Semper pump company has a permanent funding requirement of $135,000 in operating asset and seasonal funding requirement that vary between $0 and $990,000 and average $101,250. If simper can borrow short-term funds at 6.25% and long term funds at 8%, and if it can earn 5% on the investment of any surplus balances, than determine the total annual cost under i) aggressive strategy ii) conservative strategy

Semper pump company has a permanent funding requirement of $135,000 in operating asset and seasonal funding requirement that vary between $0 and $990,000 and average $101,250. If simper can borrow short-term funds at 6.25% and long term funds at 8%, and if it can earn 5% on the investment of any surplus balances, than determine the total annual cost under i) aggressive strategy ii) conservative strategy

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 1PB

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Q: Semper pump company has a permanent funding requirement of $135,000 in operating asset and seasonal funding requirement that vary between $0 and $990,000 and average $101,250. If simper can borrow short-term funds at 6.25% and long term funds at 8%, and if it can earn 5% on the investment of any surplus balances, than determine the total annual cost under i) aggressive strategy ii) conservative strategy
Oxford Company has limited funds available for investment and must ration the funds among the four competing projects shown below: Project Required A Inflows $ 120,000 $ 239,323 $ 133,000 $ 212,000 $ 102,000 $ 170,035 $ 172,000 $ 248,136 The net present values above have been computed using a 10% discount rate. Required: 1. Compute the profitability index for each project. 2. In order of preference, rank the four projects in terms of net present value, profitability index, and internal rate of return. B Present Investment Value of Cash C D Required 1 Required 2 Life of the Project (years) 7 12 7 Complete this question by entering your answers in the tabs below. Project A Compute the profitability Index for each project. Note: Round your answers to 2 decimal places. 3 Profitability Index Internal Rate of Return 20% 22% 19% 21% Prev 5 of 5 www Next
Eddie Corporation is considering the following three investment projects (Ignore income taxes.): Project D $ 65,600 $ 76,096 Multiple Choice Investment required Present value of cash inflows Rank the projects according to the profitability index, from most profitable to least profitable. O E, C, D E, D, C D, C, E Project C $ 57,600 $ 63,936 C, E, D. Project E $ 136,000 $ 148,240
IRR and NPV approaches Hotel Amazing is attempting to select the best of a group of independent projects competing for the firm's fixed capital budget of $5.5 million. Management recognizes that any unused portion of this budget will earn less than the 12% cost of capital, thereby resulting in a present value of inflows that is less than the initial investment. A summary of the independent projects are shown in the following table. see image for table a) Use the internal rate of return (IRR) approach to select the best group of projects. b) Use the net present value ( NPV) approach to select the best group of projects. c) Are the projects selected in parts a and b the same? Explain your answer. d) Which projects should Hotel Amazing implement? Why? Fast answer
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A firm with a 14% WACC is evaluating two projects forthis year’s capital budget. After-tax cash flows, including depreciation, are as follows: a. Calculate NPV, IRR, MIRR, payback, and discounted payback for each project.b. Assuming the projects are independent, which one(s) would you recommend? c. If the projects are mutually exclusive, which would you recommend?d. Notice that the projects have the same cash flow timing pattern. Why is there a conflictbetween NPV and IRR?
The management of Winstead Corporation is considering the following three investment projects (Ignore income taxes.): Project Q Project R Project S Investment required $ 57,200 $ 97,200 $ 176,000 Present value of cash inflows $ 62,092 $ 111,792 $ 193,320 The only cash outflows are the initial investments in the projects. Required: Rank the investment projects using the project profitability index.
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