The Minock Group, a nonprofit organization that does not pay taxes, is considering buying laboratory equipment with an estimated life of seven years so it will not have to use outsiders' laboratories for certain types of work. The following are all of the cash flows affected by the decision: Use Exhibit A.8 Investment (outflow at time 0) Periodic operating cash flows: Annual cash savings because outside laboratories are not used Additional cash outflow for people and supplies to operate the equipment Salvage value after seven years, which is the estimated life of this project Discount rate Required: a. Calculate the net present value of this decision. Note: Round PV factor to 3 decimal places. Negative amounts should be indicated by a minus sign. b. Should The Minock Group buy the equipment? $5,000,000 950,000 150,000 280,000 6%
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- NPV and IRR The first two scenarios are independent. All cash flows are after-tax cash flows. The present value tables provided in Exhibit 19B.1 and Exhibit 19B.2 must be used to solve the following problems. Required: 1. Patz Corporation is considering the purchase of a computer-aided manufacturing system. The cash benefits will be $800,000 per year. The system costs $4,000,000 and will last eight years. Compute the NPV assuming a discount rate of 10 percent. Should the company buy the new system? Yes 2. Amy Wetzel has just invested $270,000 in a restaurant specializing in German food. She expects to receive $43,470 per year for the next eight years. Her cost of capital is 5.5 percent. Compute the internal rate of return. Enter your answer as a whole percentage value (for example, 16% should be entered as "16" in the answer box). X % Did Amy make a good decision? Yes 3. For each of the previous two requirements, choose the data analytic type that applies and explain why (descriptive,…NPV and IRR The first two scenarios are independent. All cash flows are after-tax cash flows. The present value tables provided in Exhibit 19B.1 and Exhibit 19B.2 must be used to solve the following problems. Required: 1. Patz Corporation is considering the purchase of a computer-aided manufacturing system. The cash benefits will be $800,000 per year. The system costs $4,000,000 and will last eight years. Compute the NPV assuming a discount rate of 10 percent. Should the company buy the new system? 2. Amy Wetzel has just invested $270,000 in a restaurant specializing in German food. She expects to receive $43,470 per year for the next eight years. Her cost of capital is 5.5 percent. Compute the internal rate of return. Enter your answer as a whole percentage value (for example, 16% should be entered as "16" in the answer box).fill in the blank 3 % Did Amy make a good decision? 3. For each of the previous two requirements, choose the data analytic type that applies and explain why…gnmentMain.do?invoker=&takeAssignmentSession Locator-&inprogress=false $ 4 < Year 1 Year 2 Year 3 Cash payback period for a Service Company Omni Financial Inc. is evaluating two capital investment proposals for a drive-up ATM kiosk, each requiring an investment of $200,000 and each with an 8-year life and expected total net cash flows of $320,000. Location 1 is expected to provide equal annual net cash flows of $40,000, and Location 2 is expected to have the following unequal annual net cash flows: Σ Oll % 5 J USG taRM In $78,000 Year 5 58,000 Year 6 38,000 Year 7 Year 4 26,000 Year 8 Determine the cash payback period for both location proposals. Location 1 Location 2 ✪ < 6 D & 7 years years C 2 * 4 $42,000 34,000 24,000 20,000 8 G te Το Fi 76 O AF + S Dec 8 2:30 BEB V A b
- The management of Ryland International Is considering Investing in a new facility and the following cash flows are expected to result from the investment: A. What Is the payback period of this uneven cash flow? B. Does your answer change if year 6s cash inflow changes to $920,000?Suzanne's Cleaners is considering a project that has the following cash flow data. What is the project's payback? Year 0 1 2 3 4 5 Cash flows -$1,100 $300 $310 $320 $330 $340 2.85 years 3.16 years 3.52 years 2.31 years 2.56 yearsa. Use exhibits 26-3 and 26-4 to help compute the net present value of the proposal to sell the existing equipment and buy the laser printer, discounted at an annual rate of 15 percent. In you computation, make the following assumptions regarding the timing of cash flows. 1. The purchase price of the laser printer will be paid in cash immediately. 2. The $200,000 sales price of the existing equipment will be received in cash immediately. 3. The income tax benefit from selling the equipment will be realized one year from today.
- Star City is considering an investment in the community center that is expected to return the following cash flows: Use Exhibit A.8. Year Net Cash Flow 1234in 5 $ 28,000 58,000 88,000 88,000 108,000 This schedule includes all cash inflows from the project, which will also require an immediate $208,000 cash outlay. The city is tax-exempt; therefore, taxes need not be considered. Required: a. What is the net present value of the project if the appropriate discount rate is 22 percent? (Round PV factor to 3 decimal places. Negative amount should be indicated by a minus sign.) Net present valueces Duo Corporation is evaluating a project with the following cash flows: Year 0 Cash Flow -$ 29,100 -2345 1 11,300 14,000 15,900 13,000 -9,500 The company uses a discount rate of 12 percent and a reinvestment rate of 7 percent on all of its projects. a. Calculate the MIRR of the project using the discounting approach. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the MIRR of the project using the reinvestment approach. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. Calculate the MIRR of the project using the combination approach. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Discounting approach MIRR b. Reinvestment approach MIRR % c. Combination approach MIRR %NEED PART 4 & 5 ANSWERED ONLY Boston Cola is considering the purchase of a special-purpose bottling machine for $35,000. It is expected to have a useful life of 4 years with no terminal disposal value. The plant manager estimates the following savings in cash operating costs: Boston Cola uses a required rate of return of 14% in its capital budgeting decisions. Ignore income taxes in your analysis. Assume all cash flows occur at year-end except for initial investment amounts. Data Table Year Amount Year 1 $15,000 Year 2 11,000 Year 3 10,000 Year 4 8,000 Total $44,000 (Use factor amounts rounded to three decimal places. Round your answers to the nearest whole dollar. Use a minus sign or parentheses for a negative net present value.) Calculate the following for the special purpose bottling machine: 1. Net present value = -1900 2. Payback period = 2.90 3. Discounted payback period: Amount can not be determined…
- Duo Corporation is evaluating a project with the following cash flows: Year 0 PO12345 Cash Flow -$ 29,300 11,500 14,200 16,100 13,200 -9,700 The company uses a discount rate of 11 percent and a reinvestment rate of 8 percent on all of its projects. a. Calculate the MIRR of the project using the discounting approach. (Do not round Intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the MIRR of the project using the reinvestment approach. (Do not round Intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. Calculate the MIRR of the project using the combination approach. (Do not round Intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Discounting approach MIRR b. Reinvestment approach MIRR c. Combination approach MIRR % % %Ironwood Charities is considering an investment in one of their buildings that is expected to return the following cash flows: Use Exhibit A.8. Year 1 4Nm & in 2 3 4 5 Net Cash Flow $ 15,000 27,000 43,000 58,000 48,000 This schedule includes all cash inflows from the project, which will also require an immediate $152,000 cash outlay. The organization is tax-exempt; therefore, taxes need not be considered. Required: a. What is the net present value of the project if the appropriate discount rate is 8 percent? b. What is the net present value of the project if the appropriate discount rate is 4 percent? Complete this question by entering your answers in the tabs below. Required A Required B What is the net present value of the project if the appropriate discount rate is 8 percent? Note: Round PV factor to 3 decimal places. Negative amount should be indicated by a minus sign. Net present valueDuo Corporation is evaluating a project with the following cash flows: Cash Flow Year 0 WNIO 1 2 3 4 5 -$ 28,900 11,100 13,800 15,700 12,800 -9,300 The company uses a discount rate of 13 percent and a reinvestment rate of 6 percent on all of its projects. a. Calculate the MIRR of the project using the discounting approach. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the MIRR of the project using the reinvestment approach. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. Calculate the MIRR of the project using the combination approach. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Discounting approach MIRR b. Reinvestment approach MIRR c. Combination approach MIRR % % %