Schneeberger, Inc. is considering investing in one of two alternatives for increasing the acceleration of its linear motor actuators. The first, alternative X, requires an initial investment of $180,000 and its cash flows exhibit an annual rate of return of i*x = 19%. The second, alternative Y, requires an initial investment of $150,000 and its cash flows have an annual rate of return of *Y = 19%. Schneeberger's MARR is 20% per year. Answer the following questions; (a) Will the rate of return on the incremental investment in X be larger or smaller than *X? (b) What is the expected X-Y?
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- Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated revenue producing life of 4 years. Falkland has a cost of capital of 8%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?Tyler, Inc., is considering switching to a new production technology. The cost of the required equipment will be $3,529,783 . The discount rate is 13.99 percent. The cash flows that the firm expects the new technology to generate are as follows. a. Compute the payback and discounted payback periods for the project. b. What is the NPV for the project? Should the firm go ahead with the project? c. What is the IRR, and what would be the decision based on the IRR? Years CF 0 $(3,529,783) 1-2 0 3-5 $916,204 6-9 $1,590,056A company that manufactures magnetic flow meters expects to undertake a project that will have the cash flows below. At an interest rate of 10% per year, what is the equivalent annual cost of the project? Find the AW value using (a) tabulated factors, (b) calculator functions, and (c) a spreadsheet. Which method did you find the easiest to use?
- Q11. Schneeberger, Inc. is considering investing in one of two alternatives for increasing the acceleration of its linear motor actuators. The first, alternative X, requires an initial investment of $165,000 and its cash flows exhibit an annual rate of return of i*x = 25%. The second, alternative Y, requires an initial investment of $150,000 and its cash flows have an annual rate of return of i*Y = 15%. Schneeberger’s MARR is 20% per year. Answer the following questions; (a) Will the rate of return on the incremental investment in X be larger or smaller than i*X? (b) What is the expected i*X-Y? The rate of return on the increment is (Click to select) greater than less than 25% per year. The expected i*X-Y is %.Your answer is partially correct. Sunland Company is considering a long-term investment project called ZIP. ZIP will require an investment of $123,600. It will have a useful life of 4 years and no salvage value. Annual cash inflows would increase by $82,400, and annual cash outflows would increase by $41,200. The company's required rate of return is 12%. Click here to view the factor table. Calculate the internal rate of return on this project. (Round answers to whole number (e.g., 15%).) Internal rate of return on this project is between 3 % and 1539 % Determine whether this project should be accepted? The project should be accepted.FB Company is considering investing in two construction projects, and he developed the following estimates of the cash flows. His required return is 10% and views these projects as equally risky. Required: a) Calculate the net present value (NPV) of each project, assess its acceptability, and indicate which project is best using NPV. b) Calculate the profitability index (PI) of each project, assess its acceptability, and indicate which project is best using PI. c) If both the projects have recorded a positive NPV value and the projects are mutually exclusive, which projects would you recommend for FB Company to undertake? Why?
- OmegaTech is considering project A. The project would require an initial investment of $52,100.00, and then have an expected cash flow of $77,900.00 in 4 years. Project A has an internal rate of return of 9.31 percent. The weighted-average cost of capital for OmegaTech is 6.99 percent. The risk of the project is similar to the average risk of the company. Which one of the following assertions is true? The NPV that Omega Tech would compute for project A is less than or equal to -$11.16. The NPV that Omega Tech would compute for project A can not be computed from the information provided The NPV that Omega Tech would compute for project A is equal to greater than $0.00. The NPV that OmegaTech would compute for project A is greater than -$11.16 but less than $0.00.Ariake Inc. is considering a major expansion of its product line and has estimated the following free cash flows associated with such an expansion. The initial outlay would be $1,850,000, and the project would generate incremental free cash flows of $400,000 per year for 7 years. The appropriate required rate of return is 8 percent. a. Calculate the NPV b. Calculate the PI c. Calculate the IRR d. Should the project be accepted? Why? (*You must show your calculation process as well.)You are considering opening a new plant. The plant will cost $100.0 million upfront. After that, it is expected to produce profits of $30.0 million at the end of every year. The cash flows are expected to last forever. Calculate the NPV of this investment opportunity if your cost of capital is 8.0%. Should you make the investment? Calculate the IRR. Use the IRR to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged.
- Technology Innovations is planning to purchase one of two chip insertion machines. Due to the pace of technological change in this area, it is realistic to assume that these are one-shot investments. The expected cash flows for each machine are shown below. MARR is 8%/year. Based on a present worth analysis, which machine is preferred?OmegaTech is considering project A. The project would require an initial investment of $58,500.00, and then have an expected cash flow of $72,800.00 in 4 years. Project A has an internal rate of return of 9.57 percent. The weighted-average cost of capital for OmegaTech is 6.69 percent. The risk of the project is similar to the average risk of the company. Which one of the following assertions is true? The NPV that Omega Tech would compute for project A is less than or equal to -$11.24. The NPV that Omega Tech would compute for project A is greater than -$11.24 but less than $0.00. The NPV that Omega Tech would compute for project A can not be computed from the information provided The NPV that Omega Tech would compute for project A is equal to greater than $0.00.Hasty Drums, Inc. is considering two independent projects and is using the internal rate of return technique to make a choice. Project X requires an initial investment of $80,000; it will have cash inflows at the end of each of the next five years of $25,000. Project Z requires an initial investment of $120,000; it has cash inflows of $40,000 at the end of each of the next four years. What are the IRRs of each project? (Project X? and project Z?)