Homework Answers
The answer is B. the inital price of the investment
Whenever we compute NPV, cash outflows more generally happen at the start of the project at time 0, to find the correct npv, we take the actual amount spent on the investment initially.
Add Answer to:
Which of the following would be used in the computation of an initial investment? 21 the...
A firm can purchase new equipment for a $11,000 initial investment. The equipment generates an annual...
A firm can purchase new equipment for a $11,000 initial investment. The equipment generates an annual after-tax cash inflow of $4,000 NPV and maximum return for 5 years. a. Determine the net present value (NPV) of the asset, assuming that the firm has a cost of capital of 10%. Is the project acceptable? b. Determine the maximum required rate of return that the firm can have and still accept the asset.
6. Which of the following best describes the composition of depreciable asset in the initial outlay...
6. Which of the following best describes the composition of depreciable asset in the initial outlay calculation? purchase price of a new asset purchase price of a new asset, shipping/installation cost, initial investment in working capital, and net proceeds from the sale of the old asset purchase price of a new asset, shipping/installation cost, and initial investment in working capital purchase price of a new asset and shipping/installation cost none of the above
Initial investment —Basic calculation Cushing Corporation is considering the purchase of a new grading machine to...
Initial investment —Basic calculation Cushing Corporation is considering the purchase of a new grading machine to replace the existing one. The existing machine was purchased 33 years ago at an installed cost of $19,500; it was being depreciated under MACRS using a 5-year recovery period. (See table for the applicable depreciation percentages.) The existing machine is expected to have a usable life of at least 5 more years. The new machine costs $35,400 and requires $4,700 in installation costs; it...
McCormick & Company is considering a project that requires an initial investment of $24 million to...
McCormick & Company is considering a project that requires an initial investment of $24 million to build a new plant and purchase equipment. The investment will be depreciated as a modified accelerated cost recovery system (MACRS) seven-year class asset. The new plant will be built on some of the company's land, which has a current, after-tax market value of $4.3 million. The company will produce bulk units at a cost of $130 each and will sell them for $420 each....
Exercise 11-1 Payback period computation; uneven cash flows LO P1 Beyer Company is considering the purchase of an asset for $210,000. It is expected to produce the following net cash flows. The cash...
Exercise 11-1 Payback period computation; uneven cash flows LO P1 Beyer Company is considering the purchase of an asset for $210,000. It is expected to produce the following net cash flows. The cash flows occur evenly within each year. Year1 $64,000 $33,000 62,000 $150,000 $28,000 $337,000 Year2 Year3 Year 4 Year5 Total Net cash flows Compute the payback period for this investment. (Cumulative net cash outflows must be entered with a minus sign. Round your Payback Period answer to 2...
Initial investment............... $80,000 Annual after-tax cash inflow............. ? Salvage value........................ $0 Net present value................ $13,600 Life...
Initial investment............... $80,000 Annual after-tax cash inflow............. ? Salvage value........................ $0 Net present value................ $13,600 Life of the project................ 7 years Discount rate........................ 12% Based on the data given above, the annual cash inflow from the project after the initial investment is closest to... (assume the after-tax cash flows are the same each year) Select one: a. $36,428 b. $22,766 c. $23,747 d. $20,509 e. $32,894
Check my work This exercise parallels the machine-purchase decision for the Mendoza Company that is discussed...
Check my work This exercise parallels the machine-purchase decision for the Mendoza Company that is discussed in the body of the chapter. Assume that Mendoza is exploring whether to enter a complementary line of business. The existing business line generates annual cash revenues of approximately $5,500,000 and cash expenses of $3,750,000, one-third of which are labor costs. The current level of investment in this existing division is $12,250,000. (Sales and costs of this division are not affected by the investment...
A project requires an initial investment of $100,000 and is expected to produce a cash inflow...
A project requires an initial investment of $100,000 and is expected to produce a cash inflow before tax of $27,500 per year for five years. Company A has substantial accumulated tax losses and is unlikely to pay taxes in the foreseeable future. Company B pays corporate taxes at a rate of 21% and can claim 100% bonus depreciation on the investment. Suppose the opportunity cost of capital is 10%. Ignore inflation. a. Calculate project NPV for each company. (Do not...
Vaughn Company has the following information about a potential capital investment: $ $ Initial investment Annual...
Vaughn Company has the following information about a potential capital investment: $ $ Initial investment Annual cash inflow Expected life Cost of capital 450,000 77,000 9 years 9% 1. Calculate the net present value of this project. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Round the final answer to nearest whole dollar.) Net Present Value
P11-11 (similar to) Question Help its existing computer system, which was Calculating initial investment Vastine Medical,...
P11-11 (similar to) Question Help its existing computer system, which was Calculating initial investment Vastine Medical, Inc., is considering replacing i purchased 2 years ago at a cost of $331,000. The system can be sold today for $205,000. It is being depreciated using MACRS and a 5-year recovery period (see the table EB). A new computer system will cost $510,000 to purchase and install. Replacement of the computer system would not involve any change in net working capital. Assume a...
A firm can purchase new equipment for a $11,000 initial investment. The equipment generates an annual after-tax cash inflow of $4,000 NPV and maximum return for 5 years. a. Determine the net present value (NPV) of the asset, assuming that the firm has a cost of capital of 10%. Is the project acceptable? b. Determine the maximum required rate of return that the firm can have and still accept the asset.
Exercise 11-1 Payback period computation; uneven cash flows LO P1 Beyer Company is considering the purchase of an asset for $210,000. It is expected to produce the following net cash flows. The cash flows occur evenly within each year. Year1 $64,000 $33,000 62,000 $150,000 $28,000 $337,000 Year2 Year3 Year 4 Year5 Total Net cash flows Compute the payback period for this investment. (Cumulative net cash outflows must be entered with a minus sign. Round your Payback Period answer to 2...
Check my work This exercise parallels the machine-purchase decision for the Mendoza Company that is discussed in the body of the chapter. Assume that Mendoza is exploring whether to enter a complementary line of business. The existing business line generates annual cash revenues of approximately $5,500,000 and cash expenses of $3,750,000, one-third of which are labor costs. The current level of investment in this existing division is $12,250,000. (Sales and costs of this division are not affected by the investment...
A project requires an initial investment of $100,000 and is expected to produce a cash inflow before tax of $27,500 per year for five years. Company A has substantial accumulated tax losses and is unlikely to pay taxes in the foreseeable future. Company B pays corporate taxes at a rate of 21% and can claim 100% bonus depreciation on the investment. Suppose the opportunity cost of capital is 10%. Ignore inflation. a. Calculate project NPV for each company. (Do not...
Vaughn Company has the following information about a potential capital investment: $ $ Initial investment Annual cash inflow Expected life Cost of capital 450,000 77,000 9 years 9% 1. Calculate the net present value of this project. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Round the final answer to nearest whole dollar.) Net Present Value
P11-11 (similar to) Question Help its existing computer system, which was Calculating initial investment Vastine Medical, Inc., is considering replacing i purchased 2 years ago at a cost of $331,000. The system can be sold today for $205,000. It is being depreciated using MACRS and a 5-year recovery period (see the table EB). A new computer system will cost $510,000 to purchase and install. Replacement of the computer system would not involve any change in net working capital. Assume a...
Most questions answered within 3 hours.
-
How many ways can 2 people be chosen and arranged in a straight
line if there...
asked 50 minutes ago -
(Problem 1d). Leandro has 16 hours per day that he can allocate
to work or leisure....
asked 1 hour ago -
Morganton Company
makes one product and it provided the following information to help
prepare the master...
asked 2 hours ago -
2Al + 3Cl2 --> 2AlCl3
If one mole Al is reacted w two moles Cl2, how...
asked 2 hours ago -
1. You will see some trends in the movement of each currency vs.
the US Dollar....
asked 2 hours ago -
9. (9 pts) An investor with a stock portfolio worth several
hundred thousand dollars sued his...
asked 3 hours ago -
Which statement is true?
a. Unless directed otherwise, the computer automatically
executes C. statements one before...
asked 3 hours ago -
When a new company is considering Speed to Market for a product
launch, which would provide...
asked 4 hours ago -
bacteria and their metabolites could either promote or protect from
cancer. Explain one of these cases...
asked 4 hours ago -
Use the sample data and confidence level given below to complete
parts (a) through (d).
A...
asked 5 hours ago -
During laser vision correction, a brief burst of 193 nm
ultraviolet light is projected onto the...
asked 5 hours ago -
1 ) How well does the initial speed, v0,calculated from Equation
4 agree with the value...
asked 5 hours ago