A company has a minimum required rate of return of 9%. The company is considering investing...
- A company has a minimum required rate of return of 9%. The company is considering investing in a factory machine which costs $75,000 and has an expected life of three years. The machine has a zero salvage value and will be depreciated using the straight-line depreciation method. The company expects to generate an extra $5,000 of net income each of the next 3 years because of this new factory machine and extra annual cash flows of $30,000 each of the 3 years the asset will be used.
Use the Present Value of an Annuity of 1
table that you will find at the top of page 2.
- Show how the $30,000 was computed from the $5,000 net income
figure (in other words, if you were given the $5,000 amount and not
the $30,000 amount, how would you compute it?
- Compute the present value of the cash receipts. $_____________
c. What is the net present value of the investment in the factory machine? $__________________________
Is the net present value a negative or positive value? ______________
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A company has a minimum required rate of return of 9%. The
company is considering investing...
! Required information [The following information applies to the questions displayed below.] A company is considering...
! Required information [The following information applies to the questions displayed below.] A company is considering investing in a new machine that requires a cash payment of $47,947 today. The machine will generate annual cash flows of $21,000 for the next three years. Assume the company uses an 8% discount rate. Compute the net present value of this investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Chart...
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6. If the internal rate of return is the same as the minimum required rate of...
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Altman Corporation is considering investing $75,000 in a new piece of machinery that will generate net...
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Johnson Manufacturing is considering investing $80,000 in a new piece of machinery that will generate net...
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! Required information [The following information applies to the questions displayed below.] A company is considering investing in a new machine that requires a cash payment of $47,947 today. The machine will generate annual cash flows of $21,000 for the next three years. Assume the company uses an 8% discount rate. Compute the net present value of this investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Chart...
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are expected to generate combined cash inflows of $30,000 per year.
The vans combined purchase price is $93,000. The expected life and
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a. calculate the net present value of the investment
opportunity.
b. indicate whether the investment opportunity is expected to
earn a return that is above or below the cost...
Johnson Manufacturing is considering investing $80,000 in a new piece of machinery that will generate net annual cash flows of $30,000 each year for the next 7 years. The machine has a salvage value of $10,000 at the end of its 7 year useful life. Johnson's cost of capital and discount rate is 8%. What is the dollar amount that we would multiply the factor by when using the PV of an Annuity table? $30,000 $80,000 o oo $10,000 $210,000...
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