Cash Payback Period, Net Present Value Analysis, and Qualitative ConsiderationsThe plant manager of Shenzhen Electronics Company is considering the purchase of new automated assembly equipment. The newequipment will cost $144,000. The manager believes that the new investment will result in direct labor savings of $36,000 per year for 10years.Present Value of an Annuity of $1 at Compound InterestYear6%10%12%15%20%10.9430.9090.8930.8700.83321.8331.7361.6901.6261.5282.6732.4872.4022.2832.10643.4653.1703.0372.8552.5894.2123.7913.6053.3532.9914.9174.3554.1113.7853.3265.5824.8684.5644.1603.60586.2105.3354.9684.4873.8376.6.8025.7595.3284.7724.031107.3606.1455.6505.0194.192a. What is the payback period on this project?yearsb. What is the net present value, assuming a 12% rate of return? Use the table provided above. Round to the nearest whole dollar.Net present valuec. What else should the manager consider in the analysis?Depreciation.Taxes and maintenance costs.Depreciation and Taxes.Maintenance costs.Таxes.3.

Here we will use the different tools of capital budgeting. The capital budgeting tools will be used…

. What is the payback period on this project? years . What is the net present value, assuming a 12% rate of return? Use the tal Net present value . What else should the manager consider in the analysis? Depreciation.

. What is the payback period on this project? years . What is the net present value, assuming a 12% rate of return? Use the tal Net present value . What else should the manager consider in the analysis? Depreciation.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Related questions

Q: Can I calculate the Rate of Return using the NPV/initial investment? Why or why not?

A: When an investment is made in a certain project, its future outcomes are measured based on the money…

Q: :If the annual worth value of an alternative is equals to a positive value, we consider this project…

A: MARR is Minimum acceptable rate of return

Q: Using the payback period method, you will accept a project if: its payback period is the same as the…

A: The objective of the question is to understand under what conditions a project would be accepted…

Q: Bruin, Incorporated, has identified the following two mutually exclusive projects: Year Cash Flow…

A: >Please refer to the spreadsheet below for calculation and answer. Cell reference is also…

Q: Bunker Hill Mining Company has two competing proposals: a processing mill and an electric shovel.…

A: Net Present value is present value of cash flow minus initial investment.

Q: cost($) 250,000 250,000 250,000 I profit ($) 20,000 15,000 8,000 ife(years) 30 30 30 al value($) 0…

A: The answer has been mentioned below.

Q: The annual growth rate of your investment can be measured by A. THE ANNUAL MEAN OF YOUR ANNUAL…

A: Several methods have been prescribed to measure the annual growth rate of an investment. We have to…

Q: Additional Information The discount rate used by the company is 12%. 5.2 Use the information…

A: Internal Rate of Return is a techniques in Capital Budgeting through which we can know the actual…

Q: The Payback period as per calculation is 6 Years . Pre determined payback period is 5.5 Years…

A: Solution: Computed payback period = 6 years Required payback period = 5.5 years

Q: Note: Where discount factors are required, use only the present value tables (Appendix 1 and 2)…

A: Capital budgeting is a strategic financial planning process used by companies to evaluate and select…

Q: You are analyzing a proposed project and have compiled the following information: WACC (Required…

A: Company evaluates particular projects on the basis of capital budgeting techniques. The capital…

Q: Net Present Value Method, Internal Rate of Return Method, and Analysis for a Service Company The…

A: Since you have posted multiple parts at once we will solve the first three sub-parts for you. To get…

Q: Crane Inc. is considering an investment project with the following characteristics: internal rate of…

A: The internal rate of return factor is used for commuting the internal rate of return when the annual…

Q: Using the payback and ARR methods to make capital investment decisions Refer to the Hunter Valley…

A: Capital investment decision: The capital investment decision is to be realized by a future value…

Q: Present using the rate of return method (ROR) with the formula. If the NPV is used to determine the…

A: Here, Net Cash Flow is 31250 Rate of Interest is 10% Initial Investment is 100000 NPV is 18462…

Q: 2) Assume that you are considering a project. Its initial after-tax cost is $1,500,000 and it is…

A: IRR is also known as Internal rate of Return. It is a capital budgeting technique which helps in…

Q: Lopez Company is considering three alternative Investment projects below: Project 1 4.3 years…

A: Payback period is the time required to recover initial investment.In case , multiple project…

Q: (a) What is the cash payback period for this proposal? (Round answer to 2 decimal places, e.g.…

A: Cash payback period represents the time period in which our initial investment will be paid back by…

Q: ther things held constant, which of the following would increase the NPV of a project being…

A: NPV = PV of cashflows - Initial Investment

Q: a. What should be your material cost for a project with MARR of 25% to make it into marginally…

A: A project is said to be viable if the sum of the present value of all cash flows is greater than…

Q: Explain how did it get the NPV, the Economic Value Added (EVA), and the Market Value Added (MVA)

A: Capital budgeting is a process that is undertaken by an organization or business to evaluate…

Q: A project requires an initial investment of $6000. It is expected to generate $1000 at the end of…

A: Given:

Q: An organisation is considering a capital investment in new equipment. The estimated cash flows are…

A: NPV is the difference between present value(PV) of cash inflows and initial investment NPV =pv of…

Q: The cash flow diagram below shows the net cash generated (A) year with initial (1) investment…

A: The minimum acceptable rate of return should be one that causes the present value of all cash…

Q: Calculate the Payback Period of Project A (expressed in years, months and days) Calculate the…

A: Accounting rate of return (ARR) and benefit to cost ratio are calculated as shown below.

Q: 3 Which of the following methods of project analysis are biased towards short-term projects? Select…

A: when companies are evaluating investment projects, they often use different financial analysis…

Q: Problem 2. The first cost (FC), life (n), and annual benefits (A) for a prospective project are…

A: ParticularsPessimisticMost likelyOptimisticFirst cost$150,000.00$100,000.00$80,000.00Annual…

Q: Question/ Requirement: Determine each project's payback period.How many years?? *The previous…

A: Payback period of the investment means in how much years cost of the investment can be recovered…

Q: Lopez Company is considering three alternative investment projects below: Project 1 5.1 years…

A: Net present value = Present value of cash inflows - Present value of cash outflows.

Q: When considering a potential capital investment, you determine that the investment will likely have…

A: The question is based on the concept of Financial Management. When we make any potential capital…

Q: For each of the following scenarios, state whether an incremental investment analysis is required to…

A: The minimum acceptable rate of return (MARR), also known as the hurdle rate is the basis of…

Q: Struggling to find the payback period and NPV. I believed pay period to be annual net…

A: Net present value :— It is the difference between present value of net cash flow and initial…

Q: A company is evaluating whether a new potential project should be taken on. The project will require…

A: Life of project is 6 years Cost of Capital is 9% To Find: Discounted payback period Net present…

Q: Please answer as quickly as possible A project is currently under review. An initial investment of…

A: A typical capital budgeting project has been provided. The magnitude and timing of the cash flows…

Q: What is the criterion to be taken as basis when deciding on the payback period? Is the payback…

A: Initial cash outlay means the initial cash expenditure which is required for the purpose of…

Q: Hearne Company has a number of potential capital investments. Because these projects vary in nature,…

A: The technique used to calculate the net present value of cash inflows and outflows for each project…

Q: A new project will cost $80,000 initially and will last for 7 years, at which time its salvage value…

A: The question is based on the concept of sensitivity analysis of capital budgeting. The analysis…

Q: Melton Manufacturing Ltd is considering two alternative investment projects. The first project calls…

A: Net Present Value (NPV): The net present value is a popular capital budgeting technique used in…

Q: Use the information provided to answer the questions.5.1 Use the information provided below to…

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

Q: Calculate the:Net Present Value (NPV) of the investment and comment on the viability of the…

A: Net present value is the method used in capital budgeting for evaluating the profitability of the…

Q: Note: Where applicable, use the present value tables provided in APPENDICES 1 and 2 that appear…

A: Hi studentSince there are multiple subparts asked, we will answer only first three subparts.Capital…

Q: We are analyzing a project and have gathered the following data. Based on this data, what is the…

A: Average accounting rate of return =Average net income/initial investment

Q: ears, with a predicted 0.8 billion RMB/year revenue and operation fee 0.45 billion RMB plus erprise…

A: Straight line method of depreciation is mostly used by accountant even though not so accurate but…

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

Cash Payback Period, Net Present Value Analysis, and Qualitative Considerations
The plant manager of Shenzhen Electronics Company is considering the purchase of new automated assembly equipment. The new
equipment will cost $144,000. The manager believes that the new investment will result in direct labor savings of $36,000 per year for 10
years.
Present Value of an Annuity of $1 at Compound Interest
Year
6%
10%
12%
15%
20%
1
0.943
0.909
0.893
0.870
0.833
2
1.833
1.736
1.690
1.626
1.528
2.673
2.487
2.402
2.283
2.106
4
3.465
3.170
3.037
2.855
2.589
4.212
3.791
3.605
3.353
2.991
4.917
4.355
4.111
3.785
3.326
5.582
4.868
4.564
4.160
3.605
8
6.210
5.335
4.968
4.487
3.837
6.
6.802
5.759
5.328
4.772
4.031
10
7.360
6.145
5.650
5.019
4.192
a. What is the payback period on this project?
years
b. What is the net present value, assuming a 12% rate of return? Use the table provided above. Round to the nearest whole dollar.
Net present value
c. What else should the manager consider in the analysis?
Depreciation.
Taxes and maintenance costs.
Depreciation and Taxes.
Maintenance costs.
Таxes.
3.

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

Step 2

Step 3

Step 4

Step by step

Solved in 4 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

If the net present value of A is +$60 and of B is +$30, then what is the net present value of the combined project?
Indicate how the internal rate of return is calculated using the factor. (answer is in % format) Please don't give solution in an image format thank u
I need to know the Cash payback period for each project, the Net present value, the annual rate of return for each project and finally I need the projects ranked best to worse (1, 2, 3) on their cashpayback, net present value, and annual return. Finally I need to know which is the best project. Question 1 of 1 > E Pharoah Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows. Project Bono Project Edge Project Clayton Capital investment $172,000 $182,000 $202,000 Annual net income: Year 1 14,700 18,900 28,350 2 14,700 17,850 24,150 3 14,700 16,800 22,050 4 14,700 12.600 13,650 5 14,700 9,450 12,600 5 14,700 9,450 12,600 Total $73,500 $75,600 $100,800 Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.)
The economic service life of a project is best described as _____________________? a. Another term for the analysis period of a benefit-cost analysis.b. The number of years for which depreciation is on-going for an asset.c. The present worth of the project after taxes.d. The amount of time (usually in years) that an asset should be used to achieve thesmallest annual cost of operation.
2a. Explain the concept of Net Present Value and Discount rates. Gentry Limited is deciding whether to undertake a project which longs for three years. The expected total project cost is 15,000,000 ZMW today and the expected income after three years will be $25,000,000 ZMW. Use a discount rate of 10% to advise Gentry Limited director if this is a good investment or not. Give reasons for your answer.
1. Calvulate the internal rate of return(IRR) of each project and based on this criterion. Indicate which project you would recommend or acceptance.
14. Consider the following possible returns over the next year on an asset Return probability -£40 0.5 £40 0.5 What is the variance of return of the asset.
Consider Supertech and Slowpoke. We find that the expected returns on these two securities are 17.5% and 5.5%, respectively. If the investor with $100 invests $60 in Supertech and $40 in Slowpoke, what is the expected return on a portfolio of these two securities are?
In my accounting class I am learning to find accounting rate of return. To solve for this I subtracted net cash flow- the salvage value divided by the initial investment. Have I done something incorrect?
Below are information relating to three (3) possible projects. Evaluate the projects by filling up the blanks provided for the final answers. Show computations in the yellow pad. Net Cash outlay Annual net cash inflows Annual depreciation expense Expected recovery period Cost of capital Discounted payback period Internal rate of return (approximate) Net Present Value (NPV) Simple Accounting Rate of Return Ranking May P300,000 50,000 20,000 10 years 16% June P120,000 35,000 18,000 6 years 18% Dianay P150,000 55,000 25,000 5 years 22%
The cash flow diagram below shows the net cash generated (A) every year with initial (1) investment requirement for a certain project whose lifetime is n=8 years with negligible (i.e. zero) salvage value at end of life. It is known that a simple payback period is three (3) years. What is the implied minimum acceptable rate of return (MARR) given this information? A >H I yrs.
What is the ERR for this project? Assume that = 12% and MARR = 20% per year. Is this project considered to be profitable? What is the simple payback period?

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS