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Mrs Alis is an intelligent business woman. She makes her investments after a very thoughtful process. In January 2018 , her manager has shown her some projects with the following details
Option A
Investment into a towel business that initially cost $200,000 and then will generate
Option B
Investment into a detergent business that initially cost $190,000 and then will generate cash inflow of $20,000 for each of next 12 years.
The
- Calculate
net present value (NPV) andinternal rate of return (IRR) of both the investments. - Comment on which investment Mrs Alis should pick on the basis NPV and IRR.
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- Ali is an intelligent business woman. She makes her investments after a very thoughtful process. In January 2018 , her manager has shown her some projects with the following details Option A Investment into a towel business that initially cost $200,000 and then will generate cash inflow of $24000 per year for the next 10 years Option B Investment into a detergent business that initially cost $190,000 and then will generate cash inflow of $20,000 for each of next 12 years. The rate of return associated with both the investments is 12%. Calculate Payback period, discounted payback period, profitability index, net present value (NPV) and internal rate of return (IRR) of both the investments. Rank the projects based on each evaluation criteria. Comment on which investment Mrs. Ali should pick on the basis NPV and IRR.Ali is an intelligent business woman. She makes her investments after a very thoughtful process. In January 2018, her manager has shown her some projects with the following details Option A Investment into a towel business that initially cost $100,000 and then will generate cash inflow of $14000 per year for the next 10 years Option B Investment into a detergent business that initially cost $90,000 and then will generate cash inflow of $10,000 for each of next 12 years. The rate of return associated with both the investments is 11%. Calculate net present value (NPV) and internal rate of return (IRR) of both the investments. Comment on which investment Mrs Alis should pick on the basis NPV and IRR.Mariam Alikozay is considering opening a cold storage refrigeration business. She would invest $50,000 to purchase equipment and furnishings and another $100,000 for inventories and other working capital needs. Rent on the building used by the business will be $25,000 per year. In addition to building rent, other annual cash outflows for operating costs will amount to $44,000. She estimates that the annual cash inflow from the business will amount to $100,000. Mariam plans to operate the business for only six years. She estimates that the equipment and furnishings could be sold at that time for about 10% of its original cost. The discount rate is 16%. Compute the net present value of this investment. Please post in word , not picture
- Mariam Alikozay is considering opening a cold storage refrigeration business. She would invest $50,000 to purchase equipment and furnishings and another $100,000 for inventories and other working capital needs. Rent on the building used by the business will be $25,000 per year. In addition to building rent, other annual cash outflows for operating costs will amount to $44,000. She estimates that the annual cash inflow from the business will amount to $100,000. Mariam plans to operate the business for only six years. She estimates that the equipment and furnishings could be sold at that time for about 10% of its original cost. The discount rate is 16%. Compute the net present value of this investment.Dawn is preparing a home office to perform subcontract projects for midsized architect firms. She plans to use $13,000 of her own funds, which currently generate a return of 4% per year. The remainder of financing will be provided by a $9,000 bank loan carrying a 9% per year interest rate. She hopes to realize a return of 3% above the average cost of capital to establish her office, and she realizes that the factors of inflation and risk should also be considered. Her decision is to add another 1.5% per year to compensate for these elements. What is the MARR she should use when evaluating projects? the Marr she should use is __%Mr.Andi is a manager at an automation company. As part of his future planning, Mr.Andi plan to manage an investment IDR 100 thousand in the first year and increase this amount is 10% annually. To solve this problem, you have to create a spreadsheet from the data provided to complete your calculations along with the cash flow. Based on the data given: (a) How long will Mr.Andi's account have value in the future of IDR 3,000,000 at a rate of return of 6% per annum? (b) If Mr.Andi counts up to the next 30 years, find the nominal amount in the next 10, 20, and 30 years that Mr. Andi will achieve. The calculation spreadsheet can describe the amount deposited annually.
- Xiao and Shiao Jing-jian, newlyweds from Laramie, Wyoming, have decided to begin investing for the future. Xiao is a 7-Eleven store manager, and Shiao is a high-school math teacher. The couple intends to take $4,000 out of their savings for investment purposes and then continue to invest an additional $200 to $400 per month. Both have a moderate investment philosophy and seek some cash dividends as well as price appreciation. Calculate the five-year return on the investment choices in the table below. Running Paws Eagle Packaging Current price $22.80 $60.00 Current earnings per share (EPS) $1.90 $2.40 Current quarterly cash dividend $0.16 $0.20 Current P/E ratio 12 25 Projected earnings annual growth rate 25 % 25 % Projected cash dividend growth rate 5 % 5 % (Hint: When making your calculations you should assume at the end of the first year. At the end of the first year the EPS for Running Paws will be $2.38 with a dividend of $0.67, and the EPS…Each of the following scenarios is independent. Assume that all cash flows are after-tax cash flows. Campbell Manufacturing is considering the purchase of a new welding system. The cash benefits will be $480,000 per year. The system costs $2,700,000 and will last 10 years. Evee Cardenas is interested in investing in a women’s specialty shop. The cost of the investment is $270,000. She estimates that the return from owning her own shop will be $52,500 per year. She estimates that the shop will have a useful life of 6 years. Barker Company calculated the NPV of a project and found it to be $63,900. The project’s life was estimated to be 8 years. The required rate of return used for the NPV calculation was 10%. The project was expected to produce annual after-tax cash flows of $135,000. 2. Conceptual Connection: Assuming a required rate of return of 8%, calculate the NPV for Evee Cardenas' investment. Round to the nearest dollar. If required, round all present value calculations to the…Each of the following scenarios is independent. Assume that all cash flows are after-tax cash flows. Campbell Manufacturing is considering the purchase of a new welding system. The cash benefits will be $480,000 per year. The system costs $2,700,000 and will last 10 years. Evee Cardenas is interested in investing in a women’s specialty shop. The cost of the investment is $270,000. She estimates that the return from owning her own shop will be $52,500 per year. She estimates that the shop will have a useful life of 6 years. Barker Company calculated the NPV of a project and found it to be $63,900. The project’s life was estimated to be 8 years. The required rate of return used for the NPV calculation was 10%. The project was expected to produce annual after-tax cash flows of $135,000. Required: 1. Compute the NPV for Campbell Manufacturing, assuming a discount rate of 12%. If required, round all present value calculations to the nearest dollar.$ Should the company buy the new welding…
- Each of the following scenarios is independent. Assume that all cash flows are after-tax cash flows. Campbell Manufacturing is considering the purchase of a new welding system. The cash benefits will be $480,000 per year. The system costs $1,650,000 and will last 10 years. Evee Cardenas is interested in investing in a women's specialty shop. The cost of the investment is $230,000. She estimates that the return from owning her own shop will be $55,000 per year. She estimates that the shop will have a useful life of 6 years. Barker Company calculated the NPV of a project and found it to be $63,900. The project's life was estimated to be 8 years. The required rate of return used for the NPV calculation was 10%. The project was expected to produce annual after-tax cash flows of $135,000. Required: 1. Compute the NPV for Campbell Manufacturing, assuming a discount rate of 12%. If required, round all present value calculations to the nearest dollar. Use the minus sign to indicate a…You have just been employed as an investment analyst in an investment bank. You took over from someone who left with a number of issues that need answers. The issues are itemized below: a) A client just deposited ¢7,000,000 in one of your investment funds which is currently earning 10% return. The bank has advised the client to deposit an additional ¢4,000,000 at the end of each of the next three years. The client would like to know how much the total amount in this investment will be in three years’ time. b) A client has been offered an investment product which requires that he pays ¢200,000 in one year, ¢400,000 the next year, ¢600,000 the year after, and ¢800,000 at the end of the following year. The client could have earned 12% on similar investments being offered on the market but has decided to take your firm’s offer. How much is this investment worth today assuming the client proceeds to invest? c) Kassim has just been offered a job at ¢600,000 a year. He anticipates his salary…You have just been employed as an investment analyst in an investment bank. You took over from someone who left with a number of issues that need answers. The issues are itemized below: a) A client just deposited ¢7,000,000 in one of your investment funds which is currently earning 10% return. The bank has advised the client to deposit an additional ¢4,000,000 at the end of each of the next three years. The client would like to know how much the total amount in this investment will be in three years’ time. b) A client has been offered an investment product which requires that he pays ¢200,000 in one year, ¢400,000 the next year, ¢600,000 the year after, and ¢800,000 at the end of the following year. The client could have earned 12% on similar investments being offered on the market but has decided to take your firm’s offer. How much is this investment worth today assuming the client proceeds to invest? c) Kassim has just been offered a job at ¢600,000 a year. He anticipates his salary…
