g to invest Rs. 350,000 in a Hardware business. The cash inflows during the first, second and third years are expected to be Rs. 125,000, Rs. 150,000 and Rs, 170,000 respectively. Cost of capital is 11% Calculate NPV using excel.

g to invest Rs. 350,000 in a Hardware business. The cash inflows during the first, second and third years are expected to be Rs. 125,000, Rs. 150,000 and Rs, 170,000 respectively. Cost of capital is 11% Calculate NPV using excel.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 18EB: Garnette Corp is considering the purchase of a new machine that will cost $342,000 and provide the...

See similar textbooks

Related questions

Q: JENNY Company is considering borrowing P800,000 from the bank for less than a year as additional…

A: Simple interest is a quick and easy method of calculating interest charged on a loan. This interest…

Q: An investment with an initial cost of $6,000 produces cash flows of 3,000, −$500, -$2,800, −$100,…

A: Solution- (1)- IRRr of the project given by=-6000+3000/1+r-500/1+r2+2800/1+r3-100/1+r4+6000/1+r5=0

Q: Answer the following question with a clear explanation, showing any steps or processes used to reach…

A: Initial investment = 20000 Year 1 - $10,000 Year 2 - $10,000 Year 3 - $2,000 Discount rate = 7% Note…

Q: You are a banker to Livingstone Thompson Limited, a textile manufacturing company. Livingstone…

A: Net Present Value (NPV) = Present value of cash flows - Initial investment

Q: Supervenes is a freight delivery company, it uses the internal rate of return (IRR) to select…

A: Internal rate of return is one of the capital budgeting techniques. It refers to the discount rate…

Q: Based upon the following cash flows, should Chipper Nipper Cookie Company introduce a new product,…

A: The NPV and IRR can be computed using excel as follows:

Q: A company has two investment possibilities, with the following cash inflows: If the firm can earn 7…

A: We need to use the concept of time value of money to solve the question. According to the concept of…

Q: raw Cash-Flow-Diagram ! The cost of utilities, taxes and maintenance on a home is $3,000 per year.…

A: The present value would be equivalent amount today required which is equivalent to the future cash…

Q: The firm has a cost of capital of 9%. g. Evaluate the acceptability of the proposed investment…

A: IRR can be calculated by following function in excel =IRR(values,[guess]) Values = Cash flows Guess…

Q: The Seattle Corporation has been presented with an investment opportunity which will yield cash…

A: Step 1: Payback period: represents the time period required for the recovery of the initial…

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: Antonio Melton, the chief executive officer of Melton Corporation, has assembled his top advisers to…

A: The question is based on the concept of Financial Management. Net present value is the difference…

Q: A man with $30,000 to invest decides to diversify his investments by placing $15,000 in an account…

A: A=PertA=AmountP=principalr=ratet=time in yearse=mathamatical constant e

Q: Sakib is considering investing in new equipment. The cost of this equipment is $45,000 and it will…

A: Cost of Capital = 12% Cash Flows: Year Cash Flow 0 -45000 1 8000 2 9000 3 12000 4 9500…

Q: The business plan for Knowlt, LLC, a start-up company that manufactures portable multigas detectors,…

A: Required: To compute the interest rate used to yield equivalent annual cash flows of $400,000 per…

Q: Darrington Inc. is evaluating an equipment purchase which requires an expenditure of $393 today…

A: NPV is the present value of future cashflows

Q: Mr. C is considering investing $20,000 in a business that has projected cash inflows as $10,000;…

A: Profitability index is calculated using the formula shown below: If this value comes out to be…

Q: A firm plans to invest in a new project that will last for four years and will generate revenues of…

A: Net-working capital is 15 % of the revenues. Revenues are as follows: Year 1 =$1,000,000 Year 2 =…

Q: The JLK Corporation is considering an investment that will cost RM80,000 and have a useful life of…

A: Payback period: Payback period is the period required to collect amount invested in a capital…

Q: You are an engineer proposing a potential investment and your company requires you to develop a…

A: Here, Initial Investment is Php 500000 Annual Revenue is Php 100000 Annual Expenses is Php70000…

Q: The business plan for KnowIt, LLC, a start-up company that manufactures portable multigas detectors,…

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

Q: Mrs. Kantu is considering investing $250, 000 in Moringa business. The cost of capital for the…

A: The IRR refers to the internal rate of return. This is the rate at which the present value of cash…

Q: An entrepreneur has a project which generates the following (sure) cash flow stream: t=1…

A: We need to calculate net present value(NPV) of the project. NPV is the difference between present…

Q: he Yurdone Corporation wants to set up a private cemetery business. According to the CFO, Barry M.…

A: A. The present value can be calculated as follows : Results obtained :

Q: s in Klang Valley and he is considering to expand his iform and furniture. The following is the…

A: In simple words, the net present value refers to the difference between the discounted value of…

Q: What is the NPV for this investment.

A: Information provided: Cost of capital = 10% Year Cashflows 0 (175,000) 1 45,000 2 45,000…

Q: how much external funding is needed for the capital investment project?

A: Answer: Plowback Ratio= 30% Dividend Payout Ratio= 100-plowback ratio= 100-30 = 70% Net Income =…

Q: You are a banker to Livingstone Thompson Limited, a textile manufacturing company. Livingstone…

A: Based on the cash flow we will discount the cash flow using the discount rates to find out the net…

Q: Bright paints Ltd. estimates its cash requirement as Rs.2,400,000/- next year. The company faces a…

A: Given that: Annual cash requirement = Rs. 24,00,000 Fixed conversion cost = Rs. 4000 Holding cost…

Q: "Mahnoor Traders" is considering to make investment in one of the two projects The details of…

A: Capital budgeting can be defined as a process of evaluating project's profitability and feasibility.…

Q: The Carlo Company has been allocated RM600,000 on investment projects for the coming year. Four…

A: NET PRESENT VALUE NPV means the present value of cash inflows are compared with…

Q: Laura Drake wishes to estimate the value of an asset expected to provide cash inflows of $2,700…

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

Q: Micheal is considering a capital investment that costs $540,000 and will provide net cash inflows…

A: Answer Calaculation of Net Present Value(NPV): At first we need to calaculate the present value of…

Q: Al's Bistro is considering a project which will produce sales of $23,000 and increase cash expenses…

A: In top-down approach for ascertaining operating cash flows (OCF), sales is the starting point and…

Q: Nu Things, Inc., is considering investing in a business venture with the following anticipated cash…

A: Given, A project which has initial investment of $70000. MARR on the project is 20%.

Q: You are a banker to Livingstone Thompson Limited, a textile manufacturing company. Livingstone…

A: Given: Year Cash flows 0 -$30,000,000 1 $8,000,000 2 $8,000,000 3 $8,000,000 4…

Q: NPV

A: Introduction: NPV or net present value is one of the capital budgeting methods which are used by…

Q: Rieger International is attempting to evaluate the feasibility of investing $95,000 in a piece of…

A: Payback period, net present value (NPV), and Internal rate of return (IRR) are capital budgeting…

Q: Atty. Munar invested P280, 000 which will be used in a project that will produce a uniform annual…

A: “Since you have posted a question with multiple sub-parts, we will solve first three subparts for…

Q: Your employer, Rubio LLC, is considering an investment in an office building that has the following…

A: Answers have been given on the next sheet

Q: ou are a banker to Livingstone Thompson Limited, a textile manufacturing company. Livingstone…

A: One capital budgeting method that takes into account the idea of the time worth of money is the…

Q: Bill Williams has the opportunity to invest in project A that costs $6,900 today and promises to pay…

A: Initial cost of both projects = $6900 We need to calculate the payback period of both projects.

Q: Morgan Stanley's wealth management unit offers to invest profits of $750,000 made by an artist on a…

A: Time value of money-It is based on the concept that money earned today is worth more than similar…

Q: 1.Sweets, Etc., Inc. plans to undertake a capital expenditure requiring P2 million cash outlay.…

A: As per the honor code, we’ll answer only one question at a time, we have answered the first question…

Q: Let's say you are going to be an Uber driver and want to estimate your annual operating after tax…

A: Cash flows are the cash generated from the operation of the business organization. In other words,…

Q: Assume that you have started a manufacturing/Service Organization in UAE with a capital of…

A: As per our protocol we provide solution to the one question only but as you have asked mixture of…

Q: anthers plc is considering a project which will generate cash flows of £5,000 each year from years 3…

A: Solution: Total presnet value of cash flows is computed by adding presnet value of of cash flows of…

Q: Sunshine Corporation is reviewing an investment proposal. The initial cost of the investment is R52…

A: 1. Year Cash inflows Cumulative Cash inflows 1 20000 20000 2 17500 37500 3 15000 52500 4…

Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

100%

Mr. Amila is considering to invest Rs. 350,000 in a Hardware business. The cash inflows during the first, second and third years are expected to be Rs. 125,000, Rs. 150,000 and Rs, 170,000 respectively.

Cost of capital is 11%

Calculate NPV using excel.

Definition Definition Transfer of funds into a company by any third party, which may happen due to any operational, investing, and financing activities. The cash inflow includes payments made by customers or investments made by the investors into the company by purchasing its equity.

Expert Solution

This question has been solved!

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

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 1 images

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

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)?
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.
Buena Vision Clinic is considering an investment that requires an outlay of 600,000 and promises a net cash inflow one year from now of 810,000. Assume the cost of capital is 10 percent. Required: 1. Break the 810,000 future cash inflow into three components: a. The return of the original investment b. The cost of capital c. The profit earned on the investment 2. Now, compute the present value of the profit earned on the investment. 3. Compute the NPV of the investment. Compare this with the present value of the profit computed in Requirement 2. What does this tell you about the meaning of NPV?
A restaurant is considering the purchase of new tables and chairs for their dining room with an initial investment cost of $515,000, and the restaurant expects an annual net cash flow of $103,000 per year. What is the payback period?
Mr. Amila is considering to invest Rs. 350,000 in a Hardware business. The cash inflows during the first, second and third years are expected to be Rs. 125,000, Rs. 150,000 and Rs, 170,000 respectively. Calculate IRR using excel.
You are offered an asset that costs $150,000 and has cash flows of $1,350 at the end of every month for the next 6years. Assume the cost of capital is 9percent per year.a. What is the IRR of the asset?b. What is the NPV of the asset? c. If your cost of capital is 12percent, should you purchase it? (Setup cash flows in Excel spreadsheets and uses the following Excel Financial functions, IRR, and NPV to derive your answers.
Micheal is considering a capital investment that costs $540,000 and will provide net cash inflows for three years. Using a hurdle rate of 8%, find the Net Present Value of the investment.
Craig Titus just invested $193,440 in a 5-year bodybuilding project that will generate cash inflows of $40,900 and $88,590 during its first two years, respectively. According to Craig Titus, the project will generate inflows of $63,490, $61,690, and $44,990, during its last three years, respectively. If Craig Titus’ cost of capital is 8.4%, the NPV of his bodybuilding project is: a. $11,843.43 b. $44,264.37 c. $9,523.12 d. $8,657.39 e. $16,235.10
Mr.Andi is a manager at an automation company. As part of his future planning, Mr.Andi plan to manage an investment IDR 100 thousand in the first year and increase this amount is 10% annually. To solve this problem, you have to create a spreadsheet from the data provided to complete your calculations along with the cash flow. Based on the data given: (a) How long will Mr.Andi's account have value in the future of IDR 3,000,000 at a rate of return of 6% per annum? (b) If Mr.Andi counts up to the next 30 years, find the nominal amount in the next 10, 20, and 30 years that Mr. Andi will achieve. The calculation spreadsheet can describe the amount deposited annually.
Mariam Alikozay is considering opening a cold storage refrigeration business. She would invest $50,000 to purchase equipment and furnishings and another $100,000 for inventories and other working capital needs. Rent on the building used by the business will be $25,000 per year. In addition to building rent, other annual cash outflows for operating costs will amount to $44,000. She estimates that the annual cash inflow from the business will amount to $100,000. Mariam plans to operate the business for only six years. She estimates that the equipment and furnishings could be sold at that time for about 10% of its original cost. The discount rate is 16%. Compute the net present value of this investment. Please post in word , not picture
Mariam Alikozay is considering opening a cold storage refrigeration business. She would invest $50,000 to purchase equipment and furnishings and another $100,000 for inventories and other working capital needs. Rent on the building used by the business will be $25,000 per year. In addition to building rent, other annual cash outflows for operating costs will amount to $44,000. She estimates that the annual cash inflow from the business will amount to $100,000. Mariam plans to operate the business for only six years. She estimates that the equipment and furnishings could be sold at that time for about 10% of its original cost. The discount rate is 16%. Compute the net present value of this investment.
A mail order business will generate cash flows of $9,000 at the end of each of the next 3 years, $19,000 at the end of year 4, $25,000 at the end of year 5 and $45,000 at the end of year 6. Given that other investments of equal risk earn 8% per annum, calculate the present value and future value of this investment