Using the provided information calculate the NPVMkhize Ltd is considering buying a machine and has presented the following information;Purchase priceExpected economic lifeMinimum required rate of returnNet cash inflowsRate of taxationDepreciation is calculated using the straight-line methodA. Positive R12,883B. Negative R9,086OC. Positive R10,089OD. Negative R988R130 00010 years12%R2500030%

NET PRESENT VALUE Net Present Value is one of the Important Capital Budgeting Technique. Net…

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Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter26: Capital Investment Analysis

Section: Chapter Questions

Problem 2MAD: Assume San Lucas Corporation in MAD 26-1 assigns the following probabilities to the estimated annual...

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Assume San Lucas Corporation in MAD 26-1 assigns the following probabilities to the estimated annual net cash flows: a. Compute the expected value of the annual net cash flows. b. Determine the expected net present value of the equipment, assuming a desired rate of return of 10% and the expected annual net cash flows computed in part (a). Use the present value tables (Exhibits 2 and 5) provided in the chapter in determining your answer. c. Based on your results in parts (a) and (b), should San Lucas Corporation invest in the equipment?
Asset Purchase Price BWP Inc. is considering the purchase of an asset. BWPs required rate of return on new assets is 12%. The expected net cash inflows generated by the new asset are as follows: Required: Given that the net cash inflows can be realized, what is the maximum amount BWP should be willing to pay for the new asset? If BWP pays that amount, at what amount should BWP recognize the asset on the balance sheet? Assume that each cash inflow occurs at the end of the year. (Contributed by Norma C. Powell)
A firm has projected the following financials for a possible project: YEAR Sales Cost of Goods S&A Depreciation Investment in NWC Investment in Gross PPE 0 1,130.00 105,468.00 1 132,716.00 Submit 549.00 2 62,780.00 62,780.00 30,000.00 30,000.00 30,000.00 21,093.60 21,093.60 21,093.60 Answer format: Currency: Round to: 2 decimal places. 3 132,716.00 132,716.00 132,716.00 549.00 What is the NPV of the project? (Hint: Be careful about rounding the WACC here!) 4 62,780,00 62,780.00 62,780.00 30,000.00 549.00 21,093.60 549.00 5 132,716.00 The firm has a capital structure of 37.00% debt and 63.00% equity. The cost of debt is 9.00%, while the cost of equity is estimated at 15.00%. The tax rate facing the firm is 38.00%. (Assume that you can't recover the final NWC position in year 5. i.e. only consider the change in NWC for each year) 30,000.00 21,093.60 549.00
A firm is considering the following independent projects. Project Investment Present value offuture cash flows NPV A $130 $176 $46 B $103 $115 $12 C $183 $287 $104 D $161 $199 $38 E $184 $273 $89 What is the Profitability Index of Project B? Question 5Answer a. 0.85 b. 1.12 c. 0.89 d. 1.18
A firm has projected the following financials for a possible project: YEAR Sales Cost of Goods S&A Depreciation Investment in NWC Investment in Gross PPE 0 1,163.00 104,285.00 1 125,285.00 2 62,893.00 62,893.00 20,857.00 125,285.00 30,000.00 30,000.00 526.00 526.00 3 125,285.00 4 125,285.00 30,000.00 30,000.00 20,857.00 20,857.00 20,857.00 What is the NPV of the project? (Hint: Be careful about rounding the WACC here!) 62,893.00 62,893.00 62,893.00 526.00 5 526.00 125,285.00 30,000.00 20,857.00 526.00 The firm has a capital structure of 46.00% debt and 54.00% equity. The cost of debt is 10.00%, while the cost of equity is estimated at 13.00%. The tax rate facing the firm is 38.00%. (Assume that you can't recover the final NWC position in year 5. i.e. only consider the change in NWC for each year)
Determine the ERR (External rate of return) of the cash flows if external rate (e) is given as %19. Year Cash Flow 0 -3000 1 2000 2 4000 3 -1000 4 3000 5 4000 6 -5000 7 9000 Select one: a. 0.2988 b. 0.2638 c. 0.2565 d. 0.3073 e. 0.2783 f. 0.3491
Consider the following two projects: Project Year 0 Year 1 Year 2 Year 3 Year 4 Discount Cash Flow Cash Flow Cash Flow Cash Flow Cash Flow Rate A - 100 40 50 60 N/A 0.13 B - 73 30 30 30 30 0.13 The net present value (NPV) of project B is closest to: O A. 17.9 В. 20.3 C. 40.6 O D. 16.2 O O
Consider the following two projects: Projec Year 0 Year 1 Year 2 Year 3 Year 4 Cash Cash Cash Cash Cash Discount Flow Flow Flow Flow Flow Rate A -100 40 50 60 N/A 0.11 -73 30 30 30 30 0.11 The net present value (NPV) of project As closest to Select one: a. 51.2 b. 25.6 O c. 20.5 Od. 22.5
onsider the following cash flows: C0=-$42 C1=+$38 C2=+$38 C3=+$38 C4=-$76 a. Which two of the following rates are the IRRs of this project?
Question The following economical indictors are referring to types of project (A and B). Answer the following points according to these given indictors in the tables. project A:r=8% project B: r=8% year cash flow (CF) year cash flow (CF) 0 -598 0 -384 1 110 1 105 2 170 2 105 3 210 3 95 4 320 4 118 A) If you are aware that( r%) percentages are various for different reasons to be (10% and 20%). So determine level of NPV during your analysis procedures for whole the mentioned cases of (% r) for each project? B) Which one of the mentioned project are more economically by using concept of IRR and take the range of (% r) between (9% to %25) for supporting your answers? C) Drawing out all the levels of various of the project for each cases of (r %) which given initially in point (A) above. D) Give clear justification about any of the above project more feasible?
Determine the ERR (External rate of return) of the cash flows if external rate (e) is given as %18. Cash Flow Year 0 1 2 3 4 5 6 Select one: a.0.3073 b.0.2988 c.0.2565 d.0.2638 e.0.3491 f.0.2783 -3000 2000 4000 -1000 3000 4000 -5000 9000
Take me to the text The following table indicates the net cash flows of a capital asset: Year Net Cash Flow 0 $-12,900 1 $4,100 2 $8,100 Do not enter dollar signs or commas in the input boxes. Use the negative sign where appropriate. Round the factor to 4 decimal places and the NPV to the nearest whole number. Assume the required rate of return is 9%. Determine the net present value of this asset. Year Net Cash Flow Factor Net Present Value $-12,900 0 1 2 Total $4,100 $8,100 SA $ 69

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