The Yurdone Corporation wants to set up a private cemetery business. According to theCFO, Barry M. Deep, business is "looking up." As a result, the cemetery project willprovide a net cash inflow of $128,000 for the firm during the first year, and the cash flowsare projected to grow at a rate of 6.1 percent per year forever. The project requires aninitial investment of $1,510,000.a. If the company requires a return of 13 percent on such undertakings, what is the NPVof the project? (Do not round intermediate calculations and round your answer to 2decimal places, e.g., 32.16.)b. The company is somewhat unsure about the assumption of a growth rate of 6.1percent in its cash flows. At what constant growth rate would the company just breakeven if it still required a return of 13 percent on its investment?Solve for g, that makes the PV of the projected cash flows equal to the initialinvestment. In other words, the NPV will be $0.00(Do not round intermediate calculations and enter your answer as a percentrounded to 2 decimal places, e.g., 32.16.)a.NPVb. Minimum growth rate%

Net present value (NPV) refers to the variance between the present value (PV) of cash inflows and…

The Yurdone Corporation wants to set up a private cemetery business. Accordi CFO, Barry M. Deep, business is "looking up." As a result, the cemetery pr provide a net cash inflow of $128,000 for the firm during the first year, and the c are projected to grow at a rate of 6.1 percent per year forever. The project re initial investment of $1,510,000. a. If the company requires a return of 13 percent on such undertakings, what is t of the project? (Do not round intermediate calculations and round your ans decimal places, e.g., 32.16.) b. The company is somewhat unsure about the assumption of a growth rate of 6 percent in its cash flows. At what constant growth rate would the company jus even if it still required a return of 13 percent on its investment? Solve for g, that makes the PV of the projected cash flows equal to the initi investment. In other words, the NPV will be $0.00 (Do not round intermediate calculations and enter your answer as a percen

The Yurdone Corporation wants to set up a private cemetery business. Accordi CFO, Barry M. Deep, business is "looking up." As a result, the cemetery pr provide a net cash inflow of $128,000 for the firm during the first year, and the c are projected to grow at a rate of 6.1 percent per year forever. The project re initial investment of $1,510,000. a. If the company requires a return of 13 percent on such undertakings, what is t of the project? (Do not round intermediate calculations and round your ans decimal places, e.g., 32.16.) b. The company is somewhat unsure about the assumption of a growth rate of 6 percent in its cash flows. At what constant growth rate would the company jus even if it still required a return of 13 percent on its investment? Solve for g, that makes the PV of the projected cash flows equal to the initi investment. In other words, the NPV will be $0.00 (Do not round intermediate calculations and enter your answer as a percen

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 15E: Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided...

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Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided manufacturing system. The annual net cash benefits and savings associated with the system are described as follows: The system will cost 9,000,000 and last 10 years. The companys cost of capital is 12 percent. Required: 1. Calculate the payback period for the system. Assume that the company has a policy of only accepting projects with a payback of five years or less. Would the system be acquired? 2. Calculate the NPV and IRR for the project. Should the system be purchasedeven if it does not meet the payback criterion? 3. The project manager reviewed the projected cash flows and pointed out that two items had been missed. First, the system would have a salvage value, net of any tax effects, of 1,000,000 at the end of 10 years. Second, the increased quality and delivery performance would allow the company to increase its market share by 20 percent. This would produce an additional annual net benefit of 300,000. Recalculate the payback period, NPV, and IRR given this new information. (For the IRR computation, initially ignore salvage value.) Does the decision change? Suppose that the salvage value is only half what is projected. Does this make a difference in the outcome? Does salvage value have any real bearing on the companys decision?
The Yurdone Corporation wants to set up a private cemetery business. According to the CFO, Barry M. Deep, business is "looking up." As a result, the cemetery project will provide a net cash inflow of $105,000 for the firm during the first year, and the cash flows are projected to grow at a rate of 5 percent per year forever. The project requires an initial investment of $1,580,000. a-1. What is the NPV for the project if the company's required return is 10 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV a- If the company requires a return of 10 percent on such undertakings, should the 2. cemetery business be started? Yes O No b. The company is somewhat unsure about the assumption of a growth rate of 5 percent in its cash flows. At what constant growth rate would the company just break even if it still required a return of 10 percent on investment? (Do not round…
The Yurdone Corporation wants to set up a private cemetery business. According to the CFO, Barry M. Deep, business is “looking up.” As a result, the cemetery project will provide a net cash inflow of $145,000 for the firm during the first year, and the cash flows are projected to grow at a rate of 4 percent per year forever. The project requires an initial investment of $1,900,000. a-1. What is the NPV for the project if the company's required return is 11 percent? The company is somewhat unsure about the 4 percent growth rate assumption in its cash flows. At what constant growth rate would the company just break even if it still required a return of 11 percent on investment?
The Yurdone Corporation wants to set up a private cemetery business. According to the CFO, Barry M. Deep, business is "looking up." As a result, the cemetery project will provide a net cash inflow of $180,000 for the firm during the first year, and the cash flows are projected to grow at a rate of 4 percent per year forever. The project requires an initial investment of $2.2 million. a-1. What is the NPV for the project if the company's required return is 11 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV a-2. If the company requires an 11 percent return on such undertakings, should the cemetery business be started? b. ON O o Yes The company is somewhat unsure about the 4 percent growth rate assumption in its cash flows. At what constant growth rate would the company just break even if it still required a return of 11 percent on investment? (Do not round intermediate calculations and enter your answer as a percent rounded to…
The Yurdone Corporation wants to set up a private cemetery business. According to the CFO, Barry M. Deep, business is "looking up." As a result, the cemetery project will provide a net cash inflow of $95,000 for the firm during the first year, and the cash flows are projected to grow at a rate of 4 percent per year forever. The project requires an initial investment of $1,480,000.    a-1 What is the NPV for the project if the company's required return is 11 percent? b. The company is somewhat unsure about the assumption of a growth rate of 4 percent in its cash flows. At what constant growth rate would the company just break even if it still required a return of 11 percent on investment?
The Yurdone Corporation wants to set up a private cemetery business. According to the CFO, Barry M. Deep, business is “looking up.” As a result, the cemetery project will provide a net cash infl ow of $85,000 for the fi rm during the fi rst year, and the cash fl ows are projected to grow at a rate of 6 percent per year forever. The project requires an initial investment of $1,400,000. a. If Yurdone requires a 13 percent return on such undertakings, should the cemetery business be started?  b. The company is somewhat unsure about the assumption of a 6 percent growth rate in its cash fl ows. At what constant growth rate would the company just break even if it still required a 13 percent return on investment?
The Yurdone Corporation wants to set up a private cemetery business. According to the CFO, Barry M. Deep, business is "looking up". As a result, the cemetery project will provide a net cash inflow of $93,000 for the firm during the first year, and the cash flows are projected to grow at a rate of 5 percent per year forever. The project requires an initial investment of $1,460,000.    a-1 What is the NPV for the project if the required return is 10 percent? (A negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)      a-2 If the company requires a return of 10 percent on such undertakings, should the firm accept or reject the project? multiple choice Accept Reject    b. The company is somewhat unsure about the assumption of a growth rate of 5 percent in its cash flows. At what constant growth rate would the company break even if…
The Yurdone Corporation wants to set up a private cemetery business. According to the CFO, Barry M. Deep, business is "looking up". As a result, the cemetery project will provide a net cash inflow of $92,000 for the firm during the first year, and the cash flows are projected to grow at a rate of 4 percent per year forever. The project requires an initial investment of $1,450,000. a-1 What is the NPV for the project if the company requires a return of 11 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV $ a-2 Should the company accept or reject the project? Reject Accept b. The company is somewhat unsure about the assumption of a growth rate of 4 percent in its cash flows. At what constant growth rate would the company just break even if it still required a return of 11 percent on investment? (Do not round intermediate calculations. Enter your…
The Yurdone Corporation wants to set up a private cemetery business. According to the CFO, Barry M. Deep, business is "looking up." As a result, the cemetery project will provide a net cash inflow of $107,000 for the firm during the first year, and the cash flows are projected to grow at a rate of 3 percent per year forever. The project requires an initial investment of $1,600,000. What is the NPV for the project if the company's required return is 12 percent? If the company requires a return of 12 percent on such undertakings, should the cemetery business be started? The company is somewhat unsure about the assumption of a growth rate of 3 percent in its cash flows. At what constant growth rate would the company just break even if it still required a return of 12 percent on investment?
The Yurdone Corporation wants to set up a private cemetery business. According to the CFO, Barry M. Deep, business is "looking up." As a result, the cemetery project will provide a net cash inflow of $122,000 for the firm during the first year, and the cash flows are projected to grow at a rate of 5.5 percent per year forever. The project requires an initial investment of $1,450,000 a. If the company requires a return of 15 percent on such undertakings, what is the NPV of the project? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b. The company is somewhat unsure about the assumption of a growth rate of 5.5 percent in its cash flows. At what constant growth rate would the company just break even if it still required a return of 15 percent on its investment? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. a. NPV b. Minimum growth rate