Due to the heavy demand for the LNG (Liquefied Natural Gas) tankers, the Hyunda Shipyard has received a contract from DET Inc., a European LNG transportation company, for building two 100,000 M³ tankers. Hyunda's cash flow throughout the 5 years contract period are summarized as follows: Year 0: receive $12 M upon contract signing Year 1: receive $12 M Year 2: disbursement of $40 M Year 3: disbursement of $40 M Year 4: receive $20 M Year 5: receive $40 M, project complete Find out all the positive IRR rates for this non-simple cash flow. 5.74% and 52.94% 5.74% and 45.72% 5.74% and 49.17% 5.74% and 63.47% 5.74% and 58.51%
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- Grummet Company is acquiring a new wood lathe with a cash purchase price of $80,000. The Wood Master Industries (the manufacturer) has agreed to accept $23,500 at the end of each of the next 4 years. Based on this deal, how much interest will Grummet pay over the life of the loan? A. $94,000 B. $80,000 C. $23,500 D. $14,000Consolidated 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.Dairy queen corporation has been awarded a contract to supply a key replacement part for its ice machine. The contract would expire in eight years. The projected cash flow resulting from the contract is detailed below: new equipment cost - 300,000 dollarsWorking capital needed - 100,000 dollars.Net annual cash flows - 85,000 dollarsSalvage value of equipment in 8 years 50,000 dollars The corporation's required rate of return is 16%. The working capital wouldbe released for use elsewhere at the end of the project. Required: Determine whether the contract should be accepted using thenet present value.
- The MGC Company has a contract with a hauler to transport its naptha requirements of 3,600,000 liter per year from a refinery in Batangas to its site in Paco at a cost of P1.05 per liter. It is proposed that the company buys a tanker with a capacity of 18,000 liters to service its requirements at a first cost of P 8,000,000 life is 6 years and a salvage value of P 800,000. Other expenses are as follows: a.) Diesel fuel at P7.95 per liter and the tanker consumers 120 liter per round trip from Paco to Batangas and back.b.) Lubricating oil servicing is P3,200 per month.c.) Labor including overtime and fringe benefits for one driver and one helper is P21,000 per month.d.) Annual taxes and insurance. 5% of first cost.e.) General maintenance per year is P40,000f.) Tires cost P 32,000 per set and will be renewed every 150 round trips. What should the MGC Company do if a 5% interest rate on investment is included in the analysis?In order to build a new warehouse facility, the regional distributor for Valco Multi-position Valves borrowed $1.6 million at 10% per year interest. If the company repaid the loan in a lump sum amount after two years, what was (a) the amount of the payment, and (b) the amount of interest?Lockheed Martin has secured a satellite launch contract from a European communications company that will pay them € 3.9M per year for the next 8 years . To land that contract , they invested € 13M in a satellite tracking system . Of that amount , €8M was paid up front and the remaining €5M was spent during the first year of operation . The annual operating costs for the satellite tracking system are estimated at € 0.9M per year ( which includes the cost of personnel , electricity , maintenance , etc. ) . At the end of the contract , it is estimated that the equipment will have a salvage value of € 0.5M . What is Lockheed Martin's internal rate of return ( IRR ) on this project ?
- Star Industries owns and operates landfills for several municipalities throughout the Midwestern part of the U.S. Star typically contracts with the municipality to provide landfill services for a period of 20 years. The firm then constructs a lined landfill (required by federal law) that has capacity for five years. The $9.8 million expenditure required to construct the new landfill results in negative cash flows at the end of years 5, 10, and 15. This change in sign on the stream of cash flows over the 20-year contract period introduces the potential for multiple IRRs, so Star's management has decided to use the MIRR to evaluate new landfill investment contracts. The annual cash inflows to Star begin in year 1 and extend through year 20 are estimated to equal $4.1 million (this does not reflect the cost of constructing the landfills every five years). Star uses a 10.2% discount rate to evaluate its new projects, so it plans to discount all the construction costs every five…APJ, Inc. is planning to purchase a new machine that will take six years to recover the cost. The new machine is expected to produce cash flow from operations, net of income taxes, of P4,500 a year for the first three years of the payback period and P3,500 a year of the last three years of the payback period. Depreciation of P3,000 a year shall be charged to income of the six years of the payback period. How much shall the machine cost? * A. P12,000 B. P18,000 C. P24,000 D. P36,000Cebu Pacific has purchased composite wing fixtures for the assembly of its new Dreamliner Commercial airliner.Assume this system costs P 3 million to install and an estimated P 200,000 per year for all materials, operating,personnel, and maintenance costs. The expected life is 10 years. An engineer wants to estimate the total revenuerequirement for each 6-month period that is necessary to recover the investment, interest, and annual costs. Find thissemiannual A value if capital funds are evaluated at 8% per year compounded semiannually.
- Water Cutter Co. is considering purchasing a system to assist inw ater jet manfacturing. The system costs $200,000. It has an expected life of 7 years, at which time its salvage value will be $9,500. Operating and maintenance expenses are estimaed to be $20,000 per year. If the system is purchased, additional revenues will be $40,000 per year. Water Cutter Co. must borrow half of the purchases price. The bank as agreed to three equal annual payments, with the first payment due at the end of year 1. The loan interest rate i 16% compounded annually. Water Cutter Co's MARR is 15% compounded annually. 1. Calculate the loan payment amount. 2. Calculate the present worth of the investment. 3. Based on the present worth you calculated, should Water Cutter Co. purchase the system? Why or why not?Water Cutter Co. is considering purchasing a system to assist inw ater jet manfacturing. The system costs $200,000. It has an expected life of 7 years, at which time its salvage value will be $9,500. Operating and maintenance expenses are estimaed to be $20,000 per year. If the system is purchased, additional revenues will be $40,000 per year. Water Cutter Co. must borrow half of the purchases price. The bank as agreed to three equal annual payments, with the first payment due at the end of year 1. The loan interest rate i 16% compounded annually. Water Cutter Co's MARR is 15% compounded annually. 1. Calculate the loan payment amount. 2. Calculate the present worth of the investment. 3. Based on the present worth you calculated, should Water Cutter Co. purchase the system? Why or why not? Water Cutter Co. is considering purchasing a system to assist inw ater jet manfacturing. The system costs $200,000. It has an expected life of 7 years, at which time its salvage value will be…XYZ Company is building an addition (building and machinery) to its manufacturing plant to increase its production capacity. The cost of the addition is $1,230,000. Its lender is willing to make a loan to the company at 70% loan to value, for 20 years, payments made monthly, and at an interest rate of 5% APR. a. How much of the total cost is CAPEX and how much of the total cost is OPEX? b. How much cash must the company have to make the down payment? c. What is the monthly payment?