Elearning Company would like to develop its technology process by purchasing a production equipment for 115 million HUF. The equipment is expected to have a useful life of 4 years. Salvage value is negligible at the end of the 4th year. The estimated EBITDAS are in yearly sequence ( HUF) 32 million, 40 million, 46 million and 52 million. The company's required rate of return is 15 percent. Use trial and error to approximate the internal rate of return for this investment proposal. (Use this information to try: IRR is between 12 and 17 percent.)

Elearning Company would like to develop its technology process by purchasing a production equipment for 115 million HUF. The equipment is expected to have a useful life of 4 years. Salvage value is negligible at the end of the 4th year. The estimated EBITDAS are in yearly sequence ( HUF) 32 million, 40 million, 46 million and 52 million. The company's required rate of return is 15 percent. Use trial and error to approximate the internal rate of return for this investment proposal. (Use this information to try: IRR is between 12 and 17 percent.)

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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The management of Zesty Corporation is considering the purchase of a new machine costing $400,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for Years 1 through 5 are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability in this situation: Year OperatingIncome Net CashFlow 1 $100,000 $180,000 2 40,000 120,000 3 20,000 100,000 4 10,000 90,000 5 10,000 90,000 The cash payback period for this investment is
The management of Arnold Corporation is considering the purchase of a new machine costing $430,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for one through five years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to this information, use the following data in determining the acceptability in this situation: Year Income from Operations Net Cash Flow 1 $100,000 $180,000 2 40,000 120,000 3 20,000 100,000 4 10,000 90,000 5 10,000 90,000 The net present value for this investment is a.negative $25,200. b.positive $25,200. c.negative $124,800. d.positive $152,000.
A machine costs $600,000 and is expected to yield an after-tax net income of $23,000 each year. Management predicts this machine has a 12-year service life and a $120,000 salvage value, and it uses straight-line depreciation. Compute this machine's accounting rate of return. Choose Numerator: Annual after-tax net income $ 1 23,000 / Accounting Rate of Return Choose Denominator: Annual average investment $ = 360,000 = Insert
The management of Nebraska Corporation is considering the purchase of a new machine costing $490,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability: Year OperatingIncome Net CashFlow 1 $100,000 $180,000 2 40,000 120,000 3 40,000 100,000 4 10,000 90,000 5 10,000 120,000 The cash payback period for this investment is
Domestic
A mechanical workshop invested in purchasing a semiautomatic machine for $50,000, that expected to generate a net income of $8,000 starting year 4 and expected to decrease by 5% per year thereafter. The useful life of the machine is 20 years. If the workshop's minimum attractive rate of return (MARR) is 10% per year, the standard notation for determining the discounted payback period is: O 0 = -50,000 + 8,000 (P/A, 5%, 10%, np - 3) (P/F, 10%, 3) O 0= -50,000 + 8,000 (P/A, 5%, 10%, np) O 0 = -50,000 + 8,000 (P/A, -5%, 10%, np - 4) (P/F, 10%, 4) O 0= -50,000 + 8,000 (P/A, 5%, 10%, np - 4) (P/F, 10%, 4) O 0= -50,000 + 8,000 (P/A, -5%, 10%, np) (P/F, 10%, 4) None of them O 0 = -50,000 + 8,000 (P/A, -5%, 10%, np - 3) (P/F, 10%, 3) O 0= -50,000 + 8,000 (P/A, -59%, 10%, np) (P/F, 10%, 3)
Alternative R has a first cost of $85,000, annual M&O costs of $60,000, and a $20,000 salvage value after 5 years. Alternative S has a first cost of $175,000 and a $55,000 salvage value after 5 years, but its annual M&O costs are not known. Determine the M&O costs for alternative S that would yield a required incremental rate of return of 25.00% The M&O cost for alternative S is $
The initial investment cost of machine A is 9,000 TL, the useful life of the machine is 6 years and annual operating costs are 5,000 TL. The initial investment cost of machine B is 16,000 TL, and at the end of its 9-year useful life, the machine can be sold for 4,000 TL. Since the operating costs of machine B are 4,000 TL per year, compare the two machines according to the present value analysis based on an analysis period of the least common multiple of the alternative life of the machines. The interest rate is 10% per year.
A company with a MARR of 10% must install one of two production machines. The economic parameters of each machine are as follows: Machine Initial cost (5) Service life (years) Salvage value end of life (S) $15,000 4 years $22,000 6 years 52,000 $1,000 The Future worth (FW) for the machine Y over the 12 years analysis period is:
A firm is considering an investment in new equipment that has the following information. Purchase Cost: $132,793 Salvage Value in five years time: $18,337 Useful life is 5 years and depreciation is determined using the straightline method. Expected increased annual cash flows are $52,651 What is the payback period in years? Calculate to 2 decimal places
A machine with a purchase price of R1 200 000 is estimated to eliminate manual operations by R400 000 per year.The machine is expected to have a useful life of four years. Use the information provided above to calculate the Internal Rate of Return (expressed to twodecimal places) using interpolation.

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