In year three of a product's life, the cash flows expected are: marketing cost of $100,000,...
In year three of a product's life, the cash flows expected are: marketing cost of $100,000, production cost of $200,000, and a revenue of $800,000. At 12.4% interest rate, what is the present value (at time zero) of the cash flow of year three? (assume all cash flows occur at the end of the year).
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In year three of a product's life, the cash flows expected are:
marketing cost of $100,000,...
An office building is expected to create operating cash flows of $25,500 a year for three...
An office building is expected to create operating cash flows of $25,500 a year for three years, based on tenants' rental income. The purchase of the fixed assets for this building will cost $53,000. These assets will have no value at the end of the project. Ar additional $4,000 of net working capital will be required throughout the life of the project. Calculate the net present value of this project if the required rate of return is 13 percent?
Problem 2 (25 points) Suppose that an oil well is expected to produce 100,000 barrels (BBL)...
Problem 2 (25 points) Suppose that an oil well is expected to produce 100,000 barrels (BBL) of oil during its first year of production. However, its subsequent production (or yield) is expected to decrease by 12% over the previous year's production for each year of production over the 7-year project. The oil well has proven reserves to satisfy the project requirements. The price of oil is expected to start at $120 per barrel during the first year and increase 8.5%...
Development cost $ 1,300,000 Estimated development time 9 months Pilot testing $ 200,000 Ramp-up cost $...
Development cost
$
1,300,000
Estimated development time
9
months
Pilot testing
$
200,000
Ramp-up cost
$
400,000
Marketing and support cost
$
150,000
per year
Sales and production volume
60,000
per year
Unit production cost
$
100
Unit price
$
210
Interest rate
8
%
Assume all cash flows occur at the end of each period.
a. What is the net present value (discounted at
8%) of this project? Consider all costs and expected revenues.
(Enter your answer in thousands...
show work 17. A project is expected to create operating cash flows of $30,000 a year...
show work
17. A project is expected to create operating cash flows of $30,000 a year for three years. The initial cost of the fixed assets is $75,000. These assets will be worthless at the end of the project. An additional $5,000 of net working capital will be required throughout the life of the project. What is the project's net present value if the required rate of return is 12 percent? A. $-20,157.76 $-4,386.16 $1,306.09 $5,208.11 $15,954.17
Help with #6? 6. (Equity Valuation Cash Flows] Following are financial statements (historical and forecasted) for...
Help with #6?
6. (Equity Valuation Cash Flows] Following are financial statements (historical and forecasted) for the Global Products Corporation. GLOBAL PRODUCTS CORPORATION BALANCE SHEETS 2016 FORECAST 2017 Cash $ 50,000 $ 60,000 Accounts receivable 200,000 290,000 Inventories 450,000 570,000 Total current assets 700,000 920,000 Fixed assets, net 300,000 380,000 Total assets $1,000,000 $1,300,000 Accounts payable 140,000 180,000 Accruals 50,000 70,000 Bank loan 80,000 90,000 co Total current liabilities 270,000 340,000 Long-term debt 400,000 550,000 Common stock ($1 par value)...
A capital investment project requires an investment of £100,000 and has an expected life of four...
A capital investment project requires an investment of £100,000 and has an expected life of four years. Annual cash flows, which occur evenly throughout 5 years amount to £45,000 per annum. The net present value of the project using a 12 percent discount rate is Select one: a. £33,732 b. £68,162 c. £62,225 d. £98,980 e. £28,162
(Calculating free cash flows) Vandelay Industries is considering a new project with a 4-year life with...
(Calculating free cash flows) Vandelay Industries is considering a new project with a 4-year life with the following cost and revenue data. This project will require an investment of $120,000 in new equipment. This new equipment will be depreciated down to zero over 4 years using the simplified straight-line method and has no salvage value. This new project will generate additional sales revenue of $112,000 while additional operating costs, excluding depreciation will be 562,000. Vandelay's marginal tax rate is 31...
(1)Your firm has identified three potential investment projects. The projects and their cash flows are shown...
(1)Your firm has identified three potential investment projects. The projects and their cash flows are shown here (Project Cash Flow Today ($) Cash Flow in One Year ($)) A -10- 20 B 5 -5 C 20 -10 Suppose all cash flows are certain and the risk-free interest rate is 10%. a. What is the NPV of each project? b. If the firm can choose only one of these projects, which should it choose? c. If the firm can choose any...
(Calculating project cash flows and NPV) The Guo Chemical Corporation is considering the purchase of a...
(Calculating project cash flows and NPV) The Guo Chemical Corporation is considering the purchase of a chemical analysis machine. The purchase of this machine will result in an increase in earnings before interest and taxes of $85,000 per year. The machine has a purchase price of $100,000, and it would cost an additional $5,000 after tax to install this machine correctly. In addition, to operate this machine properly, inventory must be increased by $20,000. This machine has an expected life...
Your firm is evaluating a capital budgeting project. The estimated cash flows appear below. The board...
Your firm is evaluating a capital budgeting project. The estimated cash flows appear below. The board of directors wants to know the expected impact on shareholder wealth. Knowing that the estimated impact on shareholder wealth equates to net present value (NPV), you use your handy calculator to compute the value. What is the project's NPV? Assume that the cash flows occur at the end of each year. The discount rate (i.e., required rate of return, hurdle rate) is 20.1%. (Round...
An office building is expected to create operating cash flows of $25,500 a year for three years, based on tenants' rental income. The purchase of the fixed assets for this building will cost $53,000. These assets will have no value at the end of the project. Ar additional $4,000 of net working capital will be required throughout the life of the project. Calculate the net present value of this project if the required rate of return is 13 percent?
Problem 2 (25 points) Suppose that an oil well is expected to produce 100,000 barrels (BBL) of oil during its first year of production. However, its subsequent production (or yield) is expected to decrease by 12% over the previous year's production for each year of production over the 7-year project. The oil well has proven reserves to satisfy the project requirements. The price of oil is expected to start at $120 per barrel during the first year and increase 8.5%...
Development cost
$
1,300,000
Estimated development time
9
months
Pilot testing
$
200,000
Ramp-up cost
$
400,000
Marketing and support cost
$
150,000
per year
Sales and production volume
60,000
per year
Unit production cost
$
100
Unit price
$
210
Interest rate
8
%
Assume all cash flows occur at the end of each period.
a. What is the net present value (discounted at
8%) of this project? Consider all costs and expected revenues.
(Enter your answer in thousands...
show work
17. A project is expected to create operating cash flows of $30,000 a year for three years. The initial cost of the fixed assets is $75,000. These assets will be worthless at the end of the project. An additional $5,000 of net working capital will be required throughout the life of the project. What is the project's net present value if the required rate of return is 12 percent? A. $-20,157.76 $-4,386.16 $1,306.09 $5,208.11 $15,954.17
Help with #6?
6. (Equity Valuation Cash Flows] Following are financial statements (historical and forecasted) for the Global Products Corporation. GLOBAL PRODUCTS CORPORATION BALANCE SHEETS 2016 FORECAST 2017 Cash $ 50,000 $ 60,000 Accounts receivable 200,000 290,000 Inventories 450,000 570,000 Total current assets 700,000 920,000 Fixed assets, net 300,000 380,000 Total assets $1,000,000 $1,300,000 Accounts payable 140,000 180,000 Accruals 50,000 70,000 Bank loan 80,000 90,000 co Total current liabilities 270,000 340,000 Long-term debt 400,000 550,000 Common stock ($1 par value)...
(Calculating free cash flows) Vandelay Industries is considering a new project with a 4-year life with the following cost and revenue data. This project will require an investment of $120,000 in new equipment. This new equipment will be depreciated down to zero over 4 years using the simplified straight-line method and has no salvage value. This new project will generate additional sales revenue of $112,000 while additional operating costs, excluding depreciation will be 562,000. Vandelay's marginal tax rate is 31...
(Calculating project cash flows and NPV) The Guo Chemical Corporation is considering the purchase of a chemical analysis machine. The purchase of this machine will result in an increase in earnings before interest and taxes of $85,000 per year. The machine has a purchase price of $100,000, and it would cost an additional $5,000 after tax to install this machine correctly. In addition, to operate this machine properly, inventory must be increased by $20,000. This machine has an expected life...
Your firm is evaluating a capital budgeting project. The estimated cash flows appear below. The board of directors wants to know the expected impact on shareholder wealth. Knowing that the estimated impact on shareholder wealth equates to net present value (NPV), you use your handy calculator to compute the value. What is the project's NPV? Assume that the cash flows occur at the end of each year. The discount rate (i.e., required rate of return, hurdle rate) is 20.1%. (Round...
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