Answered: A permanent (life = infinity) project…

A permanent (life = infinity) project has the following estimates: First cost = -20 M, Annual cost = - 4 M, and Annual revenue = 8 M. At MARR = 10%, the annual worth of the project equals:

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 1P: A project has an initial cost of 40,000, expected net cash inflows of 9,000 per year for 7 years,...

See similar textbooks

Related questions

Q: project requires an initial, up-front (at t=0) capital expenditure of $11,820. It then generates…

A: In this we to calculate present value of cash flow and from that we have to calculate net present…

Q: The initial cost of a project is 2,180,441 and annual income is 597,733. The expected life to be 12…

A: Capital budgeting is the process in which various projects and alternatives are evaluated and…

Q: A permanent (life = infinity) project has the following estimates: First cost = -20 M, Annual cost =…

A: The question gives the following information:

Q: A project has an initial cost of $60,000, expected net cash inflows of $15,000 per year for 10…

Q: If a project costs $120,000 and is expected toreturn $40,000 annually, how long does it take…

Q: A project has an initial cost of $60,000, expected net cash inflows of $10,000 per year for 10…

A: The project NPV is calculated as present value of cash inflows less initial cost

Q: project's discounted payback period

A: Discounted Payback Period: Discounted payback period means how much time the discounted values of…

Q: The initial cost of a project is 2,180,441 and annual income is 597,733 . The expected life to be 12…

A: Initial Cost = 2,180,441 Annual Income = 597,733 Life = 12 years MARR = 15%

Q: Project K costs $51275, its expected net cash inflows are $13000 per year for 7 years, and its WACC…

A: Modified internal rate of return (MIRR) measures the attractiveness of an investment.It is used to…

Q: Suppose a project costs $2,200 and produces cash flows of $640, $800 and $1,900 in each of the first…

A: IRR can be calculated by following function in excel IRR can be calculated by following function…

Q: XYZ company has made three different estimates for a target project as shown in the following table:…

A: The Annual Worth: The annual worth turns the NPV of a project into a series of uniform cash flows…

Q: A project requires an initial investment of $170,000 and has a project profitability index of 0.350.…

A: Profitability Ratio The Profitability Index (PI) measures the ratio between the present value of…

Q: For a proposed manufacturing plant, a fixed capital investment of P11,000,000 is required together…

A: The question is related to Capital Budgeting. The Rate of Return is calculated with the help of…

Q: Some particulars for a project are as follows. Initial Capital Cost in year 0 ($Mn) Follow-up…

A: The overall cost of an asset across its life cycle, including original capital expenses, maintenance…

Q: Find the equivalent present worth of the following 6-year project using the following data; purchase…

A: Present Worth: It is the present value of cash flows including all costs and savings. The cash…

Q: A project has an initial cost of $40,000, expected net cash inflows of $9,000 per year for 7 years,…

A: The Internal rate of return is one of the capital budgeting method under which the projects are…

Q: A project requires an initial outlay of $80000 and produces a return of $20000 at the end of year 1,…

A: Solution:- IRR (Internal Rate of Return) means the rate at return the project is yielding. It is the…

Q: Determine the average rate of return for a project that is estimated to yield total income of…

A: Average rate of return = ? Initial investment = $608,000 Average investment = 1/2 (cost -…

Q: A project has an initial cost of $50 000, net annual cash inflows of $20 000, and a $2 000 salvage…

A: Rate of return is the return on the profit on investment, It can change the value of investment,…

Q: Determine the average rate of return for a project that is estimated to yield total income of…

Q: A project has an initial cost of $40,000, expected net cash inflows of $9,000per year for 7 years,…

A: NPV abbreviated as Net Present Value is the difference between the present value of cash inflows and…

Q: What is the equivalent annual cost for a project that requires a $50,000 investment at time-period…

A: Given, Initial Investment = $50,000 Annual Expense = $10,000 Opportunity cost = 10%

Q: You are considering an investment in a project that has an initial cost of $150,000; annual , cost…

A: Minimum need annual revenue will be calculated using excel goal seek function

Q: a. Determine the net present value of Project 1 over a six-year life with residual value, assuming a…

A: Net present value is a capital budgeting technique that shows the profitability of the project by…

Q: Average Rate of Return Determine the average rate of return for a project that is estimated to yield…

A: Average annual income = $665,820/6 Average annual income = $110,970 Average investment = ($731,600…

Q: Consider the following set of independent investment projects: (a) For a MARR of 10%, compute the…

A: Compounding and discounting are two different techniques which are used to measure the effect of…

Q: Average Rate of Return Determine the average rate of return for a project that is estimated to yield…

A: It is also known by the name of the accounting rate of return. We can evaluate by dividing average…

Q: A project has an initial cost of $65,000, expected net cash inflows of $14,000 per year for 9 years,…

A: NPV is the sum of present value of future cashflows

Q: The construction of a bypass road needs a capital investment of $200,000 and $10,000 would be…

A: The Discounted Payback Period: The discounted payback period is an indicator that gives the number…

Q: A project has an initial cost of $40,000, expected net cash inflows of $9,000 per year for 7 years,…

A: Solution:- We know, Net Present value (NPV) means the net present value of cash inflows after…

Q: The construction of a bypass road needs a capital investment of $200,000 and $10,000 would be…

A: The following information is given in the question Particulars Amount Investment 2,00,000…

Q: Determine the average rate of return for a project that is estimated to yield total income of…

A: 1. Compute the estimated average annual income: Estimated average annual income=$484,4404…

Q: You are considering a project with the following financial data: Required initial investment at n =…

A: The capital budgeting is a technique that helps to analyze the profitability of the project.

Q: Average Rate of Return Determine the average rate of return for a project that is estimated to…

A: Average Rate of Return is the average rate of profit earned over the investment made. Example: If…

Q: A project with a life of 10 has an initial fixed asset investment of $25,620, an initial NWC…

A: Equivalent Annual Cost(EAC) is the composition of annual cash outlay and annuity for initial cash…

Q: A project has an initial cost of P52,125, expected net cash inflows of P12,000 per year for 8 years,…

A: NPV is the difference between resent value of all cash inflows and initial investment. NPV =Present…

Q: Determine the average rate of return for a project that is estimated to yield total income of…

A: Average rate of return = Average Annual income / Initial investment where, Average Annual income =…

Q: A project requires an investment of $2,500 and has a net present value of $430. If the internal rate…

A: The ratio that evaluates the profitability of the investment is term as the profitability index…

Q: A five-year project has an initial fixed asset investment of $300,000, an initial NWC investment of…

A: Equivalent annual cost (EAC) is the annual cost of owning and maintaining an asset determined by…

Q: A project has an initial cost of $50,000, expected net cash inflows of $8,000 per year for 11 years,…

A: The concept of time value of money states that worth of money changes with passage of time. This is…

Q: o ha

A: Maximum initial investment should be equal to the present value of annual cash flows. This can be…

Q: The project’s payback is 1.5 years, and it has a weighted average cost of capital of 10 percent.…

A: WACC = 10% Year Cash Flow 0 1 400 2…

Q: Given the net present value (NPV) of Project A is -$500,000, Project B is $200,000 and Project C is…

A: Concept. NPV is net present value. It can be defined as sum of present value of all future cash…

Q: Details for two project proposals are shown below: Initial Cost Project Life (years) MARR (% per…

A: Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…

Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

A permanent (life = infinity) project has the following estimates: First cost = -20 M, Annual cost = - 4 M, and Annual revenue = 8 M. At MARR = 10%, the annual worth of the project equals:

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Determine the B/C ratio for the following project.First Cost = P100, 000Project life, years = 5Salvage value = P10, 000Annual benefits = P60, 000Annual O and M = P22, 000Interest rate= 15%
A project has an initial cost of $90,400, a life of 9 years, and equal annual cash inflows. The required return is 8.4 percent. According to the profitability index decision rule, what is the minimum annual cash flow necessary to accept the project?
Consider the following sets of investment projects: Compute the equivalent annual worth of each project at i = 10%, and determine the acceptability of each project.
A permanent (life = infinity) project has the following estimates: First cost = -20 M, Annual cost = - 4 M, and Annual revenue = 8 M. At MARR = 10%, the present worth of the project equals: O - 40 M 2M О - 16 М 20 М
Suppose that a project requires an initial investment of 20 000 USD at the begynning of year 1. The project is expected to return 25 000 USD at the end of year 1. The required rate of return for the project is 20%. Calcualte the Net Present Value of the project as well as the Internal Rate of Return.
A project has an initial cost of $40,000, expected net cash inflows of $9,000 per year for 7 years, and a cost of capital of 11%. Requirements: What is the project’s NPV? What is the project’s IRR? What is the project’s PI? What is the project’s payback period? What is the project’s discounted payback period?
A project has an initial cost of P52,125, expected net cash inflows of P12,000 per year for 8 years, and a cost of capital of 12%. a.) What is the project's NPV? b.) What is the project's IRR? c.) What is the project's PI? d.) What is the project's payback period?
A project has an initial cost of $40,000, expected net cash inflows of $9,000 per year for 7 years, and a cost of capital of 11%. a. What is the project’s NPV? (Hint: Begin by constructing a time line) b. What is the project’s IRR? c.what is the project’s payback period?
A project has an initial cost of P52,125, expected net cash inflows of P12,000 per year for 8 years, and a cost of capital of 12%. What is the project’s NPV? What is the project’s IRR? What is the project’s PI? What is the project’s payback period?
Calculate the capitalized cost of a project that has an initial cost of P3M. The annual operating cost will be P100,000 at the end of every year for the first five years and P160,000 thereafter. Assume i=15%.
A project has an initial cost of $50 000, net annual cash inflows of $20 000, and a $2 000 salvage value after five years. Which of the following gives the project's approximate external rate of return (i*) if MARR=10 percent?
Calculate the NPV of a project under consideration with the following information: project life = 5 years; project cost = $1,500,000; unit sales = 25,000; unit price = $200; unit variable cost = $170; fixed costs = $250,000; tax rate = 34%; rate of return = 12%.