7 Determine the capitalized cost of a series of cash flows starting at the end the first year with $800 and increasing at the rate of $200 peryear till ond of year 6. The series of cash flows from yoar 1 to 6 repeats forever. MARR = 6%O 8567O 1961321101O 6225O None

Capitalized Cost: Here, capitalized cost of the increased cash flow series is equal to the present…

Determine the capitalized cost of a series of cash flows starting at the end the first year with $800 and increasing at the rate of $200 per year till end of year 6. The series of cash flows from year 1 to 6 repeats forever. MARR = 6% O 8567 O 19613 O 21101 O 6225 O None

Determine the capitalized cost of a series of cash flows starting at the end the first year with $800 and increasing at the rate of $200 per year till end of year 6. The series of cash flows from year 1 to 6 repeats forever. MARR = 6% O 8567 O 19613 O 21101 O 6225 O None

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 1MC

See similar textbooks

Related questions

Q: Solve for the missing information pertainıng lo Using the tables in Exhibits 26–3 and 26-4,…

A: Hello. Since your question has multiple sub-parts, we will solve first three sub-parts for you. If…

Q: For the cash flows shown, the correct equation for FW2 using the ROIC method at the reinvestment…

A: The reinvestment rate is the rate at which the cash flows arising in a project are reinvested into…

Q: present worth of the following cash flows based on an interest rate of 7.23% per year, compounded…

A: Present value of cash is the discounted value of cash flow today considering the interest and period…

Q: The internal rate of return method is used by Testerman Construction Co. in analyzing a capital…

A: a. At internal rate of return, the present value of cash inflows is equal to the present value of…

Q: 1- Calculate the rate of return to be obtained for the investment to be made in the 1st year…

A: Investment means engaging your funds to generate income in the future. The rate of return (ROR)…

Q: Three investments cost $7,000 each and have the following cash flows. Rank them on the basis of…

A: Capital budgeting is the process by which a corporation examines potential large projects or…

Q: 2. At an interest rate of 10% per year, calculate the capitalized cost of $10,000 (cost) in year 0,…

A: Capitalized Cost=-Initial Cost-Annual Payment×(P/A, r%, n years)-Terminal Payment×(P/F, r%, n years)

Q: Analyze below Cash Flow and compute for the unknown value. ... EOY (end of year) $5 $5 $5 $10 $15…

A: Here, Interest Rate (r) is 10% Compounding Period (m) is Semi Annual i.e 2 Payment Period (p) is…

Q: Find the present worth in year O for the cash flows shown. Let -13% per year. 8 Year 50 70 90 110…

A: The current value of the cash flow or stream of cash flow after discounting is termed as the present…

Q: An investor invested $50,000 at the beginning. He received the following cash flows from the…

A: IRR stands for internal rate of return. It is the rate at which net present value of project is 0.…

Q: Ms. Ga Ling projected the following data for GWAPO Corporation: (amounts in millions of Pesos) Year…

A: Initial investmenr is P50,000,000 Life 10 years Annual CAPEX requirement is P2,000,000 Outstanding…

Q: Beyer Company is considering the purchase of an asset for $400,000. It is expected to produce the…

A: Capital budgeting is the managerial approach used to evaluate whether Organization’s long term…

Q: What is the present value of the cash flow given below, interest at 8% compounded semi-annually. 0.5…

A: The given problem can be solved using PV function in excel. PV function computes present worth for…

Q: Assume a $55,000 investment and the following cash flows for two alternatives. Year Investment A…

A: A method of capital budgeting that helps to evaluate the time period a project requires to cover its…

Q: Compare between the following two (After Tax cash flow) machines using internal rate of retura…

A: Internal rate of return is the real return from an investment or a machine by considering future…

Q: Sanka Company is considering the purchase of an asset for $360,000. It is expected to produce the…

A: The payback period refers to the time period that is required to recover the initial cost. With the…

Q: Compute the payback period for an investment with the following net cash flows. (Round your answer…

A: Last year in which cumulative net cash flow is negative (Y) = 4th year Minimum cash inflow required…

Q: The internal rate of return method is used by Testerman Construction Co. in analyzing a capital…

A: Internal Rate of ReturnInternal Rate of Return is the return where the sum of discounted cash…

Q: For the cash flows shown and in preparation for a PW-based rate of return analysis, determine the…

A: Meaning of Incremental Cash flow Incremental cash flow is the extra operating cash flow that a…

Q: Beyer Company is considering the purchase of an asset for $180,000. It is expected to produce the…

A: Cash payback method: Cash payback period is the expected time period which is required to recover…

Q: Beyer Company is considering the purchase of an asset for $205,000. It is expected to produce the…

A: Net present value is the difference between the present value of cash inflows and present value of…

Q: Beyer Company is considering the purchase of an asset for $210,000. It is expected to produce the…

A: Payback period is the period within which the company recovers its investment amount in a project.

Q: Suppose an asset has a first cost of $8,000,a life of five years, a salvage value of $2,000 atthe…

A: Cash Flow form Operation after tax may be calculated using either: Direct method or Indirect method.…

Q: culate IRR on excel for the cash flows of $500 received per year for 3 years for an investment of…

A: The given problem can be solved using IRR function in excel.

Q: Assume that Linda Company is to make an investment of uneven cash payments for three years as…

A: Interest rate = 10% End of year 1 payment = P 200,000 End of year 2 payment = P 300,000 End of year…

Q: Calculate the Net Present Value (NPV) and the Profitability Index (PI) over the six years. Assume…

A: Net present value (NPV) is the difference of present value of all cash inflows and the cash outflow.…

Q: What is the present value of the following cash flow stream at a rate of 8.0%? Years 0 1 2 3 4 Cash…

A: Present value is calculating by discounting the cash flows at required rate of return i.e. 8%.

Q: Beyer Company is considering the purchase of an asset for $220,000. It is expected to produce the…

A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: equipment has a useful life of five years and a residual value of $75,000. Depreciati using the…

A: Accounting rate of return can be computed using the following formula : ARR=Average net…

Q: Assume that the bank decided to give a loan of $ 59 million to Nivea Corporation (recorded for…

A: Hey, since there are multiple subpart questions posted, we will answer the first three subpart…

Q: The following are the cash flows of two projects: Year Project A Project B 0 $ (390 ) $ (390…

A: Payback period for project A and Project B is 1.8 years and 1.3 years. Computation of payback…

Q: assume that the bank decided to give a loan of $ 59 million to Nivea Corporation (recorded for…

A: Net present value (NPV) is the difference between the present values of cash inflows and cash…

Q: The internal rate of return method is used by Queen Bros. Construction Co. in analyzing a capital…

A: The internal rate of return is the percentage at which the net present value of the company is zero.…

Q: Find the ROR of the following cash flow. MARR is 18% per year. Year 0 1 3 4 5 7 8 Cash -32,000…

A: The ROR is the interest rate that results in net present worth(NPW) of project zero. It can be…

Q: Beyer Company is considering the purchase of an asset for $245,000. It is expected to produce the…

A: Net present Value Method is a process to justify whether the business is avail to recover its cost…

Q: For the cash flows shown in the diagram, determine the value of x and 2x that will make the future…

A: Calculation of values of x and 2x:Answer:The values of x and 2x are 10,744.42 and 21,488.84

Q: Analyze below Cash Flow and compute for the unknown value. ... 2 3 4 7 8 9 10 EOY (end of year) $5…

A: Interest rate = 10% semiannually compounded Let CFn = Cashflow in year n n = 10 years

Q: mpany project capitalized for $ 50,000 invested in depreciable assets will earn a uniform annual…

A: The income return on investment is defined as cash flows.The interest or dividends paid by a…

Q: From Part A above, assume that the bank decided to give a loan of $ 59 million to Nivea Corporation…

A: Net present value (NPV) is the difference between the present values of cash inflows and cash…

Q: In a geometric sequence of annual cash flows starting at the end of year zero, the value of A at e…

A: Solution- Year Cash flow ($) increased by 15% Present value factor (10%) Present Value($) 0…

Q: The cash flows for two alternatives are shown. The correct equation for computing the AW of…

A: Annual worth(AW) shows the net difference between all benefits and costs which occurs in 1 year at…

Q: Find teh present value of the streams of cash flows shown in the following table. Assume that…

A: Opportunity cost = 14%

Q: The internal rate of return method is used by Queen Bros. Construction Co. in analyzing a capital…

A: IRR Annual growth rate of growth that is estimated to be generated from an investment.

Q: Given the following: Single Cash Flow = 100; WACC = 5.0%; Duration = 3 years Calculate the Present…

A: Present value = Cashflow/(1 + WACC)^Time Dta given is - Cashflow = 100 WACC =5% Time =3 years

Q: a. Calculate the terminal cash flow for a usable life of (1) 3 years, (2) 5 years, and (3) 7 years.…

A: Profit form sale of proposed asset = $ 10,200 Tax on sale of proposed assets = profit*(1-t)…

Concept explainers

Market Efficiency

Market efficiency refers to the market's ability to provide investors with all available information about investment options for buying and selling securities. Market efficiency reflects the true value of securities without undervaluing or overvaluing them. When the quality and quantity of information increase, the market becomes more efficient, allowing it to reduce arbitrage and obtain higher market returns from investment. In a well-functioning market, everyone receives all information completely and immediately at no cost. It opens up a plethora of opportunities for investors to access various investment options.

Question

Determine the capitalized cost of a series of cash flows starting at the end the first year with $800 and increasing at the rate of $200 per
year till ond of year 6. The series of cash flows from yoar 1 to 6 repeats forever. MARR = 6%
O 8567
O 19613
21101
O 6225
O None

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1 Introduction

VIEW

Step 2 Calculation of capitalized cost of future cash inflows

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

An investment of 1,000 produces a net cash inflow of 500 in the first year and 750 in the second year. What is the payback period? a. 1.67 years b. 0.50 year c. 2.00 years d. 1.20 years e. Cannot be determined
Assume San Lucas Corporation in MAD 26-1 assigns the following probabilities to the estimated annual net cash flows: a. Compute the expected value of the annual net cash flows. b. Determine the expected net present value of the equipment, assuming a desired rate of return of 10% and the expected annual net cash flows computed in part (a). Use the present value tables (Exhibits 2 and 5) provided in the chapter in determining your answer. c. Based on your results in parts (a) and (b), should San Lucas Corporation invest in the equipment?
Beyer Company is considering the purchase of an asset for $205,000. It is expected to produce the following net cash flows. The cash flows occur evenly within each year. Assume that Beyer requires a 9% return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Year 1 Year 2 Year 3 Year 4 Year 5 Total Net cash flows $ 74,000 $ 59,000 $ 100,000 $ 166,000 $ 54,000 $ 453,000 a. Compute the net present value of this investment.b. Should Beyer accept the investment? Compute the net present value of this investment. (Round your answers to the nearest whole dollar.)
Beyer Company is considering the purchase of an asset for $180,000. It is expected to produce the following net cash flows. The cash flows occur evenly within each year. Assume that Beyer requires a 10% return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Year 1 Year 2 Year 3 Year 4 Year 5 Total Net cash flows $ 60,000 $ 40,000 $ 70,000 $ 125,000 $ 35,000 $ 330,000 a. Compute the net present value of this investment. (Round your answers to the nearest whole dollar.) b. Should Beyer accept the investment? Yes No
vanhoe Company accumulates the following data concerning a proposed capital investment: cash cost \$212.060. net annual cash flows $43,000, and present value factor of cash inflows for 10 years is 5.22 (rounded). (If the net present value is negative, use either a negative sign preceding the number eg-45 or parentheses eg(45).) Determine the net present value, and indicate whether the investment should be made. dont give answer in image thnku
The following present value factors are provided for use in this problem. Periods Present Valueof $1 at 11% Present Value of anAnnuity of $1 at 11% 1 0.9009 0.9009 2 0.8116 1.7125 3 0.7312 2.4437 4 0.6587 3.1024 Cliff Co. wants to purchase a machine for $62,000, but needs to earn a return of 11%. The expected year-end net cash flows are $24,000 in each of the first three years, and $28,000 in the fourth year. What is the machine's net present value? Multiple Choice $(3,351). $15,093. $77,093. $(43,556). $100,000.
Economics Assume the data below describes the real cash flow of a 9-year project and all expenditures made at the beginning of each period. Using 10% discount rate, the investment cost (for the first four years starting from year 0), in present value terms, in year 0 is $1,403.08 and $1,867.50 when evaluated as of the beginning of year 4. What is the accrued opportunity cost of capital at the beginning of year 4? Year 0 = -500 Year 1 = -200 Year 2 = -600 Year 3 = -300 Year 4 = +520 Year 5 = +634 Year 6 = +736 Year 7 = +785 Year 8 = +861
Beyer Company's is considering the purchase of an asset for $205,000. It is expected to produce the following net cash flows. The cash flows occur evenly within each year. Assume that Beyer requires a 12% return on invetsments. (PV of $1, FV of $1, PVA of $1, and FVA of $1. Net cash flows (Year 1 $70,000, Year 2 $50,000. Year 3 $88,000, Year 4 $159,000 and Year 5 $53,000. A. Compute the net present value of this investment B. Should Beyer accept the investment?
PART B Assume that the bank decided to give a loan of $ 59 million to Nivea Corporation (recorded for initial year). Nivea-Corporation invested the amount in a project and generated the following sequence of cash flows over six years: Year Cash Flow ($ million) 0 -59.00 1 4.00 2 5.00 3 6.00 4 7.33 5 8.00 6 8.25 Calculate the Payback period Calculate the Net Present Value (NPV) and the Profitability Index (PI) over the six years. Assume any discount rate This project does not end after the sixth year but instead will generate cash flows far into the future. Estimate the project’s terminal value, assuming that cash flows after year 6 continue at $8.25 per year perpetuity and then recalculate the investment’s NPV. Calculate the terminal value assuming that cash flows after the sixth year grow at 2% annually in perpetuity, and then recalculate the
The internal rate of return method is used by Queen Bros. Construction Co. in analyzing a capital expenditure proposal that involves an investment of $234,327 and annual net cash flows of $57,000 for each of the 6 years of its useful life. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.352 2.991 6 4.917 4.355 4.111 3.784 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 a. Determine a present value factor for an annuity of $1, which can be used in determining the internal rate of return. If required, round your answer to three decimal places. b. Using the factor determined in part (a) and the present value of an annuity of $1 table above, determine the internal rate of return for the proposal.
Juliana is considering an investment proposal with the following cash flows: Initial investment-depreciable assets $55,000 Net cash inflows from operations (per year for 10 years) 11,000 Disinvestment 0 a. Determine the payback period. Round your answer to one decimal place; for example, enter 1.4 for 1.44 or 1.5 for 1.45. Answer years For parts b. and c., round your answers to three decimal places if applicable. For example, enter 0.084 for 0.0844 or 0.085 for 0.0845. b. Determine the accounting rate of return on initial investment. Answer c. Determine the accounting rate of return on average investment.
Determine the capitalized cost of $100,000 now and $50,000 per year in years 1 through infinity at a) an interest rate of 10% per year. b) an interest rate of 10% per year compounded continuously.