A small scale mining investment is expected to generate $60,000 per year in profits over the next 15 years. If these profits are invested in a mutual fund account that ears a market interest rate of 10% per year, calculate how much the fund will be worth after the 15 years in actual dollars and in real dollars Inflation is expected to average 6% per year over that period. In real dollar A. $3,256,990 B. $1,906,350 C. $795,450 D. $1,181,400 In actual dollars A. $3,256,990 B. $795,450 C. $1,506,350 D. $1,181,400 please dont provid

A small scale mining investment is expected to generate $60,000 per year in profits over the next 15 years. If these profits are invested in a mutual fund account that ears a market interest rate of 10% per year, calculate how much the fund will be worth after the 15 years in actual dollars and in real dollars Inflation is expected to average 6% per year over that period. In real dollar A. $3,256,990 B. $1,906,350 C. $795,450 D. $1,181,400 In actual dollars A. $3,256,990 B. $795,450 C. $1,506,350 D. $1,181,400 please dont provid

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter26: Capital Investment Analysis

Section: Chapter Questions

Problem 3CMA

See similar textbooks

Similar questions

Fenton, Inc., has established a new strategic plan that calls for new capital investment. The company has a 9.8% required rate of return and an 8.3% cost of capital. Fenton currently has a return of 10% on its other investments. The proposed new investments have equal annual cash inflows expected. Management used a screening procedure of calculating a payback period for potential investments and annual cash flows, and the IRR for the 7 possible investments are displayed in image. Each investment has a 6-year expected useful life and no salvage value. A. Identify which project(s) is/are unacceptable and briefly state the conceptual justification as to why each of your choices is unacceptable. B. Assume Fenton has $330,000 available to spend. Which remaining projects should Fenton invest in and in what order? C. If Fenton was not limited to a spending amount, should they invest in all of the projects given the company is evaluated using return on investment?
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
Redbird Company is considering a project with an initial investment of $265,000 in new equipment that will yield annual net cash flows of $45,800 each year over its seven-year life. The companys minimum required rate of return is 8%. What is the internal rate of return? Should Redbird accept the project based on IRR?
Buena Vision Clinic is considering an investment that requires an outlay of 600,000 and promises a net cash inflow one year from now of 810,000. Assume the cost of capital is 10 percent. Required: 1. Break the 810,000 future cash inflow into three components: a. The return of the original investment b. The cost of capital c. The profit earned on the investment 2. Now, compute the present value of the profit earned on the investment. 3. Compute the NPV of the investment. Compare this with the present value of the profit computed in Requirement 2. What does this tell you about the meaning of NPV?
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)?