The business plan for KnowIt, LLC, a start-up company that manufactures portable multigas detectors, showed equivalent annual cash flows of $400,000 for the first 5 years. If the cash flow in year 1 was $313,000 and the constant increase thereafter was $50,000 per year, what interest rate was used in the calculation? what is the interest rate used in the calculation?

The business plan for KnowIt, LLC, a start-up company that manufactures portable multigas detectors, showed equivalent annual cash flows of $400,000 for the first 5 years. If the cash flow in year 1 was $313,000 and the constant increase thereafter was $50,000 per year, what interest rate was used in the calculation? what is the interest rate used in the calculation?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 18EB: Garnette Corp is considering the purchase of a new machine that will cost $342,000 and provide the...

See similar textbooks

Similar questions

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.
Your company is planning to purchase a new log splitter for is lawn and garden business. The new splitter has an initial investment of $180,000. It is expected to generate $25,000 of annual cash flows, provide incremental cash revenues of $150,000, and incur incremental cash expenses of $100,000 annually. What is the payback period and accounting rate of return (ARR)?
The business plan for KnowIt, LLC, a start-up company that manufactures portable multi-gas detectors, showed equivalent annual cash flows of $400,000 for the first 5 years. If the cash flow in year 1 was $320,000 and the constant increase thereafter was $50,000 per year, what interest rate was used in the calculation? (Solve using factors or a spreadsheet as requested by your instructor.)
A broadband service company borrowed $2 million for new equipment and repaid the principal ofthe loan plus $275,000 interest after 1 year. Whatwas the interest rate on the loan? A design-build engineering firm completed apipeline project wherein the company realized aprofit of $2.3 million in one year. If the amount ofmoney the company invested was $6 million, whatwas the rate of return on the investment?
A firm has invested $700 in a new machine that is expected to last for the next 5 years. The machine will be depreciated on a straight line basis down to zero by the end of its 5 year life. The firm projects that the machine will generate consecutive annual cash inflows of $600 beginning in one year and will generate consecutive annual cash outflows at 290 also beginning in one year.. Assuming the tax rate of 38%, determine the firm's cash flow next year. $ Place your answer to dollars and cents. Do not include a dollar sign or a comma in your answer.
Jen Law Firm is evaluating a project that must create a revenue of $4,600 in the 1st year, $5,200 in the 2nd year, $5,900 in the 3rd year, and $5,700 in the 4th year. The firm receives each cash flow at the end of each year. If the required return of Jen Law Firm is 12%, compounding semi-annually, how much will be the future value of these cash flows at the end of the 4th year?
You have been given information on the cash flows for the next three years for AMG inc., a conglomerate. After growing at 10% a year for the next 3 years, the operating income is expected to grow 2.5% a year forever, after year 3. AMG will continue to generate the same return on capital it earned in the first 3 years in perpetuity. Estimate the terminal value at the end of year 3, if the cost of capital is 7.5%. Year 1: EBIT (1-t) = $100 Reinvestment = $80 FCFF = $20 Year 2: EBIT (1-t) = $110 Reinvestment = $88 FCFF = $22 Year 3: EBIT (1-t) = $121 Reinvestment = $96.80 FCFF = $24.20 Choices: A. $496.10 B. $1240.25 C. $1654.49 D. $1984.40 E. $2480.50
You are offered an asset that costs $150,000 and has cash flows of $1,350 at the end of every month for the next 6years. Assume the cost of capital is 9percent per year.a. What is the IRR of the asset?b. What is the NPV of the asset? c. If your cost of capital is 12percent, should you purchase it? (Setup cash flows in Excel spreadsheets and uses the following Excel Financial functions, IRR, and NPV to derive your answers.
A firm has a liability cash flow of 100 at the end of year two and a second liability cash flow of 200 at the end of year three. The firm also has asset cash flows of X at the end of years one and five. Using an annual effective interest rate of 10%, calculate the absolute value of the difference between the Macaulay durations of the asset and liability cash flows.
A start-up company expects to spend $100,000 the first year for advertising, with amounts decreasing by $10,000 each year. Income is expected to be $400,000 the first year, increasing by $50,000 each year. Determine the equivalent annual worth in years 1 through 5 of the company’s net cash flow at an interest rate of 16% per year
Konerko, Inc., manageent expects the company to earn cash flows of $13,227, $15,611, $18,970, and $19, 114 over the next four years. If the company uses an 8 percent discount rate, what is the future value of these cash flows at the end of year 4?
A corporation makes an investment of $20,000 that will provide the following cash flows after the corresponding amounts of time:Year 1 - $10,000Year 2 - $10,000Year 3 - $2,000Should the company make this investment? What is the net present value at a 7 percent discount rate? Round your answer to two decimal points.