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Present worth is an equivalence method of analysis in which a project's cash flows are discounted to a single present value. True or false?
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- Assuming monetary benefits of an information system at $85,000 per year, one-time costs of $75,000, recurring costs of $35,000 per year, a discount rate of 12 percent, and a 5-year time horizon, calculate the net present value (NPV) of the system’s costs and benefits. Also calculate the overall return on investment (ROI) of the project and then present a break-even analysis (BEA). At what point does break-even occur?An electric cooperative is considering the use of a concrete pole in the expansion of its power distribution lines. A concrete pole costs 18,000 each and will last 20 years. The company is presently using creosoted wooden poles which cost 12,000 per pole and will last 10 years. If money is worth 12 percent, which pole should be used? Assume annual taxes amount to 1 percent of first cost and zero salvage value in both cases. choices A.Creosoted wooden pole B.Concrete poleWhat process does the net present value method use to help management determine whether a project is acceptable to a company? Options : A. It discounts net cash flows to their present value and then compares that value to the capital outlay required by the project.B. It determines the interest rate that will cause the present value of the capital expenditure to equal the present value of the expected net cash flows.C. It divides the present value of net cash flows by the initial investment to determine the profitability index of the project.D. It identifies the time period required to recover the cost of the capital investment from the net annual cash flow produced by the project.
- The Utah Mining Corporation is set to open a gold mine near Provo, Utah. According to the treasurer, Monty Goldstein, "This is a golden opportunity." The mine will cost 400,000,000 to open and will have an economic life of 11 years. It will generate a cash inflow of $505,000 at the end of the first year, and the cash inflows are projected to grow at 8 percent per year for the next 10 years. After 11 years, the mine will be abandoned. Abandonment costs will be $560,000 at the end of Year 11 a. What is the IRR for the gold mine?The potential percent gain or loss in changes of variable is taken into account by: a. sensitive analysis b. cost-benefit analysis c. present worth analysis d. break-even analysisYou are given the following financial data about a new system to be implemented at a company:(1) Investment cost at n = 0: $23,000(2) Investment cost at n = 1: $18,000(3) Useful life:10 years(4) Salvage value (at the end of 11 years): $7,000(5) Annual revenues: $19,000 per year(6) Annual expenses: $6,000 per year(7) MARR: 10%Note: The first revenues and expenses will occur at the end of year 2.(a) Determine the conventional-payback period.(b) Determine the discounted-payback period.
- You have a project with the net cash flow summarized below. The project is not suitable for direct reinvestment, so incoming revenue will be placed into an external account that yields 2.5%. (The "External Reinvestment Rate" is 2.5%). What is the ERR for this project? (Provide your answers in digits only with 2 decimal places. No comas or pesos or percent.)Phil’s Flowers (PF) currently has 5,600,000 shares of stock outstanding that sell for $117 per share. Assuming no market imperfections or tax effects exist, what will be the total number of shares and the share price after each of the following? (Please consider each one independently). c) PF has a $2.50 cash dividend? (Step by step solutions )Match the measures of worth in the first column with an appropriate definition from the second column.
- i) Find the present value of an asset which will pay you a single cash flow of RM13,000 at time ? = 10. ii) Rank the following in terms of ascending order. (i.e. lowest to highest): ?,?^??, ?,?^?,?^?,?^? b) Hanie Najwa needs to borrow RM5,000 for one year. • Option A: She is offered a loan at an effective annual rate of 5% • Option B: She is offered a loan of RM10,000 at a lower effective annual rate of interest denoted by ?. If she borrows of RM10,000, she can invest the excess RM5,000 for one year at 3%. How low must the rate on the RM10,000 loan (Option B) be in order for Hanie Najwa to prefer it to the RM5,000 loan (Option A)?the potential percent gain or loss in changes of variable is taken into account by A. Break even analysis b. Cost benefit analysis c. Present worth analysis d. Sensitivity analysisConsider a palletizer at a bottling plant that has a first cost of $150,000, operating and maintenance costs of $17,500 per year, and an estimated net salvage value of $25,000 at the end of 30 years. Assume an interest rate of 8%. What is the annual equivalent cost of the investment if the planning horizon is 30 years? a. $29,760 b. $30,600 c. $31,980 d. $35,130.