(a)
Cash flow:
Cash flow is the monetary consideration (return or income) received by the business for its long-term capital investment.
Net present value method is the method which is used to compare the initial
To determine: The net present value based on the original estimates.
(b)
Net present value method:
Net present value method is the method which is used to compare the initial cash outflow of investment with the present value of its cash inflows. In the net present value, the interest rate is desired by the business based on the net income from the investment, and it is also called as the discounted cash flow method.
To determine: The net present value based on the revised estimates.
(c)
Net present value method:
Net present value method is the method which is used to compare the initial cash outflow of investment with the present value of its cash inflows. In the net present value, the interest rate is desired by the business based on the net income from the investment, and it is also called as the discounted cash flow method.
To determine: The net present value based on the original estimates with 10% of discount rate.
(d)
The
The internal rate of return method is one of the capital investment methods which determine the rate of return wherein the net present value of all the cash flows (both positive and negative) from an investment is zero. This method also called as the time-adjusted rate of return method, and it used to evaluate the different proposal’s expected rate of return.
To determine: The internal rate of return for the given proposa
Want to see the full answer?
Check out a sample textbook solutionChapter 12 Solutions
Managerial Accounting: Tools for Business Decision Making
- Parker & Stone, Incorporated, is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land six years ago for $7.4 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent facilities elsewhere. If the land were sold today, the company would net $10.2 million. The company now wants to build its new manufacturing plant on this land; the plant will cost $21.4 million to build, and the site requires $890,000 worth of grading before it is suitable for construction. What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project? Note: Do not round intermediate calculations and enter your answer in dollars, not millions, rounded to the nearest whole number, e.g., 1,234,567. Answer is complete but not entirely correct. Cash flow $ 32,490,000 xarrow_forwardParker & Stone, Incorporated, is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land six years ago for $7.9 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent facilities elsewhere. If the land were sold today, the company would net $10.7 million. The company now wants to build its new manufacturing plant on this land; the plant will cost $21.9 million to build, and the site requires $940,000 worth of grading before it is suitable for construction. What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project? Note: Do not round intermediate calculations and enter your answer in dollars, not millions, rounded to the nearest whole number, e.g., 1,234,567. Cash flow 22,840,000arrow_forwardParker & Stone, Incorporated, is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land six years ago for $8.4 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent facilities elsewhere. If the land were sold today, the company would net $11.2 million. The company now wants to build its new manufacturing plant on this land; the plant will cost $22.4 million to build, and the site requires $990,000 worth of grading before it is suitable for construction. What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project? Note: Do not round intermediate calculations and enter your answer in dollars, not millions, rounded to the nearest whole number, e.g., 1,234,567. Hint: the answer in the pic is incorrectarrow_forward
- Parker & Stone, Incorporated, is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land six years ago for $8.4 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent facilities elsewhere. If the land were sold today, the company would net $11.2 million. The company now wants to build its new manufacturing plant on this land; the plant will cost $22.4 million to build, and the site requires $990,000 worth of grading before it is suitable for construction. What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project? Note: Do not round intermediate calculations and enter your answer in dollars, not millions, rounded to the nearest whole number, e.g., 1,234,567.arrow_forwardHoosier Corporation is an entertainment company that produces and distributes digital content and operates its own amusement parks. The company is looking into expanding into a new market, Hoosiersville. There are several projects the CEO considers investing in to capture the values brought by the market. One project for consideration is an improvement to the existing amusement park in Hoosierville. If the project gets approved, the company expects an annual sale of $19.6 million from ticket sales, food, and concessions at the park, with an expected growth of 2.5% annually for a project life of 8 years. The annual operating expenses are expected to be 34% of sales, and the working capital (needed immediately) is expected to be 10% of the next year’s sales. The Tax Rate is 21% In addition, the CEO determines that the new park will need to buy a new rollercoaster which will have a $3 million upfront cost. The rollercoaster will be depreciated straight-line for eight years to an…arrow_forwardParker & Stone, Inc., is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land 7 years ago for $8 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent these facilities from a competitor instead. If the land were sold today, the company would net $10.2 million. The company wants to build its new manufacturing plant on this land; the plant will cost $12.2 million to build, and the site requires $1,428,000 worth of grading before it is suitable for construction. What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project? A. $20,674,880 B. $25,019,400 C. $22,400,000 D. $20,972,000 E. $23,828,000arrow_forward
- Parker & Stone, Inc., is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land six years ago for $5.3 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent these facilities from a competitor instead. If the land were sold today, the company would net $5.6 million. The company wants to build its new manufacturing plant on this land; the plant will cost $12.8 million to build, and the site requires $800,000 worth of grading before it is suitable for construction. What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project? (Enter your answer in dollars, not millions of dollars, e.g. 1,234,567.) Cash flow amount $ eBook & Resources eBook: 10.2. Incremental Cash Flows Check my workarrow_forwardParker & Stone, Inc., is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land six years ago for $2.8 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent these facilities from a competitor instead. If the land were sold today, the company would net $3.2 million. The company wants to build its new manufacturing plant on this land; the plant will cost $14.3 million to build, and the site requires $825,000 worth of grading before it is suitable for construction. What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project? Input area: Purchase price Appraised value Cost to build Grading costs (Use cells A6 to B9 from the given information to complete this question. Enter a "0" for any cost that should not be included.) Output area: Purchase price Appraised value Cost to build $2,800,000 $3,200,000 $14,300,000…arrow_forwardParker & Stone, Incorporated, is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land 7 years ago for $5 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent these facilities from a competitor instead. If the land were sold today, the company would net $9.6 million. The company wants to build its new manufacturing plant on this land; the plant will cost $12.2 million to build, and the site requires $1,344,000 worth of grading before it is suitable for construction. What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project? Multiple Choice $21,800,000 $24,301,200 $23,144,000 $17,618,240 $20,456,000arrow_forward
- Parker & Stone, Incorporated, is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land six years ago for $4 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent these facilities from a competitor instead. If the land were sold today, the company would net $4.3 million. The company wants to build its new manufacturing plant on this land; the plant will cost $11.5 million to build, and the site requires $670,000 worth of grading before it is suitable for construction. What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) Cash flow amountarrow_forwardParker & Stone, Incorporated, is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land 6 years ago for $7 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent these facilities from a competitor instead. If the land were sold today, the company would net $9.4 million. The company wants to build its new manufacturing plant on this land; the plant will cost $15.2 million to build, and the site requires $1,410,000 worth of grading before it is suitable for construction. What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project?arrow_forwardRichard XYZ Company., is looking at setting up a new manufacturing plant in South Park. The company bought some land six years ago for $5.3 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent facilities elsewhere. The land would net $7.7 million aftertax if it were sold today. The company now wants to build its new manufacturing plant on this land; the plant will cost $29.3 million to build, and the site requires $1.41 million worth of grading before it is suitable for construction. What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project?Thank you for your help very appreciated.arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education