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- Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided manufacturing system. The annual net cash benefits and savings associated with the system are described as follows: The system will cost 9,000,000 and last 10 years. The companys cost of capital is 12 percent. Required: 1. Calculate the payback period for the system. Assume that the company has a policy of only accepting projects with a payback of five years or less. Would the system be acquired? 2. Calculate the NPV and IRR for the project. Should the system be purchasedeven if it does not meet the payback criterion? 3. The project manager reviewed the projected cash flows and pointed out that two items had been missed. First, the system would have a salvage value, net of any tax effects, of 1,000,000 at the end of 10 years. Second, the increased quality and delivery performance would allow the company to increase its market share by 20 percent. This would produce an additional annual net benefit of 300,000. Recalculate the payback period, NPV, and IRR given this new information. (For the IRR computation, initially ignore salvage value.) Does the decision change? Suppose that the salvage value is only half what is projected. Does this make a difference in the outcome? Does salvage value have any real bearing on the companys decision?Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated revenue producing life of 4 years. Falkland has a cost of capital of 8%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?If a copy center is considering the purchase of a new copy machine with an initial investment cost of $150,000 and the center expects an annual net cash flow of $20,000 per year, what is the payback period?
- 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)?could you help with this homework question? The project you manage require $10,000 in capital outlay, $30,000 in equipment, and $10,000 in training during the first year. Each subsequent year will incur additional labor cost of $5,000 per year, reduce material costs by $15,000, and increase revenue by $20,000 per year. Assume NPV is discounted by 5%. Please include your formula for the payback method conduct a cost-benefit analysis using the payback method and the net present value method fora. What should be your material cost for a project with MARR of 25% to make it into marginally acceptable and with an annual revenue of Php 10,000.00 for 8 years? Explain why, draw its cash flow diagram, and show your complete solutions. b. Now, if the said project has a salvage cost of Php 7,300.00 after 6 years, does it make a good investment opportunity? Explain why, draw its cash flow diagram, and show your complete solutions. c. Lastly, If the said project has an annual cost of Php 2,000.00, what is your capital investment? Explain why, draw its cash flow diagram, and show your complete solutions.
- 4 You are considering the following investment activity. The facts are the following: Required investment 300,000.00 Discount Rate 9% Life of project 7.00 Years Net income for the project Sales 140,000.00 Expenses Material 25,000.00 Labor 35,000.00 Overhead 15,000.00 Total Expenses 75,000.00 Net Income 65,000.00 What is the NPV of this investment? What is the IRR of this investment? Would you fund this project? Show your work below Year 0 1 2 3 4 5 6 71. Assuming monetary benefits of a construction project at $50,000 per year during year 1, 2, 3 and 5 (not year 4), one-time costs (initial investment) of $15,000, recurring costs of $35,000 per year (every year), a discount rate of 10 per cent, and a 5-year time horizon, calculate the net present value (NPV) of an information system's costs and benefits. Calculate the overall return on investment (ROI) of the project. During which year does break-even occur?. Use the NPV template provided (modify to suit your answer) and clearly display the NPV, ROI, and year in which payback occurs. Write a paragraph explaining whether you would recommend investing in this project based on your financial analysis. Explain your answer referring to the NPV, ROI and payback for this project. Discount Rate (10%) Year 0 - 1.0000 Year 1 - .9091 Year 2 - .8264 Year 3 - .7513 Year 4 - .6830 Year 5 - .6209Use the following data to answer questions (a) to (d). Show your working method.A company is considering the purchase of a copier that costs RM 50,000. Assume the required rate of return is 10% and the following is cash flow schedule: Year 1: RM 20,000 Year 2: RM 30,000 Year 3: RM 20,000 (a) What is the project’s payback period?(b) What is the project’s NPV?(c) What is the project’s IRR?(d) What is the project’s profitability index (PI)?
- Suppose Francine Dunkelberg’s Sweets is considering investing in warehouse-management software that costs $550,000, has $75,000 residual value, and should lead to cost savings of $130,000 per year for its five-year life. In calculating the ARR, which of the following figures should be used as the equation’s denominator (average amount invested in the asset)? a. $275,000 b. $237,500 c. $625,000 d. $312,500Suppose Francine Dunkelberg’s Sweets is considering investing in warehouse-management software that costs $550,000, has $75,000 residual value, and should lead to cost savings of $130,000 per year for its five-year life. In calculating the ARR, which of the following figures should be used as the equation’s denominator (average amount invested in the asset)? $275,000 $237,500 $625,000 $312,500A project has an initial cost of $7,900 and cash inflows of $2,100, $3,140, $3,800, and $4,500 per year over the next four years, respectively. What is the payback period? I need the steps on a financial calculator the ba II
