Q5RevenuesCost of GoodsSoldGross ProfitSelling, Generaland AdminDepreciationEBITIncome tax (35%)IncrementalEarningsCapitalPurchasesChanges to NWCYear 0 Year 1-280,000Year 2140,00 440,0000-70,00 220,0000Year 3 Year 4440,00 350.0000220,00 175,000070,000 220,00 220,0000-6400 64006400175,000640075.00 75.000 75,000 75,0000-11,40 138,60 138.60 93,6000003990 -48,5148,51032,7600-7410 90,090 90,090 60,840-5.000 -5,000 -5,000 -5,000A garage is installing a new "bubble-wash" car wash. It will promote the car wash as a fun activity for the family, and it is expected that thenovelty of this approach will boost sales in the medium term. If the cost of capital is 10%, what is the net present value (NPV) of thisproject? Show all calculations

Net present value is determined by deducting the initial investment from the current value of cash…

Answered: A garage is installing a new…

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

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1) CALCULATE THE B/C RATIO AND STATE WHETHER THE PROJECT IS WORTH DOING (YES/NO). Villa Homes wants to assess the profitability of a new project in which it builds a community center inside a growing neighborhood. Assume that the company leases the equipment it needs for $100,000, that the inflation rate is 4% and that the company expects to see a $200,000 annual profit increase over the next three years. Villa Homes can use the BCR formula to calculate the overall value of this new project.
You work for an outdoor play structure manufacturing company and are trying to decide between the following two projects: Year-End Cash Flows ($ thousands) Project 0 1 2 Playhouse (minor project) -30 19 18 Fort (major poject) -75 38 52 You can undertake only one project. If your cost of capital is 6%, which one should you choose? O Playhouse because the incremental IRR is 10.56% O Playhouse because the IRR of Fort is lower Playhouse because the NPV of Playhouse is higher O Fort because the incremental IRR is 10.56%
After these previous calculations, the project still requires a big initial investment, and other options are being considered. We were considering adapting our production line, in order to produce some parts for electric automobiles, this way, and after analyzing the possible market opportunities, we could expect to obtain net revenues of $40,000 per month for at least the next 8 years. a) What is the maximum that we should invest on this project if we consider a cost of capital of 4%? b) If we ask for a loan of 2,000,000 at an annual interest rate of 2% compounded semiannually, to be paid in 8 years, how much would you have to pay every semester to cover the loan?
A neighborhood shopping center is expected to generate after-tax cash flow of $750,000 per year (at end of year) indefinitely. If an interested buyer has a cost of money of 13 %, how much will he be willing to pay for this shopping center? A $6.64 million B) $7.50 million $5.77 million D $2.21 million
You are thinking of buying an old house, renovating it, and then selling it. Your expected cash flow is as follows: Year 1 Year 3 Year 0 (present) -330,000 Year 2 660,000 -180,000 If you can borrow the money at 11% interest, would this project be profitable? Show your workings.
How do I solve this accounting question?
Do all pl
Consider a project to supply your church with 55,000 gallons of hand sanitizer annually for church services. You estimate that you will need an initial Gh¢4,200,000 in terms of investment to get the project started. The project will last for 5 years. The project will bring in annual cash flows of Gh¢1,375,000. It also estimates a salvage value of Gh¢300,000 after dismantling costs. Your cost of capital is 13 percent. Assume no taxes or depreciation. Required: What is the NPV of the sanitizer project? Should you pursue this project?
Consider a project to supply your church with 55,000 gallons of hand sanitizer annually for church services. You estimate that you will need an initial Gh¢4,200,000 in terms of investment to get the project started. The project will last for 5 years. The project will bring in annual cash flows of Gh¢1,375,000. It also estimates a salvage value of Gh¢300,000 after dismantling costs. Your cost of capital is 13 percent. Assume no taxes or depreciation. Required: d) You just received additional information that suggests that your base case (answer to a), best case (b) and worst case (c) scenarios have probabilities of 0.35, 0.35 and 0.30 respectively. What will be the expected NPV of the sanitizer project. What about the standard deviation of the sanitizer project? Do you think the project is still viable?
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Solve the following three independent scenarios: A grocery store is considering the purchase of a new refrigeration unit with an initial investment of $412,000, and the store expects a return of $100,000 in year one, $72,000 in years two and three, $65,000 in years four and five, and $38,000 in year six and beyond, what is the payback period? Payback period years. Round your Payback Period (PB) answer to two decimal places (i.e. 12.34). An auto repair company needs a new machine that will check for defective sensors. The machine has an initial investment of $224,000. Incremental revenues, including cost savings, are $120,000, and incremental expenses, including depreciation, are $50,000. There is no salvage value. What is the accounting rate of return (ARR)? Accounting Rate of Return (ARR) = Round your ARR answer, in percentage format, to two decimal places (i.e. 12.34%).
You are considering making a movie. The movie is expected to cost $10.1 million up front and take a year to produce. After that, it is expected to make $4.1 million in the year it is released and $1.9 million for the following four years. What is the payback period of this investment? If you require a payback period of two years, will you make the movie? Does the movie have positive NPV if the cost of capital is 10.9% 7 What is the payback period of this investment? The payback period is years. (Round to two decimal places)

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