Net Present Value Analysis Anderson Company must evaluate two capital expenditure proposals. Anderson's hurdle rate is...
Net Present Value Analysis
Anderson Company must evaluate two capital expenditure proposals.
Anderson's hurdle rate is 12%. Data for the two proposals
follow.
| Proposal X | Proposal Y | |
|---|---|---|
| Required investment | $300,000 | $300,000 |
| Annual after-tax cash inflows | 60,000 | |
| After-tax cash inflows at the end of years 3, 6, 9, and 12 | 180,000 | |
| Life of project | 12 years | 12 years |
Using net present value analysis, which proposal is the more
attractive?
Do not use negative signs with your answers. Round PV answers to
the nearest whole number. Use rounded answers for subsequent
calculation of net present value.
| Proposal X | Proposal Y | |
|---|---|---|
| Net present value | ||
| Initial outflows | Answer | Answer |
| PV of future cash flows | Answer | Answer |
| Net present value | Answer | Answer |
Which proposal is more attractive?
Homework Answers
| Proposal X | Proposal Y | |
|---|---|---|
| Net present value | ||
| Initial outflows | $300,000 | $300,000 |
| PV of future cash flows | 371662 | 330426 |
| Net present value | (71662) | (30426) |
Proposal Y is more attractive.
Working:
PV of future cash flows:
Proposal X = 60000*6.19437 = $371662
Proposal Y = 180000*0.71178+180000*0.50663+180000*0.36061+180000*0.25668 = $330426
Add Answer to:
Net Present Value Analysis
Anderson Company must evaluate two capital expenditure proposals.
Anderson's hurdle rate is...
Cash Payback Anderson Company must evaluate two capital expenditure proposals. Anderson's hurdle rate is 12%. Data...
Cash Payback Anderson Company must evaluate two capital expenditure proposals. Anderson's hurdle rate is 12%. Data for the two proposals follow. Proposal X Proposal Y Required investment $300,000 $300,000 Annual after-tax cash inflows 30,000 After-tax cash inflows at the end of years 3, 6, 9, and 12 75,000 Life of project 12 years 12 years What is the cash payback period for Proposal X? For Proposal Y? Hint: For Proposal Y, in what year (3, 6, 9 or 12) will...
Anderson company must evaluate two Question 4 Partially correct Mark 0.86 out of 2.00 P Rag...
Anderson company must evaluate two
Question 4 Partially correct Mark 0.86 out of 2.00 P Rag question Net Present Value Analysis Anderson Company must evaluate two capital expenditure proposals. Anderson's hurdle rate is 12%. Data for the two proposals follow. Required investment Annual after-tax cash inflows After-tax cash inflows at the end of years 3.69 and 12 Life of project ProposalX Proposal Y $300,000 $100,000 60.000 12 years 100.000 12 years Using net present value analysis, which proposal is the...
Cash Payback Anderson Company must evaluate two capital expenditure proposals. Anderson's hurdle rate is 12%. Data...
Cash Payback Anderson Company must evaluate two capital expenditure proposals. Anderson's hurdle rate is 12%. Data for the two proposals follow. Proposal X Proposal Y Required investment $540,000 $540,000 Annual after-tax cash inflows 54,000 After-tax cash inflows at the end of years 3, 6, 9, and 12 136,000 Life of project 12 years 12 years What is the cash payback period for Proposal X? For Proposal Y? Hint: For Proposal Y, in what year (3, 6, 9 or 12) will...
Highpoint Company is evaluating five different capital expenditure proposals. The company's hurdle rate for net present...
Highpoint Company is evaluating five different capital expenditure proposals. The company's hurdle rate for net present value analyses is 12%. A 10% salvage value is expected from each of the investments. Information on the five proposals is as follows: Required PV at 12% of After-Tax Avg. Annual Net Income from Proposal Investment Cash Flows Investment $265,000 $305,030 $37,400 195,000 231,780 26,000 155,000 168,040 19,200 175,000 211,300 27,600 123,000 131,990 14,960 te the excess present value index for each of the...
Weighted Average Cost of Capital and Net Present Value Analysis Tate Company is considering a proposal...
Weighted Average Cost of Capital and Net Present Value Analysis Tate Company is considering a proposal to acquire new equipment for its manufacturing division. The equipment will cost $216,000, be useful for four years, and have a $17,000 salvage value. Tate expects annual savings in cash operating expenses (before taxes) of $73,000. For tax purposes, the annual depreciation deduction will be $72,000, $96,800, $31,500, and $15,700, respectively, for the four years (the salvage value is ignored on the tax return)....
Excess Present Value Index and Average Rate of Return Highpoint Company is evaluating five different capital...
Excess Present Value Index and Average Rate of Return Highpoint Company is evaluating five different capital expenditure proposals. The company's hurdle rate for net present value analyses is 12%. A 10% salvage value is expected from each of the investments. Information on the five proposals is as follows: Proposal Required Investment PV at 12% of After-Tax Cash Flows Avg. Annual Net Income from Investment $275,000 $315,030 $37,400 205,000 241,780 26,000 165,000 178,040 19,200 185,000 221,300 27,600 133,000 141,990 14,960 a....
Weighted Average Cost of Capital and Net Present Value Analysis Tate Company is considering a proposal...
Weighted Average Cost of Capital and Net Present Value Analysis Tate Company is considering a proposal to acquire new equipment for its manufacturing division. The equipment will cost $204,000, be useful for four years, and have a $15,000 salvage value. Tate expects annual savings in cash operating expenses (before taxes) of $71,000. For tax purposes, the annual depreciation deduction will be $68,000, $91,400, $29,700, and $14,900, respectively, for the four years (the salvage value is ignored on the tax return)....
Weighted Average Cost of Capital and Net Present Value Analysis Tate Company is considering a proposal...
Weighted Average Cost of Capital and Net Present Value Analysis Tate Company is considering a proposal to acquire new equipment for its manufacturing division. The equipment will cost $204,000, be useful for four years, and have a $15,000 salvage value. Tate expects annual savings in cash operating expenses (before taxes) of $71,000. For tax purposes, the annual depreciation deduction will be $68,000, $91,400, $29,700, and $14,900, respectively, for the four years (the salvage value is ignored on the tax return)....
Excess Present Value Index and Average Rate of Return Highpoint Company is evaluating five different capital...
Excess Present Value Index and Average Rate of Return Highpoint Company is evaluating five different capital expenditure proposals. The company's hurdle rate for net present value analyses is 12%. A 10% salvage value is expected from each of the investments. Information on the five proposals is as follows: Proposal Required Investment PV at 12% of After-Tax Cash Flows Avg. Annual Net Income from Investment $270,000 $310,030 $37,400 200,000 236,780 26,000 160,000 173,040 19,200 180,000 216,300 27,600 128,000 136,990 14,960 a....
Weighted Average Cost of Capital and Net Present Value Analysis Reed Incorporated is considering a proposal...
Weighted Average Cost of Capital and Net Present Value Analysis Reed Incorporated is considering a proposal to acquire new equipment for its manufacturing division. The equipment will cost $192,000, be useful for four years, and have a $12,000 salvage value. Reed expects annual savings in cash operating expenses (before taxes) of $68,000. For tax purposes, the annual depreciation deduction will be $64,000, $86,000, $28,000, and $14,000, respectively, for the four years (the salvage value is ignored on the tax return)....
Anderson company must evaluate two
Question 4 Partially correct Mark 0.86 out of 2.00 P Rag question Net Present Value Analysis Anderson Company must evaluate two capital expenditure proposals. Anderson's hurdle rate is 12%. Data for the two proposals follow. Required investment Annual after-tax cash inflows After-tax cash inflows at the end of years 3.69 and 12 Life of project ProposalX Proposal Y $300,000 $100,000 60.000 12 years 100.000 12 years Using net present value analysis, which proposal is the...
Highpoint Company is evaluating five different capital expenditure proposals. The company's hurdle rate for net present value analyses is 12%. A 10% salvage value is expected from each of the investments. Information on the five proposals is as follows: Required PV at 12% of After-Tax Avg. Annual Net Income from Proposal Investment Cash Flows Investment $265,000 $305,030 $37,400 195,000 231,780 26,000 155,000 168,040 19,200 175,000 211,300 27,600 123,000 131,990 14,960 te the excess present value index for each of the...
Weighted Average Cost of Capital and Net Present Value Analysis Tate Company is considering a proposal to acquire new equipment for its manufacturing division. The equipment will cost $216,000, be useful for four years, and have a $17,000 salvage value. Tate expects annual savings in cash operating expenses (before taxes) of $73,000. For tax purposes, the annual depreciation deduction will be $72,000, $96,800, $31,500, and $15,700, respectively, for the four years (the salvage value is ignored on the tax return)....
Excess Present Value Index and Average Rate of Return Highpoint Company is evaluating five different capital expenditure proposals. The company's hurdle rate for net present value analyses is 12%. A 10% salvage value is expected from each of the investments. Information on the five proposals is as follows: Proposal Required Investment PV at 12% of After-Tax Cash Flows Avg. Annual Net Income from Investment $275,000 $315,030 $37,400 205,000 241,780 26,000 165,000 178,040 19,200 185,000 221,300 27,600 133,000 141,990 14,960 a....
Weighted Average Cost of Capital and Net Present Value Analysis Tate Company is considering a proposal to acquire new equipment for its manufacturing division. The equipment will cost $204,000, be useful for four years, and have a $15,000 salvage value. Tate expects annual savings in cash operating expenses (before taxes) of $71,000. For tax purposes, the annual depreciation deduction will be $68,000, $91,400, $29,700, and $14,900, respectively, for the four years (the salvage value is ignored on the tax return)....
Weighted Average Cost of Capital and Net Present Value Analysis Tate Company is considering a proposal to acquire new equipment for its manufacturing division. The equipment will cost $204,000, be useful for four years, and have a $15,000 salvage value. Tate expects annual savings in cash operating expenses (before taxes) of $71,000. For tax purposes, the annual depreciation deduction will be $68,000, $91,400, $29,700, and $14,900, respectively, for the four years (the salvage value is ignored on the tax return)....
Excess Present Value Index and Average Rate of Return Highpoint Company is evaluating five different capital expenditure proposals. The company's hurdle rate for net present value analyses is 12%. A 10% salvage value is expected from each of the investments. Information on the five proposals is as follows: Proposal Required Investment PV at 12% of After-Tax Cash Flows Avg. Annual Net Income from Investment $270,000 $310,030 $37,400 200,000 236,780 26,000 160,000 173,040 19,200 180,000 216,300 27,600 128,000 136,990 14,960 a....
Weighted Average Cost of Capital and Net Present Value Analysis Reed Incorporated is considering a proposal to acquire new equipment for its manufacturing division. The equipment will cost $192,000, be useful for four years, and have a $12,000 salvage value. Reed expects annual savings in cash operating expenses (before taxes) of $68,000. For tax purposes, the annual depreciation deduction will be $64,000, $86,000, $28,000, and $14,000, respectively, for the four years (the salvage value is ignored on the tax return)....
Most questions answered within 3 hours.
-
Calculate the number density of argon gas at a temperature of
24C and a pressure of...
asked 2 hours ago -
Alternative
Classification
How to Estimate
Probabilities from Data? ( For continuous Attributes)
And How to generate...
asked 2 hours ago -
An explosion breaks a 20.0-kg object into three parts. The
object is initially moving at a...
asked 3 hours ago -
Calculate the approximate number of residues of Rubisco, which
is involved in carbon fixation in plants,...
asked 4 hours ago -
Other decisions about scientific claims can have a much broader
impact.ENERGYarrow-10x10.png, environment, health, security - all...
asked 5 hours ago -
I need to write a research paper and work cited about this
topic: The United States...
asked 5 hours ago -
Hello! I was wondering if I could have some help?
If the vapor pressure of carvone...
asked 6 hours ago -
An economist wants to estimate the mean per capita income (in
thousands of dollars) for a...
asked 6 hours ago -
What would be the input/output characteristic of a circuit
obtained by putting two of your 2's-complementers...
asked 6 hours ago -
In Drosophila, the transition from the syncytial blastoderm
stage to the cellular blastoderm stage is a...
asked 6 hours ago -
Project management question:
Name 3 different types of resources (hint: humans are one
type)
asked 7 hours ago -
Consider the following reaction: C 2H 2( g) + 2H 2( g) C 2H 6(
g)...
asked 7 hours ago