Ignoring the effect of taxes, find the financial break-even quantity.
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- 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.A mini-mart needs a new freezer and the initial Investment will cost $300,000. Incremental revenues, including cost savings, are $200,000, and incremental expenses, including depreciation, are $125,000. There is no salvage value. What is the accounting rate of return (ARR)?Consolidated 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.
- Your division is considering two investment projects, each of which requires an up-front expenditure of 25 million. You estimate that the cost of capital is 10% and that the investments will produce the following after-tax cash flows (in millions of dollars): a. What is the regular payback period for each of the projects? b. What is the discounted payback period for each of the projects? c. If the two projects are independent and the cost of capital is 10%, which project or projects should the firm undertake? d. If the two projects are mutually exclusive and the cost of capital is 5%, which project should the firm undertake? e. If the two projects are mutually exclusive and the cost of capital is 15%, which project should the firm undertake? f. What is the crossover rate? g. If the cost of capital is 10%, what is the modified IRR (MIRR) of each project?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.The Ulmer Uranium Company is deciding whether or not to open a strip mine whose net cost is $4.4 million. Net cash inflows are expected to be $27.7 million, all coming at the end of Year 1. The land must be returned to its natural state at a cost of $25 million, payable at the end of Year 2. Plot the project’s NPV profile. Should the project be accepted if r = 8%? If r = 14%? Explain your reasoning. Can you think of some other capital budgeting situations in which negative cash flows during or at the end of the project’s life might lead to multiple IRRs? What is the project’s MIRR at r = 8%? At r = 14%? Does the MIRR method lead to the same accept-reject decision as the NPV method?
- Gardner Denver Company is considering the purchase of a new piece of factory equipment that will cost $420,000 and will generate $95,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further Instructions on internal rate of return in Excel, see Appendix C.A project has an accounting break-even quantity of 28,700 units, a cash break-even quantity of 17,120 units, a life of 10 years, fixed costs of $178,000, variable costs of $18.40 per unit, and a required return of 14 percent. Depreciation is straight-line to zero over the project life. Ignoring taxes, what is the financial break-even quantity?Consider a project with the following data: accounting break-even quantity = 19,000 units; cash break-even quantity = 16,000 units; life = three years; fixed costs = $160,000; variable costs = $30 per unit; required return = 10 percent. Ignoring the effect of taxes, find the financial break-even quantity.
- Modern Artifacts can produce keepsakes that will be sold for $76 each. Non-depreciated fixed costs are $940 per year and variable costs are $48 per unit. a. If the project requires an initial investment of $2,940 and is expected to last for 8 years and the firm pays no taxes, what are the accounting and NPV break-even levels of sales? The initial investment will be depreciated straight-line over 8 years to a final value of zero, and the discount rate is 14%. (Round your answers to the nearest whole dollar.) NPV break-even sales level is ?We are evaluating a project that costs $845,000, has an eight-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 51,000 units per year. Price per unit is $53, variable cost per unit is $27, and fixed costs are $950,000 per year. The tax rate is 22%, and we require a return of 12% on this project. a. Calculate the accounting break-even point. b. Calculate the base-case operating cash flow and NPV. c. Suppose the projections given for price per unit, quantity, variable costs per unit, and fixed costs are all accurate to within ±10%. Calculate the best-case and worst-case NPV figures.Please show steps or formula, NOT in excel. I cannot use excel to solve. Project L costs $75,000, its expected cash inflows are $14,000 per year for 12 years, and its WACC is 13%. What is the project's NPV? Do not round intermediate calculations. Round your answer to the nearest cent.
