the new machinery will be felt in the additional annual cash flows of 375000 OMR over the next five years. What is the payback period for this project? If their acceptance period is three years, will this project be ?ассepted اخترأحد الخیارات a. 2.82 years, yes O b. None of these O c. 2.53 years, yes d. 3.33 years, no O e. 3.84 years, no OA company is considering embarking on a 4-year business line that requires an initial capital investment of £90,000 at outset and a further £20,000 exactly half a year later. The project is expected to generate the following net annual end-of-year earnings: ● Year 1: £17,300; Year 2: £21,700; Year 3: £24,500. Further, during the 4th year net income will be received continuously at a constant annual rate of £22,000. Finally, at the end of the 4-year term, the company intends to sell the business line for £65,000. Calculate, to the nearest 0.1%, the effective annual yield that the company would obtain from this project.An equipment which can be purchase for P700,000 is expected to generate a net cash flow of P200,000 annually for five years which is the estimated service life of the equipment. Its salvage value at the end of the service life is estimated to be 5% of its purchased cost. a. What is the rate of return of the initial investment? b. What is the simple pay-back period? c. If the company's minimum attractive rate of return(MARR) is set at 15%, using NPW is this investment acceptable? d. What is the internal rate of return(IRR) of this machine? e. What is the external rate of return(ERR) at the 15% MARR?
- A company is considering the purchase of a new piece of equipment for P900,000. Predicted annual cash inflows from this investment are P360,000 (year 1), P300,000 (year 2), P180,000 (year 3), P150,000 (year 4) and P60,000 (year 5). The payback period is:LENLEN Company is considering on investing in new automated machinery. The machinery will be used for five years in the project. (Prevailing cost of capital at 10% per annum) The new investment needs a P1,700,000 cash outflow. The estimated cash inflow of income from the investment of machinery for the next five (5) years would be: CASH INFLOWS YEAR 1 P 950,000 750,000 650,000 350,000 150,000 REQUIRED: By applying the following evaluation techniques if the investment economically acceptable. Show your complete solution and Answer it if acceptable or not acceptable from 1 to 4 below: 3. Net Present Value 4. Profitability IndexA new equipment that will increase revenue by P94,500 a year requires an investment of P430,000. It is estimated to have a net salvage value of P50,000 at the end of 12 years, with annual expenses for repairs and maintenance totaling P15,000. Determine if the investment is justified using future worth analysis and an 18% rate of return.
- ABTS Co Ltd is considering the purchase of a new machine. Two alternative machines (A and B) have been suggested each having an initial cost of R400 000 and requiring R20 000 as additional working capital at the end of the 1st year Earnings after taxation are expected to be as follows. All cash flows are expected at the end of each period.Year1 Machine A R40 000Machine B R120 000Year 2 R120 000 R160 000Year 3 R160 000 R200 000Year 4 R240 000 R120 000Year 5 R160 000 R80 000The company has target return on capital of 10% and on this basis, you are required to compare the profitability of the machines and state which alternatives you consider financially preferable using the i) Payback, ii) Net Present Value and iii) Internal Rate of Return methods.LENLEN Company is considering on investing in new automated machinery. The machinery will be used for five years in the project. (Prevailing cost of capital at 10% per annum) The new investment needs a P1,700,000 cash outflow. The estimated cash inflow of income from the investment of machinery for the next five (5) years would be: YEAR CASH INFLOWS P 950,000 750,000 2. 650,000 350,000 3 4 150,000 REQUIRED: By applying the following evaluation techniques if the investment economically acceptable. Show your complete solution and Answer it if acceptable or not acceptable from 1 to 4 below: 1. Payback period 2. Discounted payback periodUse the information provided below to calculate the Accounting Rate of Return on averageinvestment (expressed to two decimal places). INFORMATIONThe management of Unicorn Limited is presently appraising the production and sale of a new product. Thiswould involve the purchase of a new machine with a cost price of R500 000. The machine is expected to havea useful life of six years and a scrap value of R100 000.Annual sales of the product are estimated to be 3 000 units at a selling price of R120 per unit. Expenses(including depreciation) are expected to amount to R80 per unit