Charlie has a project for which he had determined a present worth of $56,822. He now has to calculate the IRR for the project, but unfortunately he has lost complete information about the cash flows. He knows only that the project has afive-year service life and a first cost of $180,000, that a set of equal cash flows occurred at the end of each year, and that the MARR used was 10 percent. What is the IRR for this project?A Click the icon to view the table of compound interest factors for discrete compounding periods when i= 10%.The IRR for the project is percent.(Round to one decimal place as needed.) Single PaymentUniform SeriesSeriesArithmeticCompound PresentAmountSinkingUniformCapitalRecovery WorthFactorPresentGradientWorthFundSeriesSeriesFactorFactorFactorFactorFactorFactor(F/P,i,N)(P/F,i,N)0.90909(A/F,i,N)(F/A,i,N)1.0000(A/P,i,N)1.1000(P/A,i,N)(A/G,i,N)1.10001.000000.909090.000001.21000.826450.476192.10000.576191.73550.476191.33100.751310.302113.31000.402112.48690.936561.46410.683010.21547,4.64100.315473.16991.38121.61050.620920.163806.10510.263803.79081.81011.77160.564470.129617.71560.229614.35532.22361.94870.513160.105419.48720.205414.86842.62162.14360.466510.0874411.4360.187445.33493.00452.35790.424100.0736413.5790.173645.75903.3724102.59370.385540.0627515.9370.162756.14463.7255112.85310.350490.0539618.5310.153966.49514.0641123.13840.318630.0467621.3840.146766.81374.388424.5230.140787.10344.69880.289660.26333133.45230.04078143.79750.0357527.9750.135757.36674.9955154.17720.239390.0314731.7720.131477.60615.2789164.59500.217630.0278235.9500.127827.82375.54935.05450.197840.0246640.5450.124668.02165.8071175.55990.179860.0219345.5990.121938.20146.0526180.163510.0195551.1590.11955.8.36496.2861196.11590.0174657.2750.117468.51366.5081206.72750.148640.0156264.0020.115628.64876.7189217.40020.13513O 7715601800.01400171 402011401Z12 3 4 56 78

The value of payment or receipt to be executed in future at present time is called the Present…

Charlie has a project for which he had determined a present worth of $56,822. He now has to calculate the IRR for the project, but unfortunately he has lost complete information about the cash flows. He knows only that the project has a five-year service life and a firet cost of $180,000, that a set of equal cash flows occurred at the end of each year, and that the MARR used was 10 percent. What is the IRR for this project? Click the icon to view the table of compound interest factors for discrete compounding periods when i= 10%. The IRR for the project is percent. (Round to one decimal place as needed.)

Charlie has a project for which he had determined a present worth of $56,822. He now has to calculate the IRR for the project, but unfortunately he has lost complete information about the cash flows. He knows only that the project has a five-year service life and a firet cost of $180,000, that a set of equal cash flows occurred at the end of each year, and that the MARR used was 10 percent. What is the IRR for this project? Click the icon to view the table of compound interest factors for discrete compounding periods when i= 10%. The IRR for the project is percent. (Round to one decimal place as needed.)

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 22E

See similar textbooks

Similar questions

Taos Productions bought a piece of equipment for $79,860 that will last for 5 years. The equipment will generate net operating cash flows of $20,000 per year and will have no salvage value at the end of its life. What is the internal rate of return?
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.
Staten Corporation is considering two mutually exclusive projects. Both require an initial outlay of 150,000 and will operate for five years. The cash flows associated with these projects are as follows: Statens required rate of return is 10%. Using the net present value method and the present value table provided in Appendix A, which of the following actions would you recommend to Staten? a. Accept Project X and reject Project Y. b. Accept Project Y and reject Project X. c. Accept Projects X and Y. d. Reject Projects X and Y.
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.
The Scampini Supplies Company recently purchased a new delivery truck. The new truck cost $22,500, and it is expected to generate net after-tax operating cash flows, including depreciation, of $6,250 per year. The truck has a 5-year expected life. The expected salvage values after tax adjustments for the truck are given here. The company’s cost of capital is 10%. Should the firm operate the truck until the end of its 5-year physical life? If not, then what is its optimal economic life? Would the introduction of salvage values, in addition to operating cash flows, ever reduce the expected NPV and/or IRR of a 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?
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?
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.
Charlie has a project for which he had determined a present worth $56,920. He now has to calculate the IRR for the project, but unfortunately, he has lost complete information about the cash flows. He knows only that the project has a five-year service life and the first cost of $200,000, that a set of equal cash flows occurred at the end of each year, and that the MARR used was 10 percent. What is the IRR for this project?
The Sampson Company is considering a project that requires an initial outlay of $75,000 and produces cash inflows of $20,806 each year for five years. Sampson's cost of capital is 10%. Calculate the project's IRR recognizing the fact that the cash inflows are an annuity. Is the project acceptable? Did your calculation in this part result in any number(s) that were also calculated in part a? What is it about this problem that creates this similarity? Will this always happen in such cases? What is the project's NPV? Is it acceptable according to NPV rules?
Mountain Frost is considering a new project with an initial cost of $205,000. The equipment will be depreciated on a straight-line basis to a zero book value over the four-year life of the project. The projected net income for each year is $20,000, $20,900, $24,600, and $16,900, respectively. What is the average accounting return? Please make sure its correct
Tom is evaluating a project that costs $3, 500, 000, has a five-year life, and has no salvage value. Assume that depreciation is straight - line to zero over the life of the project. Sales are projected at 125, 000 units per year, price per unit is $65, variable cost per unit is $40, and fixed costs are $2 million per year. The tax rate is 21%, and the required rate of return on the project is 10%. Calculate the annual operating cash flow for the project. (Round to 2 decimals) Calculate the NPV for the project. (Round to 2 decimals) Calculate the accounting break - even number of units for the project. (Round to 2 decimals) Calculate the equivalent annual cost for the project. (Enter a positive value and round to 2 decimals)