The production department is proposing the purchase of an automatic insertion machine. T have identified 3 machines and have asked the accountant to analyze them to determine th best cash payback. Machine A P40,000 Machine B Machine C P75,000 Annual Cash Flow P50,000 Average Investment P300.000 P250.000 P500.000
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- Sky Limited is going into the manufacture of Smart Vehicle Tracking Device (SVTD) particularly designed for tracking the commercial vehicles such as lorries and trucks and has identified two potential machines that could be used to produce it. The Finance Manager has produced for the board the following potential cash flows from operating either machine. Year 0 1 2 IAWN O 3 4 5 5 Capital Outlay Cash Inflow Cash Inflow Cash Inflow Cash Inflow Cash Inflow Residual Value Machine A £'000 -4,200 1,200 1,300 1,000 1,400 1,100 700 Machine B £¹000 -4,800 1,100 1,400 1,200 1,000 1,300 900 The company has a cost of capital of 11% Required a) Calculate the Payback period for each of the machines and identify which should be invested in and explain why. b) Calculate the Accounting rate of return for each machine and identify which should be invested in and explain why. c) Calculate the Net present Value of each machine and identify which should be invested in and explain why. d) The Marketing…Consider the decision to purchase one of the two machines X or Y, which cost M100 000 and M150 000, respectively, The net cash inflows expected from these two machines are shown in Table 6.1 below Year Machine X Machine Y 10 000 50 000 15 000 50 000 20 000 50 000 4 25 000 50 000 30 000 50 000 40 000 50 000 7 45 000 40 000 Your Task; i) Calculate the PayBack Period (PBP) of machines X and Y ii) Calculate the Return on Investment (ROI) of each machine i) Which machine would you recommend on the basis of the PBP and the ROI and why? 2. 3. 6.The investment committee of Sentry Insurance Co. is evaluating two projects, office expansion and upgrade to computer servers. The projects have different useful lives, but each requires an investment of $1,104,000. The estimated net cash flows from each project are as follows: Net Cash Flow Year OfficeExpansion Server 1 $308,000 $407,000 2 308,000 407,000 3 308,000 407,000 4 308,000 407,000 5 308,000 6 308,000 The committee has selected a rate of 15% for purposes of net present value analysis. It also estimates that the residual value at the end of each project's useful life is $0, but at the end of the fourth year, the office expansion's residual value would be $385,000. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5…
- Creditpoint LLC has received the following information for a Project The Present Value of Cash Inflow is OMR 10000 The Present Value of Cash Outflow ( Investments) is OMR 7000 What is the Net Present Value of the Project? O +3000 O - 3000 O +12000 O 1000he capital investment committee of Iguana Inc. is considering two capital investments. The estimated operating income and net cash flows from each investment are as follows: Year Robotic AssemblerOperating Income Robotic AssemblerNet Cash Flow WarehouseOperating Income WarehouseNet Cash Flow 1 $50,400 $157,000 $106,000 $251,000 2 50,400 157,000 81,000 212,000 3 50,400 157,000 40,000 149,000 4 50,400 157,000 18,000 102,000 5 50,400 157,000 7,000 71,000 Total $252,000 $785,000 $252,000 $785,000 Each project requires an investment of $480,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 10% for purposes of the net present value analysis. Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8…Consider a project with the following cash flows: Time 0 1 2 3 4 5 CF -$5,000 $5,000 $4,000 $2,000 $1,000 -$6,000 Please round your answer to two decimal places. (e.g. 12345.67 for $12,345.67; 12.34 for 12.34%) a) To calculate the MIRR, find the modified cash flow at year 5 b) What does excel (or your calculator) say the IRR is?
- The investment committee of Sentry Insurance Co. is evaluating two projects, office expansion and upgrade to computer servers. The projects have different useful lives, but each requires an investment of $838,000. The estimated net cash flows from each project are as follows: Net Cash Flow Year Office Expansion Server 1 $234,000 $309,000 2 234,000 309,000 3 234,000 309,000 4 234,000 309,000 5 234,000 6 234,000 The committee has selected a rate of 15% for purposes of net present value analysis. It also estimates that the residual value at the end of each project's useful life is $0, but at the end of the fourth year, the office expansion's residual value would be $293,000. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5…The investment committee of Sentry Insurance Co. is evaluating two projects, office expansion and upgrade to computer servers. The projects have different useful lives, but each requires an investment of $838,000. The estimated net cash flows from each project are as follows: Net Cash Flow Year Office Expansion Server 1 $234,000 $309,000 2 234,000 309,000 3 234,000 309,000 4 234,000 309,000 5 234,000 6 234,000 The committee has selected a rate of 15% for purposes of net present value analysis. It also estimates that the residual value at the end of each project's useful life is $0, but at the end of the fourth year, the office expansion's residual value would be $293,000. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665…Hello, how can I solve the activity and what is the answer? Martian Corporation, a space vehicle development company, is starting a new division that will develop the next-generation launch missile engine configuration. Use a hand application of the MIRR method to determine the EROR for the estimated net cash flows (in $1000 units) of $-50,000 in year 0, $14,000 in years 1 through 8, and $-2,000 in year 9. Assume a borrowing rate of 14% and an investment rate of 21% per year. What is the external rate of return?
- Matchroom's investment appraisal committee have worked out the Net Cash flows in the working shown below. Additional details of the project are also given below. Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Net Cashflows 114,285.71 25,528.57 27,795.21 30,257.55 32,932.34 39,694.93 Additional Information The cost of the machine is £ 115,000 with a residual value of £3,857 Matchroom prefer the straight-line method as a method of depreciation For capital investment projects ABC Ltd uses a discount rate of 10% and 20% for their IRR calculations. Calculate the IRR (Internal Rate of Return) of the new machine (using the 10% and 20% discount rates provided). Make use of the template provided above and do not round off your calculations until the final answer. NPVA= number is a negative value, include the minus sign e.g. -100000 |Round off your answer to the nearest whole number with no £ sign. If the NPVB= number is a negative value, include the minus sign e.g. -100000 | Round off your answer to…Iceland Corporation Limited is considering investing in one of two machines – A or B. The initial cost and net cash inflows from each project are shown below. The opportunity cost for both projects is 10% per cent. Cash Flow Machine A Machine B $ $ Initial Cost (6 000 000) (4 500 000) Net Cash Inflows Year 1 1 000 000 1 400 000 Year 2 1 300 000 1 600 000 Year 3 2 300 000 1 600 000 Year 4 1 200 000 1 600 000 Year 5 1 200 000 1 200 000 Required: a) Calculate the ARR on initial capital for machine A and machine B. b) Calculate the ARR on average capital for machine A and machine B. Iceland Corporation Limited is considering investing in one of two machines – A or B. The initial cost and net cash inflows from each project are shown below. The opportunity cost for both projects is 10% per cent. Cash Flow Machine A Machine B $ $ Initial Cost (6 000 000) (4 500 000) Net Cash Inflows Year 1 1 000 000 1 400 000 Year 2 1 300 000 1 600 000 Year 3 2 300 000 1 600 000 Year 4 1 200 000 1 600 000 Year 5 1 200 000 1 200 000 Discount factors at 10% per annum Year Factor 1 0.909 2 0.826 3 0.751 4 0.683 5 0.621 Required: Calculate the payback period for each machine. Based on the payback method, identify the project in which the company should invest, giving ONE reason for your choice. Calculate the net present value (NPV) for machine A and machine B. Based on the NPV, identify the machine that the company should invest in, giving ONE