Q1. | |||||
A | B | ||||
Initial Investment | 275000 | 225000 | |||
Divide: Annual cashflows | 55000 | 35000 | |||
Payback period | 5 | 6.43 | |||
Investment A is Preferred | |||||
Q2. | |||||
Option -1 | |||||
Annual paymenet | 50000 | ||||
Multiply: ANNuity PVF at 8% | 4.623 | ||||
Present value | 231150 | ||||
Option-2 | |||||
Present value | 300000 | ||||
Option-3 | |||||
Amount received 6yrs from now | 400000 | ||||
Multiply: PVF at 8% for 6th yr | 0.63 | ||||
Present value | 252000 | ||||
24) Yates, Inc. is evaluating two possible investments in depreciable plant assets. The company uses the straigh...
Rocco Manufacturing is considering following two investment proposals: Proposal X Proposal Y Investment $740,000 $508,000 Useful life 5 years 4 years Estimated annual net cash inflows received at the end of each year $154,000 $92,000 Residual value $66,000 $0 Depreciation method Straight-line Straight-line Annual discount rate 10% 9% Compute the present value of the future cash inflows from Proposal X. Present value of an ordinary annuity of $1: 8% 9% 10% 1 0.926 0.917 0.909 2 1.783 1.759 1.736 3...
1) If taxes are ignored and the required rate of return is 9%.
What is the project's net present value? $_________
2) Based on the analysis, should Norton Company proceed with the
project?
a. Yes
b. No
Norton Company is considering a project that will require an initial investment of $750,000 and will return $200,000 each year for 5- years. Below is a table for the present value of si at compound interest. Year Year 9% 9% 0.917 0.842 0.772...
X Company is planning to launch a new product. A market research study, costing $160,000, was conducted last year, indicating that the product will be successful for the next four years. Profits from sales of the product are expected to be $170,000 in each of the first two years and $117,000 in each of the last two years. The company plans to undertake an immediate advertising campaign that will cost $76,000. New manufacturing equipment will have to be purchased for...
Apologies that the sizes of the pictures are so odd.
X Company is considering replacing one of its machines in order to save operating costs. Operating costs with the current machine are $64,000 per year; operating costs with the new machine are expected to be $45,000 per year. The new machine will cost $71,000 and will last for six years, at which time it can be sold for $1,000. The current machine will also last for six more years but...
X Company is planning to launch a new product. A market research study, costing $150,000, was conducted last year, indicating that the product will be successful for the next four years. Profits from sales of the product are expected to be $156.000 in each of the first two years and $104,000 in each of the last two years. The company plans to undertake an immediate advertising campaign that will cost $93,000. New manufacturing equipment will have to be purchased for...
X Company must replace one of its current machines with either Machine A or Machine B. The useful life of both machines is seven years. Machine A costs $51,000, and Machine B costs $59,000. Estimated annual cash flows with the two machines are as follows: Year Machine A Machine B 1 $-6,000 $-7,000 2 -8,000 -4,000 3 -8,000 -3,000 4 -8,000 -3,000 5 -6,000 -3,000 6 -5,000 -2,000 7 -4,000 -2,000 If X Company buys Machine B instead of Machine...
X Company is planning to launch a new product. A market research study, costing $130,000, was conducted last year, indicating that the product will be successful for the next four years. Profits from sales of the product are expected to be $161,000 in each of the first two years and $104,000 in each of the last two years. The company plans to undertake an immediate advertising campaign that will cost $90,000. New manufacturing equipment will have to be purchased for...
Stellan Manufacturing is considering the following two investment proposals: Proposal X Proposal Y Investment $ 724 comma 000$724,000 $ 510 comma 000$510,000 Useful life 5 years 4 years Estimated annual net cash inflows received at the end of each year $ 158 comma 000$158,000 $ 106 comma 000$106,000 Residual value $ 66 comma 000$66,000 $0 Depreciation method Straightminus−line Straightminus−line Annual discount rate 10% 9% Present value of an ordinary annuity of $1: 8% 9% 10% 1 0.926 0.917 0.909 2...
X Company is considering replacing one of its machines in order to save operating costs. Operating costs with the current machine are $61,000 per year; operating costs with the new machine are expected to be $46,000 per year. The new machine will cost $69,000 and will last for five years, at which time it can be sold for $1,500. The current machine will also last for five more years but will not be worth anything at that time. It cost...
X Company is considering replacing one of its machines in order to save operating costs. Operating costs with the current machine are $65,000 per year; operating costs with the new machine are expected to be $47,000 per year. The new machine will cost $70,000 and will last for five years, at which time it can be sold for $1,500. The current machine will also last for five more years but will not be worth anything at that time. It cost...