Aria Acoustics, Inc. projects unit sales for a new seven-octave voice emulation implant as follows: Year Unit Sales 1 73,000 86,000 105,000 97,000 2 3 4 67,000 Production of the implants will require $1,500,000 in networking capital to start. It is expected that networking capital requirements are not changing over the life of the project. Total fixed costs are $3,300,000 per year, variable production costs are $225 per unit, and the units are priced at $375 each. The equipment needed to begin production has an installed cost of $16,500,000. Because the implants are intended for professional singers, this equipment is considered industrial machinery and thus qualifies as a seven-year MACRS property. In five years, this equipment can be sold for about 20 percent of the acquisition cost. The tax rate is 21 percent and the required returns is 18 percent. Based on these preliminary estimates, what is the NPV of the project? What is the IRR?

Aria Acoustics, Inc. projects unit sales for a new seven-octave voice emulation implant as follows: Year Unit Sales 1 73,000 86,000 105,000 97,000 2 3 4 67,000 Production of the implants will require $1,500,000 in networking capital to start. It is expected that networking capital requirements are not changing over the life of the project. Total fixed costs are $3,300,000 per year, variable production costs are $225 per unit, and the units are priced at $375 each. The equipment needed to begin production has an installed cost of $16,500,000. Because the implants are intended for professional singers, this equipment is considered industrial machinery and thus qualifies as a seven-year MACRS property. In five years, this equipment can be sold for about 20 percent of the acquisition cost. The tax rate is 21 percent and the required returns is 18 percent. Based on these preliminary estimates, what is the NPV of the project? What is the IRR?

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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30. KTC Toy Co. is at present spending P400 000.00 annually for the manual operation of its assembly line. To cut costs, three proposals for automation are being considered. Proposal X has an initial equipment cost of P800 000.00, has salvage value of P75 000.00 at the end of six years and results in 65% savings per year on Operations cost. Proposal Y costs P500 000.00, has a six-year life, a salvage value of P50 000.00 and results in 50% savings per year. Proposal Z has an initial cost of P300 000.00, a life of three years with no salvage value. With this proposal, a similar replacement will be available for P350 000.00 and a 45% savings in operations is realized, Determine the best alternative using annual worth analysis and an MARR of 14%, (Ans. ATX = P63 060.83: ATY= P77 279-13; ATZ= P42 101.86; Best alternative is Proposal Y)
Barker Production Company is considering the purchase of a flexible manufacturing system. The annual cash benefits/savDecreased waste$ 75,000Increased quality100.000Decrease in operating costs62,500Increase in on-time deliveries12.500The system will cost S750,000 and will last ten years. The company's cost of capital is 10%.What is the payback period for the flexible manufacturing system?What is the NPV for the flexible manufacturing system?
You are evaluating a project for The Farstroke golf club, guaranteed to correct that nasty slice. You estimate the sales price of The Farstroke to be $400 per unit and sales volume to be 1,000 units in year 1; 1,500 units in year 2; and 1,325 units in year 3. The project has a 3-year life. Variable costs amount to $225 per unit and fixed costs are $100,000 per year. The project requires an initial investment of $165,000 in assets, which can be depreciated using bonus depreciation. The actual market value of these assets at the end of year 3 is expected to be $35,000. NWC requirements at the beginning of each year will be approximately 20 percent of the projected sales during the coming year. The tax rate is 21 percent and the required return on the project is 10 percent. What change in NWC occurs at the end of year 1?
2
You are evaluating a project for The Farstroke golf club, guaranteed to correct that nasty slice. You estimate the sales price of The Farstroke to be $450 per unit and sales volume to be 1,200 units in year 1; 1,325 units in year 2; and 1,000 units in year 3. The project has a 3-year life. Variable costs amount to $250 per unit and fixed costs are $100,000 per year. The project requires an initial investment of $150,000 in assets, which can be depreciated using bonus depreciation. The actual market value of these assets at the end of year 3 is expected to be $30,000. NWC requirements at the beginning of each year will be approximately 20 percent of the projected sales during the coming year. The tax rate is 21 percent and the required return on the project is 10 percent. What is the operating cash flow for the project in year 2? Note: Enter your answer as a whole number. Operating cash flow
You are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that wimpy backhand. You estimate the unit sales price of The Ultimate to be $500 and sales volume to be 1,000 units in year 1; 1,250 units in year 2, and 1,450 units in year 3. The project has a three-year life. Variable costs amount to $225 per unit and fixed costs, excluding depreciation, are $110,000 per year. The project requires an initial investment of $170,000 which is depreciated straight-line to zero over the three-year project life. The expected scrap value of the asset at the end of year 3 is $35,000. Networking capital investment is initially lowered by $80,000 and it will be fully replaced at the end of the project’s life. The tax rate is 34% and the required return on the project is 10%. What is the NPV of this project? Accordingly, what is your decision?
You are evaluating a project for The Farstroke golf club, guaranteed to correct that nasty slice. You estimate the sales price of The Farstroke to be $490 per unit and sales volume to be 1,200 units in year 1; 1,125 units in year 2; and 1,000 units In year 3. The project has a 3-year life. Variable costs amount to $270 per unit and fixed costs are $100,000 per year. The project requires an initial Investment of $138,000 in assets, which can be depreciated using bonus depreciation. The actual market value of these assets at the end of year 3 is expected to be $26,000. NWC requirements at the beginning of each year will be approximately 30 percent of the projected sales during the coming year. The tax rate is 21 percent and the required return on the project is 11 percent. What change in NWC occurs at the end of year 1? (Enter a decrease as a negative amount using a minus sign.) Decrease of
Can someone please help me solve this question using Excel?
We project unit sales for a new household-use laser-guided cockroach search and destroy system as follows: Year 1 2 3 4 5 The new system will be priced to sell at $465 each. The cockroach eradicator project will require $2,000,000 in net working capital to start, and total net working capital will rise to 15% of the change in sales. The variable cost per unit is $335, and total fixed costs are $2,300,000 per year. The equipment necessary to begin production will cost a total of $21 million. This equipment is mostly industrial machinery and thus qualifies for CCA at a rate of 20%. In five years, this equipment will actually be worth about 20% of its cost. NPV Unit Sales 100,000 112,000 135,000 141,000 94,000 The relevant tax rate is 35%, and the required return is 15%. Based on these preliminary estimates, what is the NPV of the project? (Enter the answer in dollars. Do not round your intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.)…
Mehmet Group wants to produce the M machines used in the casting industry in the Big Industry. The planned annual production and sales amount is 20,000 units and the sales price is calculated as "cost x 1.35". Information about this investment and production is given below. What is the sales price per unit of this project? What is the present and future value of the project's profit? TABLE: Workshop building and outbuildings 1.000.000 Usd Machine facilities 4,000,000 usd Staff is 380,000 usd and increasing by 40,000 usd every year Energy 180,000 usd and increasing by 15% every year Financing expenses 750,000 usd and decreasing by 10% each year Management and sales expenses decrease by 280,000 usd and 10,000 usd every year Raw material and auxiliary material 1.700 usd per unit Operation cost is 200,000 usd each year Major repair-maintenance is 150,000 usd in the 10th year Scrap value 8,000,000 usd in the 20th year Economic life 20 years Capital cost 25%
We project unit sales for a new household-use laser-guided cockroach search and destroy system as follows: Year 1 2 3 4 5 NPV Unit Sales 95,500 107,500 130,500 136,500 89,500 The new system will be priced to sell at $420 each. The cockroach eradicator project will require $1,900,000 in net working capital to start, and total net working capital will rise to 15% of the change in sales. The variable cost per unit is $290, and total fixed costs are $1,400,000 per year. The equipment necessary to begin production will cost a total of $17 million. This equipment is mostly industrial machinery and thus qualifies for CCA at a rate of 20%. In five years, this equipment will actually be worth about 20% of its cost. The relevant tax rate is 35%, and the required return is 18%. Based on these preliminary estimates, what is the NPV of the project? (Enter the answer in dollars. Do not round your intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.)
NPV. Grady Precision Measurement Tools has forecasted the following sales and costs for a new GPS system: annual sales of 45,000 units at $16 a unit, production costs at 37% of sales price, annual fixed costs for production at $200,000. The company tax rate is 38%. What is the annual operating cash flow of the new GPS system? Should Grady Precision Measurement Tools add the GPS system to its set of products? The initial investment is $1,320,000 for manufacturing equipment, which will be depreciated over six years (straight line) and will be sold at the end of five years for $380,000. The cost of capital is 12%. What is the annual operating cash flow of the new GPS system? $ (Round to the nearest dollar.)

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