Advise the Manson Mothers, if should make this investment or not?
Q: Garfield Inc. is considering a 10-year capital investment project with forecasted revenues of…
A: Net cash inflow represents the inflow of the company after deducting the cash outflow of the…
Q: Faleye Consulting is deciding which of two computer systems to purchase. It can purchase…
A: Please find the answer to the above question below:
Q: White Lion Homebuilders is considering investing in a one-year project that requires an initial…
A: Initial Investment = 450,000 Floatation Cost = 2% * Initial Investment = 2%*450,000 = 9000 Cash…
Q: Carson Trucking is considering whether to expand its regional service center in Mohab, UT. The…
A: Initial cash Flow (Year 0) = - $10,500,000 Cash flow (Year 1 - 6) = $4,000,000 Cash flow (Year 7) =…
Q: Alter company's manager has proposed installing an equipment that will cost $36,000,have a 8-year…
A: The average rate of return calculates the rate of return compared to the initial investment costs.…
Q: Blossom, Inc., a resort management company, is refurbishing one of its hotels at a cost of…
A: The internal rate of return (IRR) is a financial statistic that is used to calculate the…
Q: Diamond Company is considering purchasing a machine that would cost $756,000 and have a useful life…
A: Payback period: Payback period is the length of time in which an investment reaches its break-even…
Q: Majestic Aircraft Corporation is considering purchasing composite wing fixtures for the assembly of…
A: Net annual cash flow = Revenue per year - annual operating cost
Q: Calculate the IRR for the project
A: Internal rate of return(IRR) is a method of capital budgeting which considers the time value of…
Q: The company will have to make Capital Investments, Working Capital investments, and generate Cash…
A: Formulas:
Q: The Ball Shoe Company is considering an investment project that requires an initial investment of…
A: Initial investment is $532,000 Cash inflows are $79,275 per year for 10 year Maximum payback period…
Q: Primus Corp. is planning to convert an existing warehouse into a new plant that will increase its…
A: 1.Payback period is the amount of time require for firm to recover its intial investment. Payback…
Q: The Square Box is considering two independent projects, both of which have an initial cost of…
A: Information Provided: Initial cost = $18,000 Required return = 12% Term = 3 years
Q: cost of the assembly system is $3 million with life expectancy of 10 years, annual operating cost of…
A: NPV= Present value of cashinflows - Present value of cashoutflows. If results are positive then it…
Q: A potential project involves an initial investment in machinery of RO.1,200,000 and has the…
A: Payback Period = Years before full recovery + (unrecovered cost at the start of the year/ cashflow…
Q: A Water Treatment Company is considering the installation of new magnetic flow mieters in one of its…
A: Since you have asked a question with multiple parts, we will solve the first 3 parts as per policy.…
Q: A company is considering investing in a new machinery. There are actually two potential projects,…
A: Payback period is the amount or time period within which initial investment amount can be recovered.
Q: Under which of the following decision rules will this project be accepted? Which decision rules are…
A: Capital budgeting is the process by which a corporation examines potential large projects or…
Q: Bnn corporation is currently evaluating a project that requires an initial investment of $1,000,000…
A: Part (1) Computation of Payback Period (Time required to recover initial investment.) Year Cash…
Q: um, Inc. is considering the purchase of new mining equipment. The equipment will cost $1,500,000 and…
A: NPV is net present value and is the difference between the present value of cash flow and initial…
Q: Garfield Inc is considering a new project that requires an initial investment of $37,700 and will…
A: Given: Initial investment = $37,700 Profitability index = 1.8
Q: Majestic Aircraft Corporation is considering purchasing composite wing fixtures for the assembly of…
A: Net annual cash flow can be defined as the per year cash inflows as deducted by the per year cash…
Q: 16
A: Calculation of the NPV (net present value) is shown below: Hence, the last option is correct.
Q: Axis Corp. is considering an investment in the best of two mutually exclusive projects. Project…
A: Formulas:
Q: Primus Corp. management is planning to convert an existing warehouse into a new plant that will…
A: Discount rate 12% YEAR CASH FLOW 0 $ (7,125,000.00) 1 $ 1,875,000.00 2 $…
Q: Jasmine Manufacturing is considering a project that will require an initial investment of $51,900…
A: Year Cash flow 0 -51900 1 9700 2 9700 3 9700 4 8400 5 8400 6 1500 7 1500 8 1500…
Q: payback period for this project?
A: Payback period is the number of years required to fully recover the initial investment.
Q: The management of SoComfy Hotel wishes to capitalize on an investment project that will cost the…
A: Given:
Q: ABC Inc. is evaluating an investment project that lasts for three years. The project has the cost of…
A: The cashflow statement refers to the recording of transactions of cash in and out from the…
Q: The Cliney Co. is considering investing $40,000 in a piece of new equipment. If the project is…
A: Given the following information: Investment in new equipment: $40,000 Estimated revenue: $15,000…
Q: Majestic Aircraft Corporation is considering purchasing composite wing fixtures for the assembly of…
A: Standard Disclaimers“Since you have asked multiple question, we will solve the first question for…
Q: Archer Daniels Midland company is considering buying a new farm that it plans to operate for 10…
A: Computation:
Q: Lakeside Winery is considering expanding its winemaking operations. The expansion will require new…
A: Net present value (NPV) is used to determine the present value of all future cash flows. Net present…
Q: Bluefield Inc. is considering a project that will require an initial investment of $20,000 and is…
A: Payback period is the time required to recover the investment.
Q: Jasper Metals is considering installing a new molding machine which is expected to produce operating…
A: The terminal cashflow is known as terminal year non operating cashflow.
Q: A new project will cost $40,000 to fund today, and an additional $40,000 next year. The device…
A: Net Present Value: It helps in analyzing the project's profitability and is computed from the…
Q: Rambus Inc. would like to purchase a production machine for $325,000. The machine is expected to…
A: Total Net savings = (annual savings - Annual maintenance cost) x no. of years = (112500-12500)*3…
Q: NOVA Company is considering a long-term investment project called STUDY. STUDY will require an…
A: Net annual cash inflow = Annual cash inflow - annual cash outflow = 79000-40000 = $39000
Q: Green Caterpillar Garden Supplies Inc. is considering a one-year project that requires an initial…
A: Amount required to be raised = Amount required/(1-flotation cost)
Q: Jasmine Manufacturing is considering a project that will require an initial investment of $49,400…
A: The payback period is the estimated period in which the investment is expected to be returned fully.…
Q: BNN Corporation is currently evaluating a project that requires an initial investment of $1,000,000…
A: The payback period is the time period required by an investment to generate enough cash flows to…
Q: If the cost of capital is 14%, calculate the net present value (NPV) and indicate whether to…
A: Net Present Value: It is a metric used in capital budgeting to determine the profitability of a…
Q: XYZ, which currently sells art products, is considering project Q, which would involve teaching art…
A: NPV = Initial Cost + PV of future Cashflows
Q: Acme, Inc. is considering a four-year project that has an initial outlay or cost of $100,000. The…
A: Unrecovered investment at start of 4th year= Initial cost – Cumulative cash inflow at the end of 3rd…
Q: Young Corporation is considering purchasing equipment that costs $50,000 and is expected to provide…
A: Period Cash Flow showing calculation of cumulative cash flow Cumulative Cash Flow 0 ($50,000)…
Q: Coyne Corporation is evaluating a capital investment opportunity. This project would require an…
A: Net Present Value = Present value of cash inflows + Present value of salvage value - Initial…
Q: Jasmine Manufacturing is considering a project that will require an initial investment of $53,700…
A: Ans. The payback period refers to the amount of time taken to recover the cost of an investment.
Q: Big Steve’s, makers of swizzle sticks, is considering the purchase of a new plastic stamping…
A: Initial outlay (I) = $105000 Annual cash inflow (A) = $17000 n = 9 years r = 9%
Mason Field Motors is evaluating a capital investment opportunity. This project would require an
initial investment of $30,000 to buy one machine and $10,000 to buy the other machine (both
machines are needed).
The project equipment will have a residual value at the end of its life of $3,000. The useful life of
the equipment is 5 years. The new project is expected to generate additional net
$12,000 per year for each of the five years.
Mansfield Motors' required
Present value of future annuity at 14% for 5 yrs is 3.4331
(Table A-4 Present Value Interest Factors for a One-Dollar Annuity Discounted)
Present value of future dollar at 14% on year 5 is= .5194
(Table A-3 Present Value Interest Factors for One Dollar Discounted)
Requirement:
Advise the Manson Mothers, if should make this investment or not?
Step by step
Solved in 2 steps
- Jasmine Manufacturing is considering a project that will require an initial investment of $52,000 and is expected to generate future cash flows of $10,000 for years 1 through 3, $8,000 for years 4 and 5, and $2,000 for years 6 through 10. What is the payback period for this project?Markoff Products is considering two competing projects, but only one will be selected. Project A requires an initial investment of $42,000 and is expected to generate future cash flows of $6,000 for each of the next 50 years. Project B requires an initial investment of $210,000 and will generate $30,000 for each of the next 10 years. If Markoff requires a payback of 8 years or less, which project should it select based on payback periods?Roberts Company is considering an investment in equipment that is capable of producing more efficiently than the current technology. The outlay required is 2,293,200. The equipment is expected to last five years and will have no salvage value. The expected cash flows associated with the project are as follows: Required: 1. Compute the projects payback period. 2. Compute the projects accounting rate of return. 3. Compute the projects net present value, assuming a required rate of return of 10 percent. 4. Compute the projects internal rate of return.
- Friedman Company is considering installing a new IT system. The cost of the new system is estimated to be 2,250,000, but it would produce after-tax savings of 450,000 per year in labor costs. The estimated life of the new system is 10 years, with no salvage value expected. Intrigued by the possibility of saving 450,000 per year and having a more reliable information system, the president of Friedman has asked for an analysis of the projects economic viability. All capital projects are required to earn at least the firms cost of capital, which is 12 percent. Required: 1. Calculate the projects internal rate of return. Should the company acquire the new IT system? 2. Suppose that savings are less than claimed. Calculate the minimum annual cash savings that must be realized for the project to earn a rate equal to the firms cost of capital. Comment on the safety margin that exists, if any. 3. Suppose that the life of the IT system is overestimated by two years. Repeat Requirements 1 and 2 under this assumption. Comment on the usefulness of this information.Gallant Sports s considering the purchase of a new rock-climbing facility. The company estimates that the construction will require an initial outlay of $350,000. Other cash flows are estimated as follows: Assuming the company limits its analysis to four years due to economic uncertainties, determine the net present value of the rock-climbing facility. Should the company develop the facility if the required rate of return is 6%?Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided manufacturing system. The annual net cash benefits and savings associated with the system are described as follows: The system will cost 9,000,000 and last 10 years. The companys cost of capital is 12 percent. Required: 1. Calculate the payback period for the system. Assume that the company has a policy of only accepting projects with a payback of five years or less. Would the system be acquired? 2. Calculate the NPV and IRR for the project. Should the system be purchasedeven if it does not meet the payback criterion? 3. The project manager reviewed the projected cash flows and pointed out that two items had been missed. First, the system would have a salvage value, net of any tax effects, of 1,000,000 at the end of 10 years. Second, the increased quality and delivery performance would allow the company to increase its market share by 20 percent. This would produce an additional annual net benefit of 300,000. Recalculate the payback period, NPV, and IRR given this new information. (For the IRR computation, initially ignore salvage value.) Does the decision change? Suppose that the salvage value is only half what is projected. Does this make a difference in the outcome? Does salvage value have any real bearing on the companys decision?
- Wansley Lumber is considering the purchase of a paper company, which would require an initial investment of $300 million. Wansley estimates that the paper company would provide net cash flows of $40 million at the end of each of the next 20 years. The cost of capital for the paper company is 13%. Should Wansley purchase the paper company? Wansley realizes that the cash flows in Years 1 to 20 might be $30 million per year or $50 million per year, with a 50% probability of each outcome. Because of the nature of the purchase contract, Wansley can sell the company 2 years after purchase (at Year 2 in this case) for $280 million if it no longer wants to own it. Given this additional information, does decision-tree analysis indicate that it makes sense to purchase the paper company? Again, assume that all cash flows are discounted at 13%. Wansley can wait for 1 year and find out whether the cash flows will be $30 million per year or $50 million per year before deciding to purchase the company. Because of the nature of the purchase contract, if it waits to purchase, Wansley can no longer sell the company 2 years after purchase. Given this additional information, does decision-tree analysis indicate that it makes sense to purchase the paper company? If so, when? Again, assume that all cash flows are discounted at 13%.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.Consolidated Aluminum is considering the purchase of a new machine that will cost $308,000 and provide the following cash flows over the next five years: $88,000, 92,000, $91,000, $72,000, and $71,000. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return in Excel, see Appendix C.