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- Consolidated Aluminum is considering the purchase of a new machine that will cost $308,000 and provide the following cash flows over the next five years: $88,000, 92,000, $91,000, $72,000, and $71,000. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return in Excel, see Appendix C.Determine cash flows Natural Foods Inc. is planning to invest in new manufacturing equipment to make a new garden tool. The new garden tool is expected to generate additional annual sales of 5,000 units at 18 each. The new manufacturing equipment will cost 120,000 and is expected to have a 10-year life and a 17,000 residual value. Selling expenses related to the new product are expected to be 3% of sales revenue. The cost to manufacture the product includes the following on a per-unit basis: Determine the net cash flows for the first year of the project, Years 29, and for the last year of the project.2- Bell Manufacturing Inc. is considering the replacement of one of its old drill presses. Three alternative replacement presses are under consideration. The relevant cash flows associated with each are shown in the following table. The firm’s cost of capital is 15%. Machine A Machine B Machine CInitial Investment 85,000 $ 60,000 $ 130,000 $Year Cash Inflows1 18,000 $ 12,000 $ 50,000 $2 18,000 14,000 30,0003 18,000 16,000 20,0004 18,000 18,000 20,0005 18,000 20,000 20,0006 18,000 25,000 30,0007 18,000 ----- 40,0008 18,000 ----- 50,000 a. Calculate the net present value (NPV) of each press. b. Using NPV, evaluate the acceptability of each press. c. Rank the presses from best to worst using NPV. d. Calculate the profitability index (PI) for each press. e. Rank the presses from best to worst using PI.
- 2- Bell Manufacturing Inc. is considering the replacement of one of its old drill presses. Three alternative replacement presses are under consideration. The relevant cash flows associated with each are shown in the following table. The firm’s cost of capital is 15%. Machine A Machine B Machine CInitial Investment 85,000 $ 60,000 $ 130,000 $Year Cash Inflows1 18,000 $ 12,000 $ 50,000 $2 18,000 14,000 30,0003 18,000 16,000 20,0004 18,000 18,000 20,0005 18,000 20,000 20,0006 18,000 25,000 30,0007 18,000 ----- 40,0008 18,000 ----- 50,000 c. Rank the presses from best to worst using NPV.d. Calculate the profitability index (PI) for each press.e. Rank the presses from best to worst using PI.Homework Hoook comp. is considering the replacement of one of its old drill presses. Three alternative replacement presses are under consideration. The relevant cash flows associated with each are shown in the following table. The firm’s cost of capital is 15%. Machine A Machine B Machine C Initial Investment 85,000 $ 60,000 $ 130,000 $ Year Cash Inflows 1 18,000 $ 12,000 $ 50,000 $ 2 18,000 14,000 30,000 3 18,000 16,000 20,000 4 18,000 18,000 20,000 5 18,000 20,000 20,000 6 18,000 25,000 30,000 7 18,000 ----- 40,000 8 18,000 ----- 50,000 Calculate the net present value (NPV) of each press. Using NPV, evaluate the acceptability of each press. Rank the presses from best to worst using NPV. Calculate the profitability index (PI) for each press. Rank the presses from best to worst using PI.Bell Manufacturing Inc. is considering the replacement of one of its old drill presses. Three alternative replacement presses are under consideration. The relevant cash flows associated with each are shown in the following table. The firm’s cost of capital is 15%. Machine A Machine B Machine C Initial Investment 85,000 $ 60,000 $ 130,000 $ Year Cash Inflows 1 18,000 $ 12,000 $ 50,000 $ 2 18,000 14,000 30,000 3 18,000 16,000 20,000 4 18,000 18,000 20,000 5 18,000 20,000 20,000 6 18,000 25,000 30,000 7 18,000 ----- 40,000 8 18,000 ----- 50,000 Calculate the net present value (NPV) of each press. Using NPV, evaluate the acceptability of each press. Rank the presses from best to worst using NPV. Calculate the profitability index (PI) for each press. Rank the presses from best to worst using PI.
- Shaylee Corp has $2.10 million to invest in new projects. The company’s managers have presented a number of possible options that the board must prioritize. Information about the projects follows: Project A Project B Project C Project D Initial investment $ 720,000 $ 400,000 $ 960,000 $ 1,115,000 Present value of future cash flows 935,000 500,000 1,650,000 1,310,000 Required:1. Is Shaylee able to invest in all of these projects simultaneously?multiple choice No Yes 2-a. Calculate the profitability index for each project. (Round your answers to 4 decimal places.)Shaylee Corp has $2.00 million to invest in new projects. The company’s managers have presented a number of possible options that the board must prioritize. Information about the projects follows: Project A Project B Project C Project D Initial investment $ 434,000 $ 249,000 $ 739,000 $ 964,000 Present value of future cash flows 784,000 434,000 1,219,000 1,579,000 Required: 1. Is Shaylee able to invest in all of these projects simultaneously? 2-A. Calculate the profitability index for each project. 2-B. What is Shaylee’s order of preference based on the profitability index?Sandhill Bakeries recently purchased equipment at a cost of $699,500. Management expects the equipment to generate cash flows of $319,250 in each of the next four years. The cost of capital is 17 percent. What is the MIRR for this project? (Round intermediate calculations to 3 decimals e.g. 15.123 and final answer to 1 decimal e.g. 15.2%. Do not round factor values.) my answer was wrong.. can someone help me?
- Based upon the following cash flows, should Chipper Nipper Cookie Company introduce a new product, Rolling In Dough Pies? The initial investment is $180,000, and the cost of capital is 11.5%. Years Cash Flows 1 $ 80,000 2 $ 95,000 3 $ 95,000 4 $110,000 5 $110,000 6 $110,000 a. Yes, the rounded NPV is $75,428.63 and the IRR is 12.27%. b. No, the rounded NPV is –$221,275.39 and the IRR is 9.97%. c. No, the rounded NPV is –$57,277.32 and the IRR is 8.75%. d. Yes, the rounded NPV is $228, 940.00 and the IRR is 46.62%.3. Kiwanda limited is considering the purchase of a new machine. Two alternatives machines, A and B, which will cost shs 6m and 7m respectively, are available in the market at a cost of 12%. The cash flows after taxation of each machine are as follows;Year Cash flowMachine A Machine Bshs shs1. 600,000 1,800,0002. 1,800,000 2,400,0003. 2,000,000 3,000,0004. 3,000,000 1,800,0005. 2,400,000 1,600,000 Required:a. Compute the net present value of each machine. b. Assume that each machine represent a project. Compute the Internal rate of return the company expects to earn from each of the two projects. c. Comments on the use of the results obtained in (a) and (b) above in selecting between the two projects.Question Howlett, Newman & Associates Limited is considering four projects to modernise their operations. The initial capital outlay for each project is $280,000. The cost of capital for the company is 8%. The cash flow for each project are detailed in the table below. Year Import/Expor Restarurant Transportation Landscaping initial (280,000) (280,000) (280,000) (280,000) Outlay 1 125,000 185,000 150,000 2 88,000 66,000 3 69,000 56,000 52,000 160,000 4 42,000 38,000 60,000 132,000 5 62,000 65,000 6 30,000 i) Caculate each project's Payback period i) Calculate each project's Net Present Value (NPV). iii) Calculate the MIRR of the projct with highest NPV.
