11. Uneven cash flowsA series of cash flows may not always necessarily be an annuity. Cash flows can also be uneven and variable in amount, but the concept of the timevalue of money will continue to apply.Consider the following case:The Purple Lion Beverage Company expects the following cash flows from its manufacturing plant in Palau over the next six years:Year 1$400,000Year 2$37,500O $1,979,094O $917,500Annual Cash FlowsYear 3$480,000Year 4$450,000O $2,292,500O $1,775,000Year 5The CFO of the company believes that an appropriate annual interest rate on this investment is 4%. What is the present value of this uneven cash flowstream, rounded to the nearest whole dollar?$550,000Year 6$375,000

NPV is also known as Net Present Value. It is a capital budgeting techniques which help in decision…

A series of cash flows may not always necessarily be an annuity. Cash flows can also be uneven and variable in amount, but the concept of the time value of money will continue to apply. Consider the following case: The Purple Lion Beverage Company expects the following cash flows from its manufacturing plant in Palau over the next six years: Annual Cash Flows Year 3 Year 4 Year 1 Year 2 $400,000 $37,500 $480,000 $450,000 The CFO of the company believes that an appropriate annual interest rate on this investment is 4%. What is the present value of this uneven cash flow stream, rounded to the nearest whole dollar? $1,979,094 $917,500 Year 5 Year 6 $550,000 $375,000 $2,292,500 $1,775,000

A series of cash flows may not always necessarily be an annuity. Cash flows can also be uneven and variable in amount, but the concept of the time value of money will continue to apply. Consider the following case: The Purple Lion Beverage Company expects the following cash flows from its manufacturing plant in Palau over the next six years: Annual Cash Flows Year 3 Year 4 Year 1 Year 2 $400,000 $37,500 $480,000 $450,000 The CFO of the company believes that an appropriate annual interest rate on this investment is 4%. What is the present value of this uneven cash flow stream, rounded to the nearest whole dollar? $1,979,094 $917,500 Year 5 Year 6 $550,000 $375,000 $2,292,500 $1,775,000

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter12: Capital Investment Decisions

Section: Chapter Questions

Problem 5MCQ: An investment of 1,000 produces a net cash inflow of 500 in the first year and 750 in the second...

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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
7. Uneven cash flows A series of cash flows may not always necessarily be an annuity. Cash flows can also be uneven and variable in amount, but the concept of the time value of money will continue to apply. Consider the following case: The Purple Lion Beverage Company expects the following cash flows from its manufacturing plant in Palau over the next five years: Annual Cash Flows Year 1 Year 2 Year 3 Year 4 Year 5 $250,000 $20,000 $180,000 $450,000 $550,000 The CFO of the company believes that an appropriate annual interest rate on this investment is 4%. What is the present value of this uneven cash flow stream, rounded to the nearest whole dollar? $450,000 $2,000,000 $1,800,000 $1,255,617 Identify whether the situations described in the following table are examples of uneven cash flows or annuity payments: Description Uneven Cash Flows Annuity Payments You recently moved to a new apartment and…
8. Unevencash flows A series, or stream, of cash flows may not always necessarily be an annuity. Cash flows can also be uneven and nonconstant, but the concept of the time value of money applies to uneven cash flows as well. Consider the following case: Swanky Beverage Co. expects the following cash flows from its manufacturing plant in Palau over the next 5 years: Year Annual Cash Flows 1 $4,600,000 2 $2,150,000 3 $6,000,000 4 $5,200,000 5 $4,250,000 1. The CFO of the company believes that an appropriate annual interest rate on this investment is 7%. What is the present value of this uneven cash flow stream (rounded to the nearest whole dollar)? $18,071,991 $19,050,000 $27,200,000 $16,444,948 2. Identify whether the situations described in the following table are examples of uneven cash flows or annuity payments. Description Uneven Cash Flows Annuity Payments Susan has been donating 10% of her salary at the end of every…
11. Uneven cash flows A series of cash flows may not always necessarily be an annuity. Cash flows can also be uneven and variable in amount, but the concept of the time value of money will continue to apply. Consider the following case: The Purple Lion Beverage Company expects the following cash flows from its manufacturing plant in Palau over the next six years: Annual Cash Flows Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 $400,000 $20,000 $180,000 $300,000 $350,000 $725,000 A. The CFO of the company believes that an appropriate annual interest rate on this investment is 9%. What is the present value of this uneven cash flow stream, rounded to the nearest whole dollar? $1,975,000 $1,395,097 $1,775,000 $600,000 B. Identify whether the situations described in the following table are examples of uneven cash flows or annuity payments: Description Uneven Cash Flows Annuity Payments Debbie has…
A series of cash flows may not always necessarily be an annuity. Cash flows can also be uneven and variable in amount, but the concept of the time value of money will continue to apply. Consider the following case: The Purple Lion Beverage Company expects the following cash flows from its manufacturing plant in Palau over the next five years: Annual Cash Flows Year 1 Year 2 Year 3 Year 4 Year 5 $250,000 $37,500 $480,000 $300,000 $550,000 The CFO of the company believes that an appropriate annual interest rate on this investment is 4%. What is the present value of this uneven cash flow stream, rounded to the nearest whole dollar? $1,650,000 $767,500 $1,410,275 $2,167,500 Identify whether the situations described in the following table are examples of uneven cash flows or annuity payments: Description Uneven Cash Flows Annuity Payments Debbie has been donating 10% of her salary at the end of every year…
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A series of cash flows may not always necessarily be an annuity. Cash flows can also be uneven and variable in amount, but the concept of the time value of money will continue to apply. Consider the following case: The Purple Lion Beverage Company expects the following cash flows from its manufacturing plant in Palau over the next four years: Annual Cash Flows Year 1 Year 2 Year 3 Year 4 $250,000 $37,500 $180,000 $300,000 The CFO of the company believes that an appropriate annual interest rate on this investment is 6.5%. What is the present value of this uneven cash flow stream, rounded to the nearest whole dollar? $650,014 $1,475,000 $467,500 $1,692,500 Identify whether the situations described in the following table are examples of uneven cash flows or annuity payments: Description Uneven Cash Flows Annuity Payments You recently moved to a new apartment and signed a contract to pay monthly rent to your…
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6.Wainright Co. has identified an investment project with the following cash flows. Year Cash Flow 1 $ 720 2 930 3 1,190 4 1,275 If the discount rate is 10 percent, what is the present value of these cash flows? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Present value $ What is the present value at 18 percent? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Present value $ What is the present value at 24 percent? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Present value $
Year 0 1 2 3 4 5 6 Cash Flow -110000 30000 40000 20000 50000 20000 20000 Given the cash flows in the table above, calculate the payback period assuming the cash flows in years 1 to 4 occur evenly throughout the year. The required rate of return is 12%. Answer in years accurate to two decimal places.
17. A project requires an immediate outflow of cash of OMR 500,000 in return for the following probable cash flows: State of economy Probability End of Year 1 (OMR) End of Year 2 (OMR) Recession 0.3 150000 100000 Growth 0.5 350000 300000 Boom 0.2 550000 500000 Assume that the state of the economy will be the same in the second year as in the first. The required rate of retum is 8 per cent. There is no tax or inflation, a. Calculate the Expected NPV b. Calculate the standard deviation of NPV.