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Initial cost:
$220,000
Cash flow year one:
$25,000
Cash flow year two:
$77,000
Cash flow year three:
$157,000
Cash flow year four:
$157,000
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Solved in 2 steps
- Initial cost: $467,000 Cash flow year one: $134,000 Cash flow year two: $230,000 Cash flow year three: $187,000 Cash flow year four: $134,000 a. Using a discount rate of 10% for this project and the NPV model, determine whether the company should accept or reject this project. b. Should the company accept or reject it using a discount rate of 14%?Initial cost: $240,000 Cash flow year one: $25,000 Cash flow year two: $75,000 Cash flow year three: $150,000 Cash flow year four: $150,000 a. Using a discount rate of 10% determine whether the company should accept or reject this project. b. Should the company accept or reject it using a discount rate of 15%? c. Should the company accept or reject it using a discount rate of 20%?question 3 a) Price RM54 per unit Variable cost RM30 per unit Fixed costs RM9,000 Required return 15% Initial investment RM18,000 Life 4 years Assume the initial investment id depreciated straight line to zero over the life of the project. Ignoring the effect of taxes, calculate: i) Accounting break-even quantity. ii) Cash break-even quantity iii) Financial break-even quantity iv) Degree of operating leverage at financial break-even lvel of output.
- 5). The HC Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow I (in dollars) Cash Flow II (in dollars) 0 -64, 000 -18,000 1 31, 000 9,700 2 31, 000 9,700 3 31, 000 9,700 a). If the required return is 10%, and the company applies the profitability index decision rule, which project should the firm accept? Why? b). If the company applies the NPV decision rule, which project should it take? Why? c). Explain why your answers in (a) and (b) are different.Tiffany Co. is analyzing two projects for the future. Assume that only one project can be selected. Project Y Project X Cost of machine P680,000 P600,000 Net cash flow: Year 1 240,000 40,000 Year 2 240,000 260,000 Year 3 240,000 260,000 Year 4 0 200,000 If the company is using the payback period method and it requires a payback of three years or less, which project should be selected? Group of answer choices Project Y. Project Y because it has a lower initial investment. Both X and Y are acceptable projects. Project X. Neither X nor Y is an acceptable project.A company only has £2,000 to invest at time t0 in projects P, Q and R. Each project is infinitely divisible but cannot be undertaken more than once. Project Investment at t0 NPV P £700 £224 Q £1,000 £360 R £1,500 £510 How much should be invested in project R to maximise the NPV achieved? A £0 B £1,000 C £1,350 D £2,000
- 10. The current project earns $100,000 and has costs of $50,000. A ne project would earn $150,000 and have costs of $75,000. What is the differential cost of the projects? a. $25,000 b. $50,000 c. 0 d. $125,000Initial cost: $467,000 Cash flow year one: $134,000 Cash flow year two: $230,000 Cash flow year three: $187,000 Cash flow year four: $134,000 Using a discount rate of 20%, this project should beQUESTION 5Read the information below and answer the following questionsINFORMATIONThe management of Mastiff Enterprises has a choice between two projects viz. Project Cos and Project Tan, each ofwhich requires an initial investment of R2 500 000. The following information is presented to you:PROJECT COS PROJECT TANNet Profit Net ProfitYear R R1 130 000 80 0002 130 000 180 0003 130 000 120 0004 130 000 220 0005 130 000 50 000A scrap value of R100 000 is expected for Project Tan only. The required rate of return is 15%. Depreciation is calculated using the straight-line method.5.4 Benefit Cost Ratio of Project Cos (expressed to three decimal places). 5.5 Internal Rate of Return of Project Cos (expressed to two decimal places) USING INTERPOLATION.
- A B Initial investment outlay ($) 200,000 275,000 Freight Charges ($) 20,000 30,000 Set Up charges ($) 5,000 7,000 Economic Life (Years) 10 10 Liquidation value at end of economic life ($) 12,000 17,000 Other fixed costs ($) 4,000 20,000 Production and sales volume (units) 9,000 12,000 Sales Price ($) 15 15 Variable Cost ($) 2.45 2.00 Rate of interest (%) 6 6 Ascertain the preferred project using:a. The profit comparison method. b. The average rate of return method. c. The static payback method d. Re-evaluate the projects using the Net Present Value. Are the results of the Project selection process the same? If different, what reasons can you offer?Question 3 Kako Ltd is considering introducing a new product unto the market. This will require the injection of capital to the tune of GH¢20,000 for the purchase of the equipment for production. The cost of the building that Kako Ltd intends to use for the project is GH¢30,000. The Production and Marketing department has presented the information in the table below: 2019 Variable cost per unit of the product GH¢2 Selling price per unit GH¢6 Quantity 4000 units per annum Again the following information should be taken not of: Feasibility studies cost the company GH¢2000 Test marketing expenses amounts to GH¢3000 Variable cost will increase by 5% per annum Selling price will increase by 10% per annum Marketing expense will be 5% of sales revenue per year An initial working capital investment of GH¢2000 will be made. Subsequently, net working capital at the end of each year will be equal to 10 percent of sales for that year. In the final year of the…7.1 A project will increase revenue from $1.7 million to $2.6 million. Wages are 40% of revenue. Maintenance on the machine will be $31,000 less than it is on the machine that will be replaced. What is the incremental net revenue (i.e. change in revenue minus expenses) that will result from accepting this project? a. $0.540 million b. $0.571 million c. $0.900 million d. $0.509 million