A machine-building factory owns a hydraulic press to be used in the production of its products. wants to manufacture. Since the production of the hydraulic press is not continuous, it will be completed in 2 years. In the 1st year,17.500 £ with year-end value and 12.500£ with year-end value in the second year. production cost incurred. For the following 5 years, the incomes in the table were obtained with year-end values. YEAR 4 6. income(1000£) 3. 7,5 7,5 10 10 Annual revenues are the values obtained after deducting operating costs. At the end of the 7th year, the company will be able to sell the machine to another company for 5,000 £. According to this information; a) What is the NET PRESENT VALUE of the flows according to the annual interest rate of 15%? b) What is the yield (Internal Profitability Ratio) % of this project? c) What is the PAYBACK PERIOD of the project based on the annual interest rate of 25%?
A machine-building factory owns a hydraulic press to be used in the production of its products. wants to manufacture. Since the production of the hydraulic press is not continuous, it will be completed in 2 years. In the 1st year,17.500 £ with year-end value and 12.500£ with year-end value in the second year. production cost incurred. For the following 5 years, the incomes in the table were obtained with year-end values. YEAR 4 6. income(1000£) 3. 7,5 7,5 10 10 Annual revenues are the values obtained after deducting operating costs. At the end of the 7th year, the company will be able to sell the machine to another company for 5,000 £. According to this information; a) What is the NET PRESENT VALUE of the flows according to the annual interest rate of 15%? b) What is the yield (Internal Profitability Ratio) % of this project? c) What is the PAYBACK PERIOD of the project based on the annual interest rate of 25%?
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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Transcribed Image Text:A machine-building factory owns a hydraulic press to be used in the production of its products.
wants to manufacture. Since the production of the hydraulic press is not continuous, it will be completed in
2 years. In the 1st year,17.500 £ with year-end value
and 12.500£ with year-end value in the second year. production cost incurred.
For the following 5 years, the incomes in the table were obtained with year-end values.
YEAR
3.
4
income(1000£)
3
7,5
7,5
10
10
Annual revenues are the values obtained after deducting operating costs. At the end of the 7th year, the
company
will be able to sell the machine to another company for 5,000 £. According to this information;
a) What is the NET PRESENT VALUE of the flows according to the annual interest rate of 15%?
b) What is the yield (Internal Profitability Ratio) % of this project?
c) What is the PAYBACK PERIOD of the project based on the annual interest rate of 25%?
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