Compare the following investment alternatives using PW analysis and an annual interest rate of %12, compounded monthly. Alternative-A Alternative-B First cost, $ 240,000 450,000 Uniform Annual operating cost, $ 22,000 34,000 Uniform quarterly Benefit, $ 65,000 77,000 Salvage value, $ 120,000 230,000 Life, year 25 infinite

Compare the following investment alternatives using PW analysis and an annual interest rate of %12, compounded monthly. Alternative-A Alternative-B First cost, $ 240,000 450,000 Uniform Annual operating cost, $ 22,000 34,000 Uniform quarterly Benefit, $ 65,000 77,000 Salvage value, $ 120,000 230,000 Life, year 25 infinite

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 29P

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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?
Project B cost $5,000 and will generate after-tax net cash inflows of $500 in year one, $1,200 in year two, $2,000 in year three. $2,500 in year four, and $2,000 in year five. What is the NPV using 8% as the discount rate? For further instructions on net present value in Excel, see Appendix C.
An investment will pay $20,400 at the end of the first year, $30,400 at the end of the second year, and $50,400 at the end of the third year. (FV of $1, PV of $1, FVA of $1, and PVA of $1) Note: Use the appropriate factor(s) from the tables provided. Required: Determine the present value of this investment using a 9 percent annual interest rate.
Para Co. is reviewing the following data relating to an energy saving investment proposal: Cost P50,000 (nondepreciable) Residual value at the end of 5 years 10,000 Present value of an annuity of 1 at 12% for 5 years 3.60 Present value of 1 due in 5 years at 12% 0.57 39. What would be the annual savings needed to make the investment realize a 12% yield assuming that Para will realize the residual value at the end of year 5?
Evaluate the following using the present worth comparison method. Use an annual interest rate of 10% and a period of 20 years for both cases. a) An initial cost of $87,000,000 investment with a first-year operation and maintenance (O&M) cost at $2,000,000, increasing by $250,000 annually. The expected revenue in the first year is $6,900,000, increasing by 8% annually. b) An initial cost of $101,000,000 investment with a first-year operation and maintenance (O&M) cost at $2,300,000, increasing by $300,000 annually. The expected revenue in the first year is $8,800,000, increasing by 8% annually. c) Which option is better?
Assume $100,000 is available for investment and MARR =10% per year. If alternative A would earn 25% per year on inveatment of 60,000 and B would be earn 20% per year on investment of 75000 the weighted average(ROR) of A
Para Co. is reviewing the following data relating to an energy saving investment proposal: Cost P50,000 (nondepreciable) Residual value at the end of 5 years 10,000 Present value of an annuity of 1 at 12% for 5 years 3.60 Present value of 1 due in 5 years at 12% 0.57 27. What would be the annual savings needed to make the investment realize a 12% yield assuming that Para will not realize the residual value at the end of year 5? 30. What would be the annual savings needed to make the investment realize a 12% yield assuming that Para will not realize the residual value at the end of year 5 and that the marginal tax rate is at 30%? 35. What would be the annual savings needed to make the investment realize a 12% yield assuming that Para will realize the residual value at the end of year 5 (as a gain) and that the marginal tax rate is at 30%?
Assuming monetary benefits of an IS at $85,000 per year (5% inflation), one-time sunk developmental costs of $110,000, recurring expenses of $40,000 (same inflation), a discount rate of 10%, and a 5 year time frame: Determine the NPV of the costs and benefits, ROI, and B/E point. Show all formulas and work for full credit.
Consider an investment with an initial cost of $10,000 and uniform annual revenue of $2,500 per year over the next five years. (a) Show that the IRR for this investment is 7.9308%. (b) Explain why is the IRR in (a) less than 2,500/10,000 = 25%.
Based on the information below, calculate the adjusted present value (APV), given that the project lifespan is 1 year and is being financed by 30% debt: Investment at t=0 € 33,000 Cashflow after yr1 € 39,600 Cost of capital (COC) 53% Cost of debt 43% Tax 33% a) The adjusted present value (APV) is: €-4325.31 b) The adjusted present value (APV) is: €-5307.69 c) The adjusted present value (APV) is: €-7117.65 d) The adjusted present value (APV) is: €-6135.26
Suppose an investment has an initial capital cost of $1100, an ongoing cost of $6.50 per year and an annual benefit of $80. If the project lasts for 20 years and the discount rate is 7%, the internal rate of return is: Provide your answer in percentage form (e.g. an IRR of 17.66% should be entered as 17.66) to 2 decimal places. Do not include any $ or % 's in your response.
Compute the (a) net present value, (b) internal rate of return (IRR), (c) modified internal rate of return (MIRR), and (d) discounted payback period (DPB) for each of the following projects. The firm’s required rate of return is 13 percent. Year Project AB Project LM Project UV 0 $(90,000) $(100,000) $ (96,500) 1 39,000 0 (55,000) 2 39,000 0 100,000 3 39,000 147,500 100,000 Which project(s) should be purchased if they are independent? Which project(s) should be purchased if they are mutually exclusive?

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	Alternative-A	Alternative-B
First cost, $	240,000	450,000
Uniform Annual operating cost, $	22,000	34,000
Uniform quarterly Benefit, $	65,000	77,000
Salvage value, $	120,000	230,000
Life, year	25	infinite