Q: Salalah Methanol Co. has bought some new machinery at a cost of 1250000 OMR. The impact of the new…
A: Capital budgeting approaches are the methodologies adopted by the top-level management to evaluate…
Q: Giant Shipping Ltd is considering to invest in one of the two following projects to buy a new…
A: Profitability Index = Present Value of future cashflow/Initial Investment Payback Period = Years…
Q: "It is estimated that a certain piece of equipment can save $22145 per year in labor and materials…
A: Annual saving (A) = $22145 r = 15.96% n = 6 years Let X = Justified price today
Q: life of 7 years. The annual maintenance cost is P6,000. While not in use by the firm, the equipment…
A: In annual worth method we try to find annual equivalent cost of of equipment and see whether it is…
Q: Bunnings Ltd is considering to invest in one of the two following projects to buy a new equipment.…
A: Profitability Index is calculated by dividing PV of Cash flows(inflows) by initial outlay of project…
Q: Alter company's manager has proposed installing an equipment that will cost $36,000, have a B-year…
A: With the initial investment of $36000, there are annual cash inflows of $ 8000 each in addition to…
Q: A firm is considering an investment in a new machine with a price of $18.03 million to replace its…
A: Net present value (NPV) is used to determine the present value of all future cash flows. Net present…
Q: The Chum Company is considering the production of a new product line which will require an…
A: The return on investment is a comparable tool that is used to measure the particular investment and…
Q: Bunnings Ltd is considering investing in one of the two following projects to buy new equipment.…
A: The table is:
Q: Salalah Foods has invested in new machinery at a cost of 1450000 OMR. This investment is expected to…
A: Payback period is the time required to cover up the initial investment of an investment. This is a…
Q: John Walker Company is planning to buy a new machine costing Php2,000,000 with a useful life of five…
A: 1) Payback period = Initial investment -------------------…
Q: You are considering investing RM60000 in new equipment. You estimate that the net cash flows will be…
A: Equivalent annual cost is the cost of a project annually for the time period of its completion. This…
Q: Raguna Co. is considering adding a new machine to its production line. The machine costs…
A: Initial cash outlay will include the total cost of machine i.e. purchase cost and installation cost,…
Q: Big Bang Ltd is considering to invest in one of the two following projects to buy a new equipment.…
A: Residual dividend payout policy state the dividend will be paid to shareholders from profit only…
Q: The TV company has made an investment in video and recording equipment that costs P106,700. The…
A: Average accounting rate of return = Average net profit / Average investment 0.10 = Average net…
Q: ny is considering the acquisition of an automatic 3D printer machine for it assemble operation of…
A: In annual worth we need to calculate annual cost and compare with annual revenue and than compare…
Q: A company would like to purchase a machine for $160,000 with a life of 8 years. They estimate a…
A: Solution-In case of calculation of capital recovery cost of annual operating cost is…
Q: Hayden Company is considering the acquisition of a machine that costs $392,000. The machine is…
A: The payback period is the length of time in which an investment reaches its break-even point. In…
Q: Galindo Long-Haul, Inc., is considering the purchase of a tractor-trailer that would cost $178,848,…
A: Given: Cost of asset is $178,848 Cash in flows is $36,000 Years = 8
Q: A project in Guatemala has initial costs of $25 million, but is expected to have a low salvage…
A: Initial cost (I) = $25 million Present value of cashflows (PV) = $24 million r = 15% n = 4 years Let…
Q: Big Bang Ltd is considering to invest in one of the two following projects to buy a new equipment.…
A: NPV is the difference between present value of all cash inflows and initial investment NPV =PV of…
Q: The Company is evaluating investing in a new metal stamping machine costing $80,458. The Company…
A: Internal rate of return, IRR is the discount rate where the present value of inflows equals present…
Q: A firm is considering purchasing equipment that will reduce cost by P 400, 000. The equipment costs…
A: Present worth method is one of a valuation method used in capital budgeting. It is calculated by…
Q: certain piece of equipment can save $16820 per year in labor and materials costs. The equipment has…
A: The given problem can be solved using PV function in excel. PV function computes present worth/…
Q: A firm is considering purchasing equipment that will reduce costs by P40,000. The equipment costs…
A: GIVEN . A firm is considering purchasing equipment that will reduce costs by P40,000. The…
Q: A company would like to purchase a machine for $160,000 with a life of 8 years. They estimate a…
A: Solution-(A)In case of calculation of capital recovery cost of the annual operating cost is…
Q: An equipment which can be purchase for P700,000 is expected to generate a net cash flow of P200,000…
A: Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…
Q: 1. What is the present value of cash inflows? 2. What is the NVP if the equipment cost 320,000,000?
A: Cash flows to sales ratio = Cash flows / Sales * 100 Calculation of cash inflows of each year:…
Q: uemon Company is taking into account the replacement of an old machine now in use with a new machine…
A: solution : given: annual cash savings before taxes =P 22,500 tax rate…
Q: XYZ Company is looking to invest in some new machinery to replace its current malfunctioning one.…
A: Answer A) Calculation of Payback period Payback period = Initial investment in Machine/ (Annual…
Q: MLF Corporation is evaluating the purchase of a P500,000 die attach machine. The cash inflows…
A: Internal rate of return is amongst one of the modern techniques of capital budgeting ,which…
Q: XYZ Company is looking to invest in some new machinery to replace its current malfunctioning one.…
A: >Payback period is the amount of time it will take to get back the amount initially invested.…
Q: Salalah Methanol Co. has bought some new machinery at a cost of 1250000 OMR. The impact of the new…
A: The payback period means the number of years required to recoup the funds which are expended in an…
Q: 900 Islands Co. is interested in purchasing a machine that would improve its operational…
A: Given, Cost = $200,000 estimated residual value =$20,000 Useful life = 8 years. Increase in cash…
Q: Raguna Co. is considering adding a new machine to its production line. The machine costs RM3,000,000…
A: Annual operating cash flows = NOPAT + depreciation NOPAT is net operating profit after tax.…
Q: Bunnings Ltd is considering to invest in one of the two following projects to buy new equipment.…
A: The discounted payback period is the time period in which the project will be able to generate…
Q: A firm is considering an investment in a new machine with a price of $15.9 million to replace its…
A: Figures in parenthesis are negative figures.Investment in a new machine = $15.9 million = $…
Q: FNV Industries is considering the purchase of a new processing machine. The initial cost of the…
A: NPV is the difference between present value of all cash inflows and initial investment. NPV =PV of…
Q: Identify which option of equipment should the company accept based on NPV method (Note: Please…
A: Net Present Value: It is the difference between the cash outflows and cash inflows discounted over…
Q: lue of P50,000 and a life of 7 years. The annual maintenance cost is P6,000. While not in use by the…
A: Given information : Proposal 1 Cost reduction 400000 Cost of equipment 300000 Salvage…
Q: Big Bang Ltd is considering to invest in one of the two following projects to buy a new equipment.…
A:
Q: Your fim is thinking about investing S200.000 in the overhaul of a manufacturing cell in a lean…
A: The present value is the value of the sum received at time 0 or the current period. It is the value…
Q: A firm is considering an investment in a new machine with a price of $18.03 million to replace its…
A: Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…
Q: This question is based on the following information: Sphinx Company is planning to invest in a…
A: Introduction: The payback period is the time it takes for an asset's net cash flows to return its…
Q: It is estimated that a certain piece of equipment can save as $25,000 per year in labour and…
A: A cashflow diagram is pictorial representation of cashflows incurred by the enterprise on its…
Q: Salalah Foods has invested in new machinery at a cost of 1450000 OMR. This investment is expected to…
A: as the cash flows are uneven, we will use the following formula to find the payback period. payback…
Q: The firm’s is considering an investment in some additional equipment. The equipment has a net cost…
A: Initial cost (C) = ₱600000 Annual cash inflow (A) = ₱128000
Q: Bunnings Ltd is considering to invest in one of the two following projects to buy a new equipment.…
A: Capital budgeting indicates the evaluation of the profitability of possible investment and projects…
Q: XYZ Company is looking to invest in some new machinery to replace its current malfunctioning one.…
A: Annual Depreciation (straight line method) = (Cost of the assets - Residual value) / Expected life…
Step by step
Solved in 3 steps with 1 images
- 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.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?Mason, Inc., is considering the purchase of a patent that has a cost of $85000 and an estimated revenue producing lite of 4 years. Mason has a required rate of return that is 12% and a cost of capital of 11%. 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?
- Gallant Sports s considering the purchase of a new rock-climbing facility. The company estimates that the construction will require an initial outlay of $350,000. Other cash flows are estimated as follows: Assuming the company limits its analysis to four years due to economic uncertainties, determine the net present value of the rock-climbing facility. Should the company develop the facility if the required rate of return is 6%?Roberts Company is considering an investment in equipment that is capable of producing more efficiently than the current technology. The outlay required is 2,293,200. The equipment is expected to last five years and will have no salvage value. The expected cash flows associated with the project are as follows: Required: 1. Compute the projects payback period. 2. Compute the projects accounting rate of return. 3. Compute the projects net present value, assuming a required rate of return of 10 percent. 4. Compute the projects internal rate of return.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?
- 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.Redbird Company is considering a project with an initial investment of $265,000 in new equipment that will yield annual net cash flows of $45,800 each year over its seven-year life. The companys minimum required rate of return is 8%. What is the internal rate of return? Should Redbird accept the project based on IRR?Each of the following scenarios is independent. All cash flows are after-tax cash flows. Required: 1. Patz Corporation is considering the purchase of a computer-aided manufacturing system. The cash benefits will be 800,000 per year. The system costs 4,000,000 and will last eight years. Compute the NPV assuming a discount rate of 10 percent. Should the company buy the new system? 2. Sterling Wetzel has just invested 270,000 in a restaurant specializing in German food. He expects to receive 43,470 per year for the next eight years. His cost of capital is 5.5 percent. Compute the internal rate of return. Did Sterling make a good decision?
- Manzer Enterprises is considering two independent investments: A new automated materials handling system that costs 900,000 and will produce net cash inflows of 300,000 at the end of each year for the next four years. A computer-aided manufacturing system that costs 775,000 and will produce labor savings of 400,000 and 500,000 at the end of the first year and second year, respectively. Manzer has a cost of capital of 8 percent. Required: 1. Calculate the IRR for the first investment and determine if it is acceptable or not. 2. Calculate the IRR of the second investment and comment on its acceptability. Use 12 percent as the first guess. 3. What if the cash flows for the first investment are 250,000 instead of 300,000?Caduceus Company is considering the purchase of a new piece of factory equipment that will cost $565,000 and will generate $135,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return In Excel, see Appendix C.Gardner Denver Company is considering the purchase of a new piece of factory equipment that will cost $420,000 and will generate $95,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further Instructions on internal rate of return in Excel, see Appendix C.