NPV and IRR Benson Designs has prepared the following estimates for a long-term project it is considering. The initial investment is $28,570, and the project will yield cash inflows of $3,000 per year for 15years. The firm has a cost of capital of 9%.a. Determine the net present value (NPV) for the project.b. Determine the internal rate of return (IRR) for the project.c. Would you recommend that the firm accept or reject the project?a. The NPV of the project is $(Round to the nearest cent.)

Step 1: Given Value for Calculation Initial Investment = i = $28,570Cash Flow = cf = $3000Time = t =…

Answered: NPV and IRR Benson Designs has prepared…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 19EA: Redbird Company is considering a project with an initial investment of $265,000 in new equipment...

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Similar questions

Redbird Company is considering a project with an initial investment of $265,000 in new equipment that will yield annual net cash flows of $45,800 each year over its seven-year life. The companys minimum required rate of return is 8%. What is the internal rate of return? Should Redbird accept the project based on IRR?
Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated revenue producing life of 4 years. Falkland has a cost of capital of 8%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?
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?
Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year for 5 years. Project L costs $25,000 and is expected to produce cash flows of $7,400 per year for 5 years. Calculate the two projects’ NPVs, IRRs, MIRRs, and PIs, assuming a cost of capital of 12%. Which project would be selected, assuming they are mutually exclusive, using each ranking method? Which should actually be selected?
Mason, Inc., is considering the purchase of a patent that has a cost of $85000 and an estimated revenue producing lite of 4 years. Mason has a required rate of return that is 12% and a cost of capital of 11%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?
There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $35,000 and is expected to generate the following cash flows: If the discount rate is 12%, compute the NPV of each project.
NPV and IRR Benson Designs has prepared the following estimates for a long-term project it is considering. The initial investment is $24,950, and the project will yield cash inflows of $8,000 per year for 5 years. The firm has a cost of capital of 15%. a. Determine the net present value (NPV) for the project. b. Determine the internal rate of return (IRR) for the project. c. Would you recommend that the firm accept or reject the project? a. The NPV of the project is $ (Round to the nearest cent.) b. The IRR of the project is%. (Round to two decimal places.) c. Would you recommend that the firm accept the project? (Select the best answer below.) Yes O No 4
NPV and IRR Benson Designs has prepared the following estimates for a long-term project it is considering. The initial investment is $17,950, and the project will yield cash inflows of $3,000 per year for 9 years. The firm has a cost of capital of 8%. a. Determine the net present value (NPV) for the project. b. Determine the internal rate of return (IRR) for the project. c. Would you recommend that the firm accept or reject the project?
NPV and IRR Benson Designs has prepared the following estimates for a long-term project it is considering. The initial investment is $37,770, and the project will yield cash inflows of $5,000 per year for 12 years. The firm has a cost of capital of 15%. a. Determine the net present value (NPV) for the project. b. Determine the internal rate of return (IRR) for the project. c. Would you recommend that the firm accept or reject the project? a. The NPV of the project is $ (Round to the nearest cent)
Benson Designs has prepared the following estimates for a long-term project it is considering. The initial investment is $26,020, and the project will yield cash inflows of $8,000 per year for 5 years. The firm has a cost of capital of 8%. a. Determine the net present value (NPV) for the project. b. Determine the internal rate of return (IRR) for the project. c. Would you recommend that the firm accept or reject the project?
NPV and IRR Benson Designs has prepared the following estimates for a long-term project it is considering. The initial investment is $31,850, and the project is expected to yield after-tax cash inflows of $7,000 per year for 7 years. The firm has a cost of capital of 9%. a. Determine the net present value (NPV) for the project. b. Determine the internal rate of return (IRR) for the project. c. Would you recommend that the firm accept or reject the project? a. The NPV of the project is $. (Round to the nearest cent.) C
NPV and IRR Benson Designs has prepared the following estimates for a long-term project it is considering. The initial investment is $41,150, and the project is expected to yield after-tax cash inflows of $9,000 per year for 7 years. The firm has a cost of capital of 8%. a. Determine the net present value (NPV) for the project. b. Determine the internal rate of return (IRR) for the project. c. Would you recommend that the firm accept or reject the project? a. The NPV of the project is $. (Round to the nearest cent.) Text dia Librai I Calculat Resource Enter vour answer in the answer box and then click Check Answer. Check Answer ic Study es Clear parts remaining nunication Tools > O Type here to search insert ( to |立

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