Dynetics Corp. has the following investment opportunities: Machine A Machine B Machine C ($10,000 cost) ($22,500 cost) ($35,500 cost) Year 1 $6,000 Year 1 $12,000 Year 1 0 Year 2 3,000 Year 2 7,500 Year 2 30,000 Year 3 3,000 Year 3 1,500 Year 3 5,000 Year 4 0 Year 4 1,500 Year 4 20,000 Under the payback method and assuming these machines are mutually exclusive, which machine(s) would Dynetics Corp. choose? a. Machine A b. Machine B c. Machine C Od. None of these choices are correct.

Providence Health is evaluating two different linen supply vendors systems for handling facility linen replacement. There are no incremental revenues attached to the projects, so the decision will be made on the basis of the present value of costs. Providence's weighted average cost of capital is 6.25%. Here are the net cash flow estimates in thousands of dollars: Year 0 1 2 3 4 5 System X System Y S (1,800) $ (3,850) S (1,000) S (500) (1,000) S (500) S S (1,000) S S (1,000) S S (1,000) S (500) (500) (500) [a] Assume initially that the systems both have average risk. Which one should be chosen? [b] Assume that System Y is judged to have high risk. The organization accounts for differential risk by adjusting its corporate cost of capital

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The investment committee of Sentry Insurance Co. is evaluating two projects, office expansion and upgrade to computer servers. The projects have different useful lives, but each requires an investment of $1,104,000. The estimated net cash flows from each project are as follows:   Net Cash Flow Year     OfficeExpansion     Server 1 $308,000       $407,000       2 308,000       407,000       3 308,000       407,000       4 308,000       407,000       5 308,000               6 308,000               The committee has selected a rate of 15% for purposes of net present value analysis. It also estimates that the residual value at the end of each project's useful life is $0, but at the end of the fourth year, the office expansion's residual value would be $385,000. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5…

Sheridan Mills management is evaluating two alternative heating systems. Costs and projected energy savings are given in the following table. The firm uses 11.50 percent to discount such project cash flows. Year   System 100   System 200 0   –$1,982,100   –$1,854,200 1   206,910   763,700 2   429,830   589,800 3   743,040   671,900 4   1,046,900   426,300 What is the NPV of the systems? (Enter negative amounts using negative sign, e.g. -45.25. Do not round discount factors and intermediate calculations. Round final answers to 0 decimal places, e.g. 5,275.)

The production department is proposing the purchase ONE automatic insertion machine. It has identified three machines (A, B and C). Each machine has an estimated useful life of 10 years. minimum desired rate of return of 10%. The accountant has identified the following data: ​   Machine A Machine B Machine C Present value of future cash flows computed using 10% rate of return $305,000 $295,000 $300,500 Amount of initial investment 300,000 300,000 300,000   Based on net present value method, which machine do you recommend?

You work for an outdoor play structure manufacturing company and are trying to decide between the following two projects: (Click on the following icon in order to copy its contents into a spreadsheet.) Project Playhouse Fort Year-End Cash Flows ($ thousands) 1 2 18 IRR 33.8% 13.2% 52 You can undertake only one project. If your cost of capital is 7%, use the incremental IRR rule to make the correct decision. 0 -25 -75 The incremental IRR is%. (Round to two decimal places.) 20 39 Save OL

Using the following information find the project's cash flow.  Once you have that information find the NPV, PI and IRR.   Cost of new equipt     7,800,000     Installation costs     200,000                 Unit Sales Year Units sold         1             80,000         2           130,000         3           140,000         4             90,000         5             70,000                   Sales price per unit $300 in years 1-4, $250 in year 5     Variable cost per unit $225/unit         Annual fixed costs $225,000 in years 1-5                   Working capital requirements: Initial working capital requirement $100,000     Each year net working capital equal to 10% of the year's sales   All working capital terminated at the end of year 5               Depreciation Bonus depreciation method - all is taken in year 1   Income tax rate 21%         Required rate of return 12%

You are considering the following project. What is the NPV of the project? WACC of the project: 0.10 Revenue growth rate: 0.05 Tax rate: 0.40 Revenue for year 1: 13,000 Fixed costs for year 1: 3,000 variable costs (% of revenue): 0.30 project life: 3 years Economic life of equipment: 3 years Cost of equipment: 20,000 Salvage value of equipment: 4,000 Initial investment in net working capital: 2,000