Deal or No Deal? Three Part Question Your neighborhood self-service laundry is for sale and you...
Deal or No Deal?
Three Part Question
Your neighborhood self-service laundry is for sale and
you consider investing in this business. For the business alone and
no other assets (such as building and land), the purchase price is
$240,000. The net cash flows for the project are $30,000 per year
for the next 5 years. You plan to borrow the money for this
investment at 5%.
Prepare a net present value calculation for this
project. What is the net present value of this project?
Calculate the simple payback period for this project.
Your desired payback period is 5 years. How long is the payback
period for this project?
Is this a good investment? What would be a good price
at which to purchase this business?
Homework Answers
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Deal or No Deal?
Three Part Question
Your neighborhood self-service laundry is for sale and
you...
Deal or No Deal? Your neighborhood self-service laundry is for sale and you consider investing in...
Deal or No Deal? Your neighborhood self-service laundry is for sale and you consider investing in this business. For the business alone and no other assets (such as building and land), the purchase price is $240,000. The net cash flows for the project are $30,000 per year for the next 5 years. You plan to borrow the money for this investment at 5%. Prepare a net present value calculation for this project. What is the net present value of this...
Your neighborhood self-service laundry is for sale and you consider investing in this business. For the...
Your neighborhood self-service laundry is for sale and you consider investing in this business. For the business alone and no other assets (such as building and land), the purchase price is $240,000. The net cash flows for the project are $30,000 per year for the next 5 years. You plan to borrow the money for this investment at 5%. Prepare a net present value calculation for this project. What is the net present value of this project? Calculate the simple...
ment sis phone tower, they use mu value method, the payback period metru, By using these...
ment sis phone tower, they use mu value method, the payback period metru, By using these methods, they can ensure a wise allocation UITJE time minimize the risks involved in the investment decision. LO3 Suppose that Neighborhood Communications is considering building a new cell phone tower and has gathered the following information: $600,000 Purchase price Residual value $100,000 Desired payback period 3 years Minimum rate of return 15% The cash flow estimates are as follows: Net Cash Projected Cash Year...
determine the payback period method lysis ment is phone tower, they use cu value method, the...
determine the payback period method
lysis ment is phone tower, they use cu value method, the payback period methuu, By using these methods, they can ensure a wise allocation UI TEJE time minimize the risks involved in the investment decision. LO3 Suppose that Neighborhood Communications is considering building a new cell phone tower and has gathered the following information: Purchase price $600,000 Residual value $100,000 Desired payback period 3 years 15% Minimum rate of return The cash flow estimates are...
Cash Payback period for a Service Company Jane's Clothing Inc. is evaluating two capital investment proposals...
Cash Payback period for a Service Company Jane's Clothing Inc. is evaluating two capital investment proposals for a retail outlet, each requiring an investment of $150,000 and each with an eight-year life and expected total net cash flows of $240,000. Location 1 is expected to provide equal annual net cash flows of $30,000, and Location 2 is expected to have the following unequal annual net cash flows: Year 1 $59,000 Year 2 44,000 29,000 Year 3 Year 4 18,000 Year...
Doug’s Custom Construction Company is considering three new projects, each requiring an equipment investment of $22,440....
Doug’s Custom Construction Company is considering three new projects, each requiring an equipment investment of $22,440. Each project will last for 3 years and produce the following net annual cash flows. Year AA BB CC 1 $7,140 $10,200 $13,260 2 9,180 10,200 12,240 3 12,240 10,200 11,220 Total $28,560 $30,600 $36,720 The equipment’s salvage value is zero, and Doug uses straight-line depreciation. Doug will not accept any project with a cash payback period over 2 years. Doug’s required rate of...
Please show work! 2. You are considering investing in a real estate project. Your one ownership...
Please show work!
2. You are considering investing in a real estate project. Your one ownership unit would cost $30,000. The project is expected to generate annual cash flows for you of: $4,500 in year 1, $5,000 in years 2-5, $8,000 in year 6 and $19,000 in year 7. With a discount rate of 8.0%, what is the net present value (NPV) of this investment? Should you invest in this deal? Why or why not?
Bramble's Custom Construction Company is considering three new projects, each requiring an equipment investment of $26,840....
Bramble's Custom Construction Company is considering three new projects, each requiring an equipment investment of $26,840. Each project will last for 3 years and produce the following net annual cash flows. Year - 2 AA $8,540 10,980 14,640 $34,160 BB $12,200 12,200 12,200 $36,600 CC $15,860 14,640 13,420 $43,920 Total The equipment's salvage value is zero, and Bramble uses straight-line depreciation. Bramble will not accept any project with a cash payback period over 2 years. Bramble's required rate of return...
Question 1 viera corporation is considering investing in a new facility. The estimated cost of the...
Question 1 viera corporation is considering investing in a new facility. The estimated cost of the facility is $2,043,938. It will be used for 12 years, then sold for $715,200. The facility will generate annual cash inflows of $384,300 and will need new annual cash outflows of $150,800. The company has a required rate of return of 7%. Click here to view.py table. Calculate the internal rate of return on this project. (Round answer to o decimal place, e.g. 23.)...
Exercise 26-2 Doug's Custom Construction Company is considering three new projects, each requiring an equipment investment...
Exercise 26-2 Doug's Custom Construction Company is considering three new projects, each requiring an equipment investment of $25,080. Each project will last for 3 years and produce the following net annual cash flows. Year 1 2 3 Total AA $7,980 10,260 13,680 $31,920 BB $11,400 11,400 11,400 $34,200 CC $14,820 13,680 12,540 $41,040 The equipment's salvage value is zero, and Doug uses straight-line depreciation. Doug will not accept any project with a cash payback period over 2 years. Doug's required...
ment sis phone tower, they use mu value method, the payback period metru, By using these methods, they can ensure a wise allocation UITJE time minimize the risks involved in the investment decision. LO3 Suppose that Neighborhood Communications is considering building a new cell phone tower and has gathered the following information: $600,000 Purchase price Residual value $100,000 Desired payback period 3 years Minimum rate of return 15% The cash flow estimates are as follows: Net Cash Projected Cash Year...
determine the payback period method
lysis ment is phone tower, they use cu value method, the payback period methuu, By using these methods, they can ensure a wise allocation UI TEJE time minimize the risks involved in the investment decision. LO3 Suppose that Neighborhood Communications is considering building a new cell phone tower and has gathered the following information: Purchase price $600,000 Residual value $100,000 Desired payback period 3 years 15% Minimum rate of return The cash flow estimates are...
Cash Payback period for a Service Company Jane's Clothing Inc. is evaluating two capital investment proposals for a retail outlet, each requiring an investment of $150,000 and each with an eight-year life and expected total net cash flows of $240,000. Location 1 is expected to provide equal annual net cash flows of $30,000, and Location 2 is expected to have the following unequal annual net cash flows: Year 1 $59,000 Year 2 44,000 29,000 Year 3 Year 4 18,000 Year...
Please show work!
2. You are considering investing in a real estate project. Your one ownership unit would cost $30,000. The project is expected to generate annual cash flows for you of: $4,500 in year 1, $5,000 in years 2-5, $8,000 in year 6 and $19,000 in year 7. With a discount rate of 8.0%, what is the net present value (NPV) of this investment? Should you invest in this deal? Why or why not?
Bramble's Custom Construction Company is considering three new projects, each requiring an equipment investment of $26,840. Each project will last for 3 years and produce the following net annual cash flows. Year - 2 AA $8,540 10,980 14,640 $34,160 BB $12,200 12,200 12,200 $36,600 CC $15,860 14,640 13,420 $43,920 Total The equipment's salvage value is zero, and Bramble uses straight-line depreciation. Bramble will not accept any project with a cash payback period over 2 years. Bramble's required rate of return...
Question 1 viera corporation is considering investing in a new facility. The estimated cost of the facility is $2,043,938. It will be used for 12 years, then sold for $715,200. The facility will generate annual cash inflows of $384,300 and will need new annual cash outflows of $150,800. The company has a required rate of return of 7%. Click here to view.py table. Calculate the internal rate of return on this project. (Round answer to o decimal place, e.g. 23.)...
Exercise 26-2 Doug's Custom Construction Company is considering three new projects, each requiring an equipment investment of $25,080. Each project will last for 3 years and produce the following net annual cash flows. Year 1 2 3 Total AA $7,980 10,260 13,680 $31,920 BB $11,400 11,400 11,400 $34,200 CC $14,820 13,680 12,540 $41,040 The equipment's salvage value is zero, and Doug uses straight-line depreciation. Doug will not accept any project with a cash payback period over 2 years. Doug's required...
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