Calculate the average rate of return on the investment.
Q: Which is the accounting rate of return using the average investment?
A: Summary of the relevant information as provided in the question : cost of investment = £…
Q: what is the discounted payback period for the investment?
A: Payback Period is the calculation of periods or years within which cost of investment is recovered.…
Q: What are the two sources of value in an investment? Given an example of each.
A: An investment is a process where the investors gives or outlays his or her capital in return of…
Q: This method evaluates the return of an investment by dividing the annual average income by the…
A: By dividing the annual average income by the average investment, return on investment is calculated.…
Q: How much is BBM investment
A: This is a partnership - admission of a partner question, where the new partner is admitted with…
Q: Why is it necessary to determine how long you can expect to reap benefit from the investment?
A: Individuals as well as firms often make investment and specify the time limit for which this…
Q: e average rate of return on investment,
A: Average rate of return of investment = Average net income * 100/(Initial investment-Salvage value)
Q: What are investment returns?
A: Investment returns are a performance measure used to evaluate a speculation’s adequacy or to think…
Q: What is the total investment approach?
A: Total Investment Approach: In the Total Investment Approach, there is a risk-return tradeoff in the…
Q: Compute the average rate of return for each investment. If required, round your answer to one…
A: 1a) Computation:
Q: What is the return on investment (ROI)?
A: Introduction: An investment is the acquisition of an asset or object with the intention of earning…
Q: effective interest rate earned on this investment.
A: Effective Interest rate is the rate that determines the return on the investment. On an investment…
Q: formula for the internal rate of return on this project.
A: Note: Since you have posted a question with multiple sub-parts, we will solve the first three…
Q: ear. Calculate the rate of return of the investment.
A: Rate of return is the internal rate of return earned. Rate of return = 20.00%
Q: The net present value of an investment represents the difference between the:
A: The Answer :
Q: Explain Cumulative Investment Return Patterns?
A: Answer: Introduction: Cumulative return is the total amount of money that an individual has…
Q: What are the three components of the rate of return in order to earn any kind of investment?
A: Following are the three components of the rate of return in order to earn any kind of investment:…
Q: Consider IRR on Incremental Investment when Initial IRR Flows are equal?
A: Answer: IRR is a measure in capital budgeting used to measure the value of the predicted…
Q: A convenient and easily understood way of comparing different investmer to use their (Select ] --…
A: In the given case A convenient and easiest way of.comparing different investment is to use their…
Q: Describe IRR on Incremental Investmentment When InitialFlows are equal?
A: The internal rate of return (IRR) is a capital budgeting metric used to gauge the benefit of…
Q: Which are the several ways of defining the concept of rate of return on investment?
A: Answer: Return on investments is an instrument which can be used to calculate the company’s…
Q: One must know the discount rate of an investment project to compute its: NPV, IRR, PI and payback…
A: The various tools employed in capital budgeting are Net present value (NPV), Profitability Index…
Q: Determine investment flows, annual operation and recovery.
A: The net annual cash flow is computed by deducting the out-of-pocket and other operating expenses…
Q: method. Does the project offer an acceptable rate of return? Evaluate the profitability measure…
A: Revenue = $11 *106 Fixed costs = $2*106 Variable cost = $7*106 Depreciation is $2.4 *106 /year for…
Q: Define real rate of return.
A: Real Rate of Return is defined as the rate that has been adjusted for rise in prices of commodities.…
Q: .Calculate (a) net present value, (b) payback period, and (c) internal rate of return.
A: Net Present Value is the excess of present value of cash inflow to that of present value of cash…
Q: What is the main determinant of the level of investment?
A: An investment is simply a financial instrument formed with the goal of allowing money to grow. One,…
Q: There are four main methods of investment appraisal: Accounting Rate of Return, Payback, Net Present…
A: Investment Appraisal The method used by firms and investors to determine whether or not a specific…
Q: Calculating the rate of return on investment.
A: Rate of return means the return expected from an investment. It is the return or income generated…
Q: What is meant by investment yields?
A: Investment Yield: It defined as Earnings or income which is earned on investment over the period of…
Q: What it the profitability index for investment project O?
A: Profitability Index = Present Value of cash flows / Initial investment =$102,500 / $95,000 =1.079
Q: Identify two problems of comparing investments using the payback time.
A: This question explains about investments using the payback time.
Q: return on investment
A: First option is wrong because return on investment will decrease if invested capital increases.…
Q: Which of the following affects the present value of an investment? a. The type of investment…
A:
Q: The size of the investment required in Y is $ The rate of return on Y is | %.
A: Rate of Return: It is the return over a period of time made on the investment. Information…
Q: Describe some of the investment strategies?
A: Investors always select investment strategies according to their suitability. Investors have…
Q: onsider the following tw
A: A. Standard deviations and coefficient of variation can be computed as follows :
Q: The payback period for the investment would be: (Ro
A: Capital budgeting: capital budgeting is a decision-making method done by management accountants in…
Q: Define the term Mean and Variance of an Investment Opportunity?
A: In terms of investment, mean is the average of all the sources of capital contributed with regard to…
Q: Describe the process of the Net-Investment Test?
A: The Net-Investment test is done to figure out if an investment is a 'Pure investment' or a 'Mixed…
Q: Discuss the three components of an investor's required rate of return on an investment
A: The rate which is expected by an investor from its investment over a time period is referred to as…
Q: Which of the following affects the present value of an investment? The type of investment (annuity…
A: Present value of the investment: Present value of the investment is calculated using the cash flows…
Q: compute each investment payback period.
A: Payback Period: It is a method used in capital budgeting to determine the time it will take for the…
Q: What is the project's internal rate of return?
A: Answer has been given in the next sheet.
Q: Calculate the internal rate of return of each investment opportunity. Daced
A: Internal Rate of Return(IRR) is one of the capital budgeting techniques used for finding the…
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- 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.Manzer Enterprises is considering two independent investments: A new automated materials handling system that costs 900,000 and will produce net cash inflows of 300,000 at the end of each year for the next four years. A computer-aided manufacturing system that costs 775,000 and will produce labor savings of 400,000 and 500,000 at the end of the first year and second year, respectively. Manzer has a cost of capital of 8 percent. Required: 1. Calculate the IRR for the first investment and determine if it is acceptable or not. 2. Calculate the IRR of the second investment and comment on its acceptability. Use 12 percent as the first guess. 3. What if the cash flows for the first investment are 250,000 instead of 300,000?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.
- 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.Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated revenue producing life of 4 years. Falkland has a cost of capital of 8%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?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)?
- 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?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%?Bouvier Restaurant is considering an investment in a grill that costs $140,000, and will produce annual net cash flows of $21,950 for 8 years. The required rate of return is 6%. Compute the net present value of this investment to determine whether Bouvier should invest in the grill.
- 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.Gardner Denver Company is considering the purchase of a new piece of factory equipment that will cost $420,000 and will generate $95,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further Instructions on internal rate of return in Excel, see Appendix C.Each of the following scenarios is independent. All cash flows are after-tax cash flows. Required: 1. Patz Corporation is considering the purchase of a computer-aided manufacturing system. The cash benefits will be 800,000 per year. The system costs 4,000,000 and will last eight years. Compute the NPV assuming a discount rate of 10 percent. Should the company buy the new system? 2. Sterling Wetzel has just invested 270,000 in a restaurant specializing in German food. He expects to receive 43,470 per year for the next eight years. His cost of capital is 5.5 percent. Compute the internal rate of return. Did Sterling make a good decision?