Windhoek Mines, Limited, of Namibia, is contemplating the purchase of equipment to exploit a mineral deposit on land to which the company has mineral rights. An engineering and cost analysis has been made, and it is expected that the following cash flows would be associated with opening and operating a mine in the area: $ 275,000 $ 100,000 $ 120,000* $ 40,000 Salvage value of equipment in four years $ 65,000 *Receipts from sales of ore, less out-of-pocket costs for salaries, utilities, insurance, and so forth. Cost of new equipment and timbers Working capital required Annual net cash receipts Cost to construct new roads in three years The mineral deposit would be exhausted after four years of mining. At that point, the working capital would be released for reinvestment elsewhere. The company's required rate of return is 20%. Required: a. What is the net present value of the proposed mining project? b. Should the project be accepted? Complete this question by entering your answers in the tabs below. Required A Required B What is the net present value of the proposed mining project? (Enter negative amount with a minus sign. Round your final answer to the nearest whole dollar amount.) Net present value

Windhoek Mines, Limited, of Namibia, is contemplating the purchase of equipment to exploit a mineral deposit on land to which the company has mineral rights. An engineering and cost analysis has been made, and it is expected that the following cash flows would be associated with opening and operating a mine in the area: $ 275,000 $ 100,000 $ 120,000* $ 40,000 Salvage value of equipment in four years $ 65,000 *Receipts from sales of ore, less out-of-pocket costs for salaries, utilities, insurance, and so forth. Cost of new equipment and timbers Working capital required Annual net cash receipts Cost to construct new roads in three years The mineral deposit would be exhausted after four years of mining. At that point, the working capital would be released for reinvestment elsewhere. The company's required rate of return is 20%. Required: a. What is the net present value of the proposed mining project? b. Should the project be accepted? Complete this question by entering your answers in the tabs below. Required A Required B What is the net present value of the proposed mining project? (Enter negative amount with a minus sign. Round your final answer to the nearest whole dollar amount.) Net present value

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Exercise 14-4 (Algo) Uncertain Future Cash Flows [LO14-4] Lukow Products is investigating the purchase of a piece of automated equipment that will save $150,000 each year in direct labor and inventory carrying costs. This equipment costs $940,000 and is expected to have a 7-year useful life with no salvage value. The company’s required rate of return is 14% on all equipment purchases. Management anticipates that this equipment will provide intangible benefits such as greater flexibility and higher-quality output that will result in additional future cash inflows. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table. Required: 1. What is the net present value of the piece of equipment before considering its intangible benefits? (Enter negative amount with a minus sign. Round your final answer to the nearest whole dollar amount.) 2. What minimum dollar value per year must be provided by the equipment’s intangible benefits to…
Exercise 14-7 (Algo) Net Present Value Analysis of Two Alternatives [LO14-2] Perit Industries has $115,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Project A Project B Cost of equipment required $ 115,000 $ 0 Working capital investment required $ 0 $ 115,000 Annual cash inflows $ 21,000 $ 69,000 Salvage value of equipment in six years $ 8,700 $ 0 Life of the project 6 years 6 years The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries’ discount rate is 15%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net present value of Project A. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.) 2. Compute the net present value of Project B. (Enter negative values with a minus sign. Round your…
13. A mining company using a 17% MARR is evaluating a new site for nickel mining. The site acquisition and equipment expenses are expected to cost P485M. Net annual receipts are estimated at P95M for the next 12 years after which the mine will be depleted. Clean up and biodiversity restoration is anticipated to cost P18M per year for the succeeding three years. Assess this venture using the ERR method. (Ans. Venture is not recommended, 16.72%)
V1. A mining company using a 17% MARR is evaluating a new site for nickel mining. The site acquisition and equipment expenses are expected to cost P485M. Net annual receipts are estimated at P95M for the next 12 years after which the mine will be depleted. Clean up and biodiversity restoration is anticipated to cost P18M per year for the succeeding three years. Assess this venture using the ERR method. (ANSWER: 16.72%)
Question 11 (Ignore income taxes in this problem.) Z Company has gathered the following data on a proposed investment project: Investment in equipment.................................. $150,000 Annual cash flows........................................... $40,000 Salvage value of equipment............................. $0 Life of the equipment....................................... 10 years Required rate of return.................................... 10% The company uses straight-line depreciation on all equipment. Required: (iv) Is this a viable project?
ssignment Question : XZ Company is medium sized metal fabricator that is currently contemplating two projects: Project A require an initial investment of $ 50,000, Project B require an initial investment of $ 55,000. Assume the NZ Company has a 10% cost of capital and the relevant cash flows for the two projects are presented in the table below: Project Project A Project B Initial Investment 50,000 55,000 Year Operating Cash Flow 1 18000 33000 2 18000 16000 3 18000 14000 4 18000 14000 5 18000 14000 Require: Calculate the NPV for Project A and B? Based on your NPV findings in section (a) which project will you recommend for NZ Company? Based on your answer in section (b) justify your recommendation?
18- ABC Inc. is considering a project that will have annual sales of $36,750 and costs,including depreciation, of $21,500. Taxes will be $3,800 and the depreciationexpense will be $2,125. An initial investment cash outlay of $1,750 is required fornet working capital. What is the project's operating cash flow? a. $12,642 b. $9,700c. $11,450d. $7,575e. $13,575f. $9,325
Problem 8-30 NPV and IRR [LO 3, 4] Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows: Year Cash Flow 0 −$ 580,000 1 210,000 2 153,000 3 218,000 4 197,000 All cash flows will occur in Erewhon and are expressed in dollars. In an attempt to improve its economy, the Erewhonian government has declared that all cash flows created by a foreign company are “blocked” and must be reinvested with the government for one year. The reinvestment rate for these funds is 5 percent. Assume Anderson uses a required return of 11 percent on this project. What is the NPV of the project? Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. What is the IRR of the project? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
Question 17 Munir S/B has provided the following data concerning a proposed investment project: Initial investment.................. $861,000 Annual net cash receipts...... $271,000 Life of the project................. 5 years Salvage value...................... $129,000 The company's tax rate is 30%. For tax purposes, the straight line method will be used and capital allowances (CA)s will be claimed only over 3 years over the entire initial cost without any reduction for salvage value. The company uses a discount rate of 11%. Required: (vi) What is the NPV of the project?
Problem 25-3A Computation of cash flows and net present values with alternative depreciation methods LO P3 [The following information applies to the questions displayed below.] Manning Corporation is considering a new project requiring a $100,000 investment in test equipment with no salvage value. The project would produce $72,000 of pretax income before depreciation at the end of each of the next six years. The company’s income tax rate is 38%. In compiling its tax return and computing its income tax payments, the company can choose between the two alternative depreciation schedules shown in the table. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use MACRS) (Use appropriate factor(s) from the tables provided.) Straight-LineDepreciation MACRSDepreciation Year 1 $ 10,000 $ 20,000 Year 2 20,000 32,000 Year 3 20,000 19,200 Year 4 20,000 11,520 Year 5 20,000 11,520 Year 6 10,000 5,760…
Problem 25-3A Computation of cash flows and net present values with alternative depreciation methods LO P3 [The following information applies to the questions displayed below.] Manning Corporation is considering a new project requiring a $100,000 investment in test equipment with no salvage value. The project would produce $72,000 of pretax income before depreciation at the end of each of the next six years. The company’s income tax rate is 38%. In compiling its tax return and computing its income tax payments, the company can choose between the two alternative depreciation schedules shown in the table. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use MACRS) (Use appropriate factor(s) from the tables provided.) Straight-LineDepreciation MACRSDepreciation Year 1 $ 10,000 $ 20,000 Year 2 20,000 32,000 Year 3 20,000 19,200 Year 4 20,000 11,520 Year 5 20,000 11,520 Year 6 10,000 5,760…
shj.8 A company is considering the purchase of a new production machine and is not sure whether the project fulfills its investment objective. The company requires that all investments must have a positive net present value (NPV). The machine costs $100,000 and will be depreciated for tax purposes on a straight-line basis over its useful life of five years. The machine has a $0 salvage value. The project will generate $30,000 of pretax operating cash inflow annually. The company has a 25% effective income tax rate and uses a 10% discount rate for investment projects. Which of the following represents the NPV of the project? Select one: a. $(14,707) b. $(33,661) c. $13,724 d. $4,246

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