You are considering making an $80,000 investment in a process improvement project. Revenues are expected to grow from $50,000 in 1 year by $30,000 each year for the next four years ($50,000 first Year, $80,000 second year, $110,000 third year and so forth) while cost are expected to increase from $20,000 in year 1 by $10,000 each year. If there is no salvage value at the end of five years. at MARR of 11%, What is the NFW of the investment?
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You are considering making an $80,000 investment in a process improvement project. Revenues are expected to grow from $50,000 in 1 year by $30,000 each year for the next four years ($50,000 first Year, $80,000 second year, $110,000 third year and so forth) while cost are expected to increase from $20,000 in year 1 by $10,000 each year. If there is no salvage value at the end of five years. at MARR of 11%, What is the NFW of the investment?
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- CT Corp. is considering two mutually exclusive projects. Both require an initial investment of P120,000 at t = 0. Project X has an expected life of 2 years with after-tax cash inflows of P67,000 and P75,000 at the end of Years 1 and 2, respectively. In addition, Project X can be repeated at the end of Year 2 with no changes in its cash flows. Project Y has an expected life of 4 years with after-tax cash inflows of P38,500 at the end of each of the next 4 years. Each project has a WACC of 8%. Listed below are the requirements for this data set: Using the replacement chain approach, how much is the NPV of Project X? (Round the final answer to the nearest peso. Use the "NPV formula" in excel for exact computation. Otherwise, answer based on rounded pv factors will also be accepted.) Which of the two projects will be more profitable considering the replacement chain approach on the NPV of Project X? Using the equivalent annuity approach, what is the equivalent annuity of Project Y?…Consider the following two mutually exclusive service projects with projectlives of three years and two years, respectively. (The mutually exclusive service projects will have identical revenues for each year of service.) The interest rate is known to be 12%. Net Cash Flow End of Year Project A Project B 0 -$1,000 -$800 1 -400 -200 2 -400 -200+0 3 -400+200 If the required service period is six years and both projects can be repeated with the given costs and better service projects are unavailable in the future, which project is better and why? Choose from the following options:(a) Select Project B because it will save you $344 in present worth over the required service period.(b) Select Project A because it will cost $1,818…Smith and Co. has to choose between two mutually exclusive projects. If it chooses project A, Smith and Co. will have the opportunity to make a similar investment in three years. However, if it chooses project B, it will not have the opportunity to make a second investment. The following table lists the cash flows for these projects. If the firm uses the replacement chain (common life) approach, what will be the difference between the net present value (NPV) of project A and project B, assuming that both projects have a weighted average cost of capital of 10%? Cash Flow Project A Project B Year 0: –$17,500 Year 0: –$40,000 Year 1: 10,000 Year 1: 8,000 Year 2: 16,000 Year 2: 16,000 Year 3: 15,000 Year 3: 15,000 Year 4: 12,000 Year 5: 11,000 Year 6: 10,000 $15,731 $11,012 $12,585 $9,439 $14,158 Smith and Co. is considering a three-year project that has a weighted average cost of capital…
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- Capital recovery (CR) is the equivalent annual amount that an asset, process, or system must earn each year to just recover the first cost and a stated rate of return over its expected life. Salvage value is considered when calculating CR. True FalseYou invest in a piece of equipment costing $40,000. The equipment will be used for two years, and it will be worth $15,000 at the end of two years. The machine will be used for 4,000 hours during the first year and 6,000 hours during the second year. The expected savings associated with the use of the piece of equipment will be $28,000 during the first year and $40,000 during the second year. Your interest rate is 10%.(a) What is the capital recovery cost?(b) What is the annual equivalent worth?(c) What is net savings generated per machine-hour?Consider two investments A and B with the sequences of cash flows given in the table below. A) If A and B are mutually exclusive? projects, which project would you select based on the rate of return on incremental investment at MARRequals=6?%? The rate of return on the incremental investment is ?
- A financial investor has an investment portfolio. A bond in her investment portfolio will mature next month and provide her $25,000 to reinvest. The choices for reinvestment have been narrowed to the following two options:Option 1: Reinvest in a foreign bond that will mature in one year. Thistransaction will entail a brokerage fee of $150. For simplicity, assume thatthe bond will provide interest over the one-year period of $2,450, $2,000, or $1,675 and that the probabilities of these occurrences are assessed to be 0.25, 0.45, and 0.30, respectively.Option 2: Reinvest in a $25,000 certificate with a savings and loan association.Assume that this certificate has an effective annual rate of 7.5%.Which form of reinvestment should the investor choose in order to maximize her expected financial gain?By outbidding its competitors, Turbo Image Processing (TIP), a defense contractor, has received a contract worth $7,300,000 to build navy flight simulators for U.S. Navy pilot training over two years. For some defense contracts, the U.S. government makes an advance payment when the contract is signed, but in this case, the government will make two progressive payments: $4,300,000 at the end of the first year and the $3.000,000 balance at the end of the second year. The expected cash outflows required in order to produce these simulators are estimated to be $1,000,000 now, $2.000,000 during the first year, and $4,320,000 during the second year. The expected net cash flows from this project are summarized as follows: In normal situations, TIP would not even consider a marginal project such as this one in the first place. However, hoping that TIP can establish itself as a technology leader in the field. management felt that it was worth outbidding its competitors by providing the lowest…Consider the two investments with the following sequences of cash flows Compute for i* for each investment What are the NPW of each alternatives with an MARR of 15% If A & B are mutually exclusive, which project is more economically desirable? (Incremental)