Answer:
1 | Estimated NPV | (1,063,610) |
2 | Estimated IRR | 10.31% |
3 | Breakeven selling price | 10,936,390 |
Calculation
1.
To calculate NPV, we need to take the cash inflows and multiply with the PV factor for each year as below:
PV Factor for 12%: We could either use PV Formula in excel, use tables or manual formulas.
Year | Net cash inflows: (a) | PV Factor (12%) (b) | Present Value (a)x(b) |
1 | - | 0.89286 | - |
2 | 1,000,000 | 0.79719 | 797,194 |
3 | 1,000,000 | 0.71178 | 711,780 |
4 | 2,500,000 | 0.63552 | 1,588,795 |
5 | 3,000,000 | 0.56743 | 1,702,281 |
6 | 3,000,000 | 0.50663 | 1,519,893 |
7 | 3,000,000 | 0.45235 | 1,357,048 |
8 | 3,000,000 | 0.40388 | 1,211,650 |
9 | 3,000,000 | 0.36061 | 1,081,830 |
10 | 3,000,000 | 0.32197 | 965,920 |
Present Value of future cash inflows | 10,936,390 |
Then deduct the cash inflow as below:
Present Value of future cash inflows | 10,936,390 |
Less: Initial investment outlay | 12,000,000 |
Net Present Value | (1,063,610) |
2.
Internal Rate of Return (IRR) = 10.31%
Using the MSExcel formula IRR(values,guess):
Values = all Net cash inflows and outflows
Guess = 0.1
3.
First, reinput portion of the contains Cash Flow information:
Manally input the values for Year 0 to Year 10. But use below formula for NPV and IRR
Then go to DATA Tab, select What if and then choose goal seek. And input the cells as shown in the picture below
Then click OK. It will automatically generate following result
So the answer = 10,936,390
MaxiCare Corporation, a not-for-profit organization, specializes in health care for senior citizens. Management is considering whether...
MaxiCare Corporation, a not-for-profit organization, specializes
in health care for senior citizens. Management is considering
whether to expand operations by opening a new chain of care centers
in the inner city of large metropolitan areas. For a new facility,
initial cash outlays for lease, renovations, net working capital,
training, and other costs are expected to be about $24 million. The
corporation expects the cash inflows of each new facility in its
first year of operation to equal the initial investment...
MaxiCare Corporation, a not-for-profit organization, specializes
in health care for senior citizens. Management is considering
whether to expand operations by opening a new chain of care centers
in the inner city of large metropolitan areas. For a new facility,
initial cash outlays for lease, renovations, net working capital,
training, and other costs are expected to be about $14 million. The
corporation expects the cash inflows of each new facility in its
first year of operation to equal the initial investment...
MaxiCare Corporation, a not-for-profit organization, specializes in health care for senior citizens. Management is considering whether to expand operations by opening a new chain of care centers in the inner city of large metropolitan areas. For a new facility, initial cash outlays for lease, renovations, net working capital, training, and other costs are expected to be about $17 million. The corporation expects the cash inflows of each new facility in its first year of operation to equal the initial investment...
MaxiCare Corporation, a not-for-profit organization, specializes in health care for senior citizens. Management is considering whether to expand operations by opening a new chain of care centers in the inner city of large metropolitan areas. For a new facility, initial cash outlays for lease, renovations, net working capital, training, and other costs are expected to be about $16 million. The corporation expects the cash inflows of each new facility in its first year of operation to equal the initial investment...
MaxiCare Corporation, a not-for-profit organization, specializes in health care for senior citizens. Management is considering whether to expand operations by opening a new chain of care centers in the inner city of large metropolitan areas. For a new facility, initial cash outlays for lease, renovations, net working capital, training, and other costs are expected to be about $16 million. The corporation expects the cash inflows of each new facility in its first year of operation to equal the initial investment...
MaxiCare Corporation, a not-for-profit organization, specializes in health care for senior citizens. Management is considering whether to expand operations by opening a new chain of care centers in the inner city of large metropolitan areas. For a new facility, initial cash outlays for lease, renovations, net working capital, training, and other costs are expected to be about $20 million. The corporation expects the cash inflows of each new facility in its first year of operation to equal the initial investment...
MaxiCare Corporation, a not-for-profit organization, specializes in health care for senior citizens. Management is considering whether to expand operations by opening a new chain of care centers in the inner city of large metropolitan areas. For a new facility, initial cash outlays for lease, renovations, net working capital, training, and other costs are expected to be about $26 million. The corporation expects the cash inflows of each new facility in its first year of operation to equal the initial investment...
Please help these answers are
not correct
MaxiCare Corporation, a not-for-profit organization, specializes in health care for senior citizens. Management is considering whether to expand operations by opening a new chain of care centers in the inner city of large metropolitan areas. For a new facility, initial cash outlays for lease, renovations, net working capital, training, and other costs are expected to be about $20 million. The corporation expects the cash inflows of each new facility in its first year...
MaxiCare Corporation, a not-for-profit organization, specializes in health care for senior citizens. Management is considering whether to expand operations by opening a new chain of care centers in the inner city of large metropolitan areas. For a new facility, initial cash outlays for lease, renovations, net working capital, training, and other costs are expected to be about $17 million. The corporation expects the cash inflows of each new facility in its first year of operation to equal the initial investment...
14 J. Morgan of SparkPlug Inc. has been approached to take over a production facility from B.R. Machine Company. The acquisition will cost $1,900,000, and the after-tax net cash inflow will be $306,000 per year for 12 years. SparkPlug currently uses 9% for its after-tax cost of capital. Tom Morgan, production manager, is very much in favor of the investment. He argues that the total after-tax net cash inflow is more than the cost of the investment, even if the...