You are faced with making a decision on a large capital investment proposal. The capital investment amount is $640,000. Estimated annual revenue at the end of each year in the eight year study period is $180,000. The estimated annual year-end expenses are $42,000 starting in year one. These expenses begin decreasing by $4,000 per year at the end of year four and continue decreasing through the end of year eight. Assuming a $20,000 market value at the end of year eight and a MARR = ɛ =12% per year, answer the following questions.
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What is the ERR of this proposal? Is it acceptable?
Please write it on a paper with clear and readable solutions. Thanks
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- The following cash flows result from a potential construction project for your company: 1. Receipts of $565,000 at the start of the contract and $1,200,000 at the end of the fourth year 2. Expenditures at the end of the first year of $400,000 and at the end of the second year of $900,000 3. A net cash flow of $0 at the end of the third year. A Using an appropriate rate of return method (Approximate ERR), for a MARR of 20%, should your company accept this project (Perform all calculations using 5 significant figures and round your answer to one decimal place. Also remember that text answers are case-sensitive):? Answers entered using text are case sensitive! What is the approximate ERR for this project? Number 5 Should your company undertake this project? (Enter either 'Yes' or 'No'): 198 团Net present value (NPV) of the project =Single payoff x PVIAF (10.20%, 9 years) - initial outlay = $6,947 x 0.42340 - $2,182 = $759.39 What's the equation for the bolded item?Determine to the nearest percent the IRR of the following projects: a. An initial outlay of $10,000 resulting in a free cash flow of $2.000 at the end of year 1, $5,000 at the end of year 2, and $8,000 at the end of year 3. b. an initial outlay of $10,000 resulting in a free cash flow of $8,000 at the end of year 1, $5,000 at the end of year 2, and $2,000 at the end of year 3. c. an initial outlay of $10,000 resulting in the free cash flow of $2,000 at the end of years 1 through 5 and $5,000 at the end of year 6.
- A bank is in the processing of rescheduling a $10 million loan paying 14% interest. If liquidated, it expects to receive $8.4 million. The rescheduling terms are as follows: Amount $10,000,000 in year 0 New maturity in years 5 Interest rate 8% Principal payments in millions $5,000,000 each in years 4 and 5 Upfront-fee 1.00% Cost of capital after rescheduling 14.00% Should the bank reschedule the loan? A Yes, reschedule the loan because the NPV is greater than liquidation value B No, do not reschedule the loan because the liquidation value is lower than the NPV C Reschedule the loan only if the cost of capital after rescheduling is 12% D Reschedule the loan only if the cost of capital after rescheduling is 15%A corporate bond has a face value of $1000 with a maturity date 20 years from today. The bond pays interest semiannually at a rate of 8% based on the face value (this means 8%/yr/semi). The interest rate paid on similar corporate bonds has decreased to a current rate of 6%/yr/semi (this would be i – the yield rate). What is the market value of this bond, or what should an investor pay for the bond?Capital Investment Decision:Accounting Rate-of-Return Method Boink Corporation manufactures metal hard hats for on-site construction workers. Recently, management has tried to raise productivity to meet the growing demand from the real estate industry. The company is now thinking about buying a new stamping machine. Management has decided that only capital investments that yield at least a 14 percent return will be accepted. The new machine would cost $325,000; revenue would increase by $98,400 per year; the residual value of the new machine would be $32,500; and operating cost increases (including depreciation) would be $74,600.Using the accounting rate-of-return method, decide whether the company should invest in the machine. Show all computations to support your decision.
- You have agreed to make investment in your friends agricultural farm. This would require an amount of $20,000 as initial investment on your part. Your friend promises you revenue (before expenses) of $3600 per year the first year and thereafter the revenue increases by $200 per year. Your share of the estimated annual expenses is $1000. You are planning to invest for six years. Your friend has made the commitment to buyout your share of the business at that time for $24000. You have decided to set a personal MARR of 15% per year. Judge the profitability of the investment project by using Future Worth (FW) method.If one account receives a benefit in the form of cash, goods or services etc, there must be equal loss of benefit by another account. This refers to? a. bookkeeping b. single entry system c. accounting d. double entry system A corporate jet costs $1,350,000 and will incur $200,000 per year in maintenance costs. The jet can be sold for $650,000 after 5 years. What is the capital recovery? MARR = 15% a. $506,310 b. $306,310 c. $270,000 d. $650,000Prepare a cashflow to forecast and use investment appraisal techniques to calculate Net Present Value (NPV), Return on Capital (ROC) and Payback Period (PB) for the BioMet face pay project. Do the project should go ahead and why?
- Business Decisions Sharon, the owner of the Brentwood Motel, is planning to renovate all the rooms in her motel. There are two plans before her. Plan A calls for an immediate cash outlay of $400,000, whereas plan B calls for an immediate outlay of $200,000. Sharon estimates that adopting plan A would yield an income stream of f(t) = 3,060,000e0.03t dollars/year for the next 5 years, whereas adopting plan B would yield an income stream of g(t) = 3,200,000 dollars/year for the next 5 years. If the prevailing rate of interest is 4%/year compounded continuously, which plan will yield the higher net income (in dollars) at the end of 5 years? plan A plan BSuppose Omni Consumer Products's CFO is evaluating a project with the following cash inflows. She does not know the project's initial cost; however, she does know that the project's regular payback period is 2.5 years. Year Cash Flow Year 1 $350,000 Year 2 $400,000 Year 3 $475,000 Year 4 $475,00 If the project's weighted average cost of capital (WACC) is 9%, what is its NPV? $373,562 $336,206 $317,528 $429,596Consider the following cash flow profile: End of Year Cash Flow Cumulative CF $6,000 1 -$2,000 $1,000 -$8,800 4 $2,600 • Calculate cumulative cash flows for periods 0 through 5 (report them in your answer), then apply the Norstrom's Rule. What is your conclusion on the number of IRR (rirr) values? It is known that rirr is in the range [8%,9%J. Use linear interpolation to approximate i.