please answer all 1- The following data pertain to an investment in equipment:Investment in the project.Annual Net cash inflows.Working capital required..Salvage value of the equipment.Life of the project.$10,000$2,400$5,000$1,0008 yearsAt the completion of the project, the working capital will be released for use elsewhere.Compute the net present value of the project, using a discount rate of 10%:A. $606B. $8,271C. S(1,729)D. $1,7292- The following information is available on a new piece of equipment:$21,720Cost of the equipment...Salvage value.Annual cash inflows.$5,000Internal rate of return.16%Required rate of return.10%The life of the equipment is approximately:A. 6 yearsB. 4.3 yearsC,8 yearsD. It is impossible to determine from the data given.3- Meclam, Inc., is considering the purchase of a machine that would cost $100,000 andwould last for 9 years. At the end of 9 years, the machine would have a salvage value of$23,000. The machine would reduce labor and other costs by $19,000 per year.Additional working capital of $2.000 would be needed immediately. All of this workingcapital would be recovered at the end of the life of the machine. The company requires aminimum pretax return of 13% on all investment projects. The net present value of theproposed project is closest to:A. $3,833B. $5,167C. -$2,492D. none of answers are correct.

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Answered: ng data pertain to an investment in…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 3MAD

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Gallant Sports s considering the purchase of a new rock-climbing facility. The company estimates that the construction will require an initial outlay of $350,000. Other cash flows are estimated as follows: Assuming the company limits its analysis to four years due to economic uncertainties, determine the net present value of the rock-climbing facility. Should the company develop the facility if the required rate of return is 6%?
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.
San Lucas Corporation is considering investment in robotic machinery based upon the following estimates: a. Determine the net present value of the equipment, assuming a desired rate of return of 10% and annual net cash flows of 700,000. Use the present value tables appearing in Exhibits 2 and 5 of this chapter. b. Determine the net present value of the equipment, assuming a desired rate of return of 10% and annual net cash flows of 500,000, 700,000, and 900,000. Use the present value tables (Exhibits 2 and 5) provided in the chapter in determining your answer. c. Determine the minimum annual net cash flow necessary to generate a positive net present value, assuming a desired rate of return of 10%. Round to the nearest dollar. d. Interpret the results of parts (a), (b), and (c).
Determine cash flows Natural Foods Inc. is planning to invest in new manufacturing equipment to make a new garden tool. The new garden tool is expected to generate additional annual sales of 5,000 units at 18 each. The new manufacturing equipment will cost 120,000 and is expected to have a 10-year life and a 17,000 residual value. Selling expenses related to the new product are expected to be 3% of sales revenue. The cost to manufacture the product includes the following on a per-unit basis: Determine the net cash flows for the first year of the project, Years 29, and for the last year of the project.
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.
Cost of Capital, Net Present Value Leakam Companys product engineering department has developed a new product that has a 3-year life cycle. Production of the product requires development of a new process that requires a current 100,000 capital outlay. The 100,000 will be raised by issuing 60,000 of bonds and by selling new stock for 40,000. The 60,000 in bonds will have net (after-tax) interest payments of 3,000 at the end of each of the 3 years, with the principal being repaid at the end of Year 3. The stock issue carries with it an expectation of a 17.5% return, expressed in the form of dividends at the end of each year (with 7,000 in dividends expected for each of the next 3 years). The sources of capital for this investment represent the same proportion and costs that the company typically has. Finally, the project will produce after-tax cash inflows of 50,000 per year for the next 3 years. Required: 1. Compute the cost of capital for the project. (Hint: The cost of capital is a weighted average of the two sources of capital, where the weights are the proportion of capital from each source.) 2. CONCEPTUAL CONNECTION Compute the NPV for the project. Explain why it is not necessary to subtract the interest payments and the dividend payments and appreciation from the inflow of 50,000 in carrying out this computation.

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ng data pertain to an investment in equipment: at in the project.. et cash inflows. capital required. $10,000 $2,400 $5,000 .....