Initial Equipment $65,000 Project Life 3 Years Sales $55,000 Variable Costs $25,000 Fixed Costs $10,000 Tax rate 26% Cost of Capital 10% Ending Book Value $10,000 Sales Price at Year 3 $5,000 NetWorking Capital $10,000 CALCULATE THE INITIAL COSTS, CALCULATE THE OPERATING CASH FLOW,CALCULATE THE TERMINAL NON OPERATING CASH FLOW, CALCULATE THE NPV. please show yourwork and formulus for the answers

ParticularsYear 1Year 2 Year 3Sales550005500055000(Variable…

Answered: Initial Equipment $65,000 Project Life…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 2PA

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Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year for 5 years. Project L costs $25,000 and is expected to produce cash flows of $7,400 per year for 5 years. Calculate the two projects’ NPVs, IRRs, MIRRs, and PIs, assuming a cost of capital of 12%. Which project would be selected, assuming they are mutually exclusive, using each ranking method? Which should actually be selected?
The cost data for two projects are given below. (a) Draw the cashflow diagram of Project 1. (b) Determine the better alternative using the annual cash flow analysis. Project 1 Project 2 $200,000 $180,000 24,000 Initial cost Net Annual Benefit 30,000 Salvage value Life in years 45,000 20,000 13 10 MARR 6%
Q1: For the machines indicated below. Consider i= 10% per year First cost Annual cost Salvage value Life duration Machine A 20,000 $ 5,000 $ 7,500 $ 3 Machine B 25,000 4,000 6,000 4 A- Draw cash flow diagram for each machine for one cycle of each project B- Draw cash flow diagram for each project considering the LCM life cycle (Hint: different project duration, need to have the LCM life cycle) C- Compare the machines to select best alternative one based on Present worth analysis method D- Repeat part B considering Future worth analysis
Consider the following information about a project: PROJECT YEAR O YEAR 1 YEAR 2 YEAR 3 YEAR 4 COSTS $160,000 $43,000 $50,000 $50,000 $64,000 BENEFITS $0 $400,000 $400, 000 $500,000 $500,000 a) Calculate the NPV assuming 10% discount rate b) Determine in which year will be the payback c) Calculate (ROI)? Provide the detail answer for your calculation.
You are considering the following investment activity. The facts are the following: Required investment 300,000.00 Discount Rate 9% Life of project 7.00 Years Net income for the project Sales 140,000.00 Expenses Material 25,000.00 Labor 35,000.00 235000 Overhead 15,000.00 Total Expenses 75,000.00 Net Income 65,000.00 What is the NPV of this investment? 2,714,193.00 What is the IRR of this investment? 11646% Would you fund this project? yes Show your work below Year 0 -300,000.00 1 65,000.00 2 65,000.00 3 65,000.00 4 65,000.00 5 65,000.00 6 65,000.00 7 65,000.00
You are given the following cash flow information for Project A: Project A PV Outflows TV Inflows Year 0 -$150,000.00 1 $80,000.00 2 -$25,000.00 3 $50,000.00 4 $80,000.00 5 -$30,000.00 6 $75,000.00 -$150,000.00 $75,000.00 Totals Now assume that the project's cost of capital is 16.0 percent, but that its true reinvestment rate is 25.0 percent. Given this information, determine the difference between the project's net present value (NPV) and its modified net present value (MNPV). O $45,129.36 O $46,411.47 O $44,701.99 $45,556.73 $45,984.10
Investment required Present value of cash inflows - Net present value Life of the project. Internal rate of return 1 Required 1 $ (270,000) 336,140 $ 66,140 Project 6 years 18% Complete this question by entering your answers in the tabs below. Required 2 Compute the profitability index for each investment project. Note: Round your answers to 2 decimal places. Profitability Index 2 $ (450,000) 522,970 $ 72,970 Project Number 3 years 19% The net present values above have been computed using a 10% discount rate. Limited funds are available for investment, so the company can't accept all of the available projects. Required: 1. Compute the profitability index for each investment project. 2. Rank the four projects according to preference, in terms of net present value, profitability index, and internal rate of return. 3 $ (360,000) 433,400 $ 73,400 12 years. 14 $ (480,000) 567,270 $ 87,270 6 years 16%
A project has cash flows of -$35,000, $0, $10,000, and $42,000 for Years 0 to 3, respectively. The required rate of return is percent, you should the project. 15 percent. Based on the internal rate of return of O 24.76; accept O 13.96; accept O 14.92; reject O 15.21; accept A Click Submit to complete this assessment. Question 30 of 30 Save and Submit
Based on the cash flows given below, calculate the PI of a project that has a required rate of return of 12 percent. Also, indicate whether the project should be accepted. (Round answer to 2 decimal places, e.g. 25.25.) Year 0: -$94,000 Year 1: $19,000 Year 2: $36,000 Year 3: -$16,000 Year 4: $103,000 PI Type your answer here Accept project Choose your answer here
Data pertaining to investment proposals is provided below: A B D -$40,000 $57,600 $17.600 Investment required -$260,000 $505,900 $245.900 -$125,000 -$640,000 $224,300 $99.300 6. Present vahue of cash inflows $1.021,400 NPV Usefil lfe of the project $381.400 6 Calculate project profitability index to rank proposals in tem of preference. Answer Choices: Project Investment profitability a. proposal Rank index preference 0.95 0.44 0.79 0.60 A 1st B 4th 2nd 3rd Project Investment profitability ь. proposal Rank preference 1.95 index A 1st B 1.44 4th 1.79 1.60 2nd D 3rd Project Investment profitability proposal Rank index preference 0.49 0.31 A 1st B 4th 0.44 2nd 0.37 3rd Project Investment profitability d. proposal Rank index preference A 1.45 1st B 0.94 4th 1.29 1.10 2nd 3rd D
NPV and EVA A project costs $2,500,000 up front and will generate cash flows in perpetuity of $240,000. The firm’s cost of capital is 9%. a. Calculate the project’s NPV. b. Calculate the annual EVA in a typical year. c. Calculate the overall project EVA and compare to your answer in part a
Accounting Draw the cash flow diagram for the given project below and then calculate the project net profit. The following table shows the activities description, dependency, duration, and cost elements. Assume the followings: Project overhead 8%. Tax 3%. Bond 1.25%. Profit 6%. Interest rate 9% per year. Down payment 10% with a guarantee letter, which costs 0.25% per month paid to the bank at the project start date. A performance guarantee letter of 10% will be submitted from contractor at the project begin. Invoices are submitted every month and will be paid a month later. Retention 10% and will be paid at the last invoice. Subcontractors: retention 10% will be paid at the last invoice, down payment 20%. Labor: labor expenses to be paid bi-weekly. Equipment: equipment expenses

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