(Discounted payback period) The Callaway Cattle Company is considering the construction of a new feed handling system for its feed lot in Abilene, Kansas. The new system will provide annual labor savings and reduced waste totaling $190,000 while the initial investment is only $480,000 Callaway's management has used a simple payback method for evaluating new investments in the past but plans to calculate the discounted payback to analyze the investment. Where the appropriate discount rate for this type of project is 12 percent, what is the projects discounted payback period? The project's discounted payback period is years (Round to two decimal places)

Compute the (1) net present value, (2) profitability index, and (3) internal rate of return for each option. (Hint: To solve for internal rate of return, experiment with alternative discount rates to arrive at a net present value of zero.) (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round answers for present value and IRR to 0 decimal places, e.g. 125 and round profitability index to 2 decimal places, e.g. 12.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Option A Option B tA $ $ Net Present Value 103345 Profitability Index 1.55 Internal Rate of Return do % %

Required information [The following information applies to the questions displayed below.] Metro Car Washes, Inc. is reviewing an investment proposal. The initial cost as well as the estimate of the book value of the investment at the end of each year, the net after-tax cash flows for each year, and the net income for each year are presented in the following schedule. The salvage value of the investment at the end of each year is equal to its book value. There would be no salvage value at the end of the investment's life. Year 0 1 2 3 4 5 Initial Cost and Book Value $345,000 230,000 138,000 69,000 23,000 0 Annual Net After-Tax Cash Flows $162,000 141,000 120,000 99,000 78,000 Annual Net Income $47,000 49,000 51,000 53,000 55,000 Management uses a 14 percent after-tax target rate of return for new investment proposals. Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) Required: 1. Compute the project's payback period. Assume that the cash flows in…

At times firms will need to decide if they want to continue to use their current equipment or replace the equipment with newer equipment. The company will need to do replacement analysis to determine which option is the best financial decision for the company. Price Co. is considering replacing an existing piece of equipment. The project involves the following: • The new equipment will have a cost of $2,400,000, and it is eligible for 100% bonus depreciation so it will be fully depreciated at t = 0. • The old machine was purchased before the new tax law, so it is being depreciated on a straight-line basis. It has a book value of $200,000 (at year 0) and four more years of depreciation left ($50,000 per year). • The new equipment will have a salvage value of $0 at the end of the project's life (year 6). The old machine has a current salvage value (at year 0) of $300,000. • Replacing the old machine will require an investment in net operating working capital (NOWC) of…

A company is intending to invest in a capital budgeting project to manufacture a medical testing device and has projected the following sales: Year 1                       Year 2                   Year 3                    Year 4                      Year 5 50,000                   66,400                   81,200                   68,500                   54,500 The installed cost of the new assets will be $18,500,000 which will be depreciated using the 7-year MACRS schedule. The assets will have a salvage value of $3,700,000. Initial NWC requirements are $1,500,000 and additional working capital needs are estimated to be 15% of the projected sales increases for the following year. Total fixed costs are $2,000,000 per year. The medical device has a selling price of $300 per unit and variable production costs are $175. The firm has a marginal tax rate of 35% and a required rate of return of 18%. Analyze this project and give your recommendation as to whether they should invest in it or…

Management of Carla Vista Mints, a confectioner, is considering purchasing a new jelly bean-making machine at a cost of $312,50O. They project that the cash flows from this investment will be $ 90,000 for the next seven years. If the appropriate discount rate is 14 percent, what is the NPV for the project? (Enter negative amounts using negative sign, e.g. -45.25. Do not round discount factors. Round other intermediate calculations and final answer to 0 decimal places, e.g. 1,525.) NPV %24

Consider how Root Valley River Park Lodge could use capital budgeting to decide whether the $13,000,000 River Park Lodge expansion would be a good investment. Assume Root Valley's managers developed the following estimates concerning the expansion: (Click the icon to view the estimates.) (Click the icon to view additional information.) The internal rate of return (IRR) of the expansion is Data table More info example 10-12% Number of additional skiers per day Average number of days per year that weather conditions allow skiing at Root Valley Useful life of expansion (in years) Average cash spent by each skier per day Average variable cost of serving each skier per day Cost of expansion Discount rate Get more help. 12-14% Print 15-16% 16-18% S Done 122 skiers 149 days Assume that Root Valley uses the straight-line depreciation method and expects the lodge expansion to have no residual value at the end of its nine-year life. The project is expected to have an average annual net cash…

Since the beginning of the fiscal year 2009, Texas Department of Transportation invest one million each year to build up the transportation management database system in one of the Southern Texas city regions. TxDot is planning to transfer this database system to the city authority by the end of the fiscal year 2020. If the rate of return is 12% per year during the investment period, what is the total value of this database system when transferring?

1. Calvulate the internal rate of return(IRR) of each project and based on this criterion. Indicate which project you would recommend or acceptance.

Keeper Inc. is considering the purchase of new equipment that will automate production and thus reduce labor costs. Keeper made the following estimates related to the new machinery: (Click the icon to view the information.) Present Value of $1 table Present Value of Annuity of $1 table Future Value of $1 table Future Value of Annuity of $1 table Read the requirements. Requirement 1. Calculate (a) net present value, (b) payback period, (c) discounted payback period, and (d) internal rate of return. a. Net present value. (Round intermediary calculations to the nearest whole dollar. Use factors to three decimal places, X.XXX, and use a minus sign or parentheses for a negative net present value. Enter the net present value of the investment rounded to the nearest whole dollar.) The net present value is $ 40,275 b. Payback period. (Round your answer to two decimal places.) The payback period in years is 4.79 c. Discounted payback period. (Round interim calculations to the nearest whole…