Henrie's Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost $151,640, including freight and installation, Henrie's estimated the new machine would increase the company's cash inflows, net of expenses, by $40,000 per year. The machine would have a five-year useful life and no salvage value. Required: 1. What is the machine's internal rate of return? Note: Round your answer to the nearest whole percentage.
Q: A company has preferred stock that can be sold for $27per share. The preferred stock pays an annual…
A: Preferred stock is a source of financing for the companies, It is less costly compared to equity…
Q: Midland Oil has $1,000 par value bonds outstanding at 18 percent interest. The bonds will mature in…
A: Bonds refer to instruments used to raise debt capital for the issuing company from non-traditional…
Q: You just deposited $15,000 in a bank account that pays a 4.0% nominal interest rate, compounded…
A: The future value can be calculated using the following formula
Q: f the estimated demand is 20,000 room-nights, the break-even price is s capital is the opportunity…
A: In finance, the term break-even point represents the selling price or sales value at which a firm is…
Q: 9. Return and Standard Deviations. Consider the following information: Rate of Return if State…
A:
Q: Calculate the amount of interest that will be charged on $17120 borrowed for 6 months at 8.7%.…
A: GivenPrincipal (amount borrowed) = $17,120Rate (annual interest rate) = 8.7% or 0.087 (as a…
Q: You are considering the purchase of a Zero Coupon Bond with a Face Value of $100,000, which matures…
A: Solution:Zero coupon bonds (ZCB) are those bonds which do not pay periodic coupon payments, instead…
Q: Olivia plans to secure a 5-year balloon mortgage of $230,000 toward the purchase of a condominium.…
A: A fixed rate mortgage is a type of mortgage in which interest rate does not vary and remains…
Q: Suppose you are the money manager of a $4.48 million investment fund. The fund consists of four…
A: CAPM refers to the relationship between the expected return of the stock and the risk associated…
Q: her Simple or General Ar ther Ordinary Annuity, Ar rmula, solve for the unkm presentation to support…
A: The future value of an annuity is the total value of a series of regular, equal cash flows received…
Q: ver the next 4 years, Gronk Co's earnings are expected to grow at an annual average rate of 7.5%…
A: PEG ratio is the calculation of P/E ratio based on the growth of the earnings…
Q: An investment project has the following cash flows over its economic life of three years: Year 0 1 2…
A: Here, YearCash Flows0 $ (142,700.00)1 $ 51,000.002 $ 62,000.003 $ 73,000.00
Q: Consider the following cash flows: Year Cash Flow 0 $19,400 10.400 9,320 6,900 123 What is the IRR…
A: YearsCash Flows0-$19,400.001$10,400.002$9,320.003$6,900.00Required:Internal rate of return =?
Q: The stock of Business Adventures sells for $100 per share. Its likely dividend payout and end-of…
A: The rate of return is a measure of the gain or loss made on an investment relative to the amount of…
Q: o offer scholarships to children of employees, a company invests $14,000 at the end of every three…
A: Annuity refers to periodic payments that are provided in exchange for a lump sum payment. Annuities…
Q: You would like to establish a trust fund that would provide annual scholarships of $100,000 today…
A: Present value is the equivalent value of money today based on the time value of money and interest…
Q: What would be the dollar size of its capital budget? $ million
A: A capital budget is a financial plan that outlines a company's long-term investment in capital…
Q: You want to save $1,000 a month for the next 10 years to buy a townhome The money will be set aside…
A: Compound = Monthly = 12Payment = p = $1000Number of Payment = n = 10 * 12 = 120Interest Rate = r =…
Q: The expected return on a Vanguard fund is 12% and the standard deviation is 0.16. The risk-free rate…
A: Portfolio is combinations of stocks in different proportion and rate of return on portfolio depends…
Q: An investor purchases a 30-year, zero-coupon bond with a face value of $5,000 and a yield to…
A: A zero coupon bond is a form of financial instrument where the bondholder receives no monthly…
Q: Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of…
A: Here, Product AProduct BCost of Equipment $ 170,000.00 $ 380,000.00Life of Equipment in…
Q: MetaYou have accumulated $8,000 toward the down payment on a piece of lake front property in rural…
A: The rate of return is a measure that indicates the performance of the investment for the respective…
Q: A firm evaluates all of its projects by applying the IRR rule. Year 0 1 2 . 3 Cash Flow -$ 149,000…
A: IRR is also known as Net Present Value. It is a capital budgeting technique which helps in decision…
Q: Tyler Enterprises's stock is currently selling for $45.56 per share, and the firm expects its…
A: Cost of equity refers to the return that is earned by investing in the company as per the holdings…
Q: In how many months will $1763 grow to $2438 at 5.1% p.a.? Round to one decimal.
A: Investment amount (P) = $ 1763Future value (FV) = $ 2348Interest rate (r) = 5.1%Number of years = n
Q: A new computer system will require an initial outlay of $20, 500, but it will increase the firm's…
A: NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…
Q: he preferred stock of Dallas Platinum Exchange has a par value of $31 and pays a 7% dividend rate…
A: Preferred stocks are paid dividend on the par value and value of stock depends on the required rate…
Q: Develop an amortization schedule for the loan described. (All answers should be entered in dollars.…
A: Amortization schedule refers to the format maintained for providing the loan to the borrower by the…
Q: A Treasury bill has a face value of $65,000, an asked yield of 3.05 percent, and matures in 60 days.…
A: Solution:Price of treasury bill refers to the price at which the bill should be traded at the given…
Q: 5. What is the NPV of buying the new lathe? (A lors not in millions. Do not round intermedia
A: Net present value is determined by deducting the current value of cash flows from the initial…
Q: You have a portfolio that is 33 percent invested in Stock R, 17 percent invested in Stock S, with…
A: Portfolio Return is the amount of return earned by the investor from multiple stock investments. It…
Q: a) What is the company’s unlevered value? b) Assuming that there are 1,000,000 shares outstanding…
A: Unlevered Firm Value:Unlevered firm value refers to the total value of a company's operations…
Q: Better Mousetraps has developed a new trap. It can go into production for an initial investment in…
A:
Q: A project that will provde annual cash flows of $2,550 for nine years costs $10,500 today. a. At a…
A: NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…
Q: a. Calculate this bond's modified duration. Do not round intermediate calculations. Round your…
A: Modified duration is a measure used in finance to estimate the percentage change in the price of a…
Q: Consider a three-year project with the following information: initial fixed asset investment =…
A: Operating cash flows is the cash flows from normal operations -selling and producing of output of…
Q: The four actors below have just signed a contract to star in a dramatic movie about relationships…
A: Solution:Present value refers to the discounted value of future values discounted at periodic…
Q: Option 01 has 12 years and option 02 has 8 years of life, and the MARR is 9 percent. Option 02, is…
A: NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…
Q: Bramble Corp. is planning to replace an old asset with new equipment that will operate more…
A: Net Present Value is used to determine the value of an investment by comparing the present value of…
Q: You find the following corporate bond quotes. To calculate the number of years until maturity,…
A: A bond is a kind of debt security issued by the government and private companies to the public for…
Q: An investment project costs $15,600 and has annual cash flows of $3,900 for six years. a. What is…
A: YearsCash flows0($15,600)1$3,9002$3,9003$3,9004$3,9005$3,9006$3,900Required:a) Discounted Payback @…
Q: What is the project's IRR? Round your answer to two decimal places. ______ %
A: IRR (Internal Rate of Return)IRR is the discount rate at which the net present value (NPV) of cash…
Q: You are considering the purchase of a Coupon Bond with a Face Value of $1,000, which matures in…
A: YTM is also known as Yield to Maturity. It is a capital budgeting technqiues whcih helps is decision…
Q: Your goal is to have $12,500 in your bank account by the end of eight years. If the interest rate…
A: Future Value = fv = $12,500Time = t = 8 YearsInterest Rate = r = 8%Annual Deposit type = at the end
Q: Ebenezer Scrooge has invested 50% of his money in share A and the remainder in share B. He assesses…
A: Here, ProbExpected ReturnStandard DeviationShare A50%16.00%23.00%Share…
Q: What is the standard deviation for a portfolio invested 50% in A, 50% in B? Probability 0.5 0.25…
A: Portfolio standard deviation measures the risk of the portfolio and is dependant upon the standard…
Q: Which term structure of interest rates property does the expectations theory not support
A: The Expectations Theory of the term structure of interest rates does not support the "Liquidity…
Q: Two securities have a covariance of 0.076. If their respective standard deviations are 13% and 22%,…
A: Correlation Co-efficient of Variance is the ratio of standard deviation of the security with the…
Q: (4B-6) Continuous Compounding You have $11,572.28 in an account that has been paying an annual rate…
A: The concept of time value of money will be used here. As per the concept of time value of money the…
Q: Problem 10-6 (Algo) Bond value [LO10-3] Kilgore Natural Gas has a $1,000 par value bond outstanding…
A: A bond refers to an instrument used by companies to raise debt capital from investors. It is…
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
- A mini-mart needs a new freezer and the initial Investment will cost $300,000. Incremental revenues, including cost savings, are $200,000, and incremental expenses, including depreciation, are $125,000. There is no salvage value. What is the accounting rate of return (ARR)?Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6 years, and an estimated salvage value of 800. The replacement machine is eligible for 100% bonus depreciation at the time of purchase- The replacement machine would permit an output expansion, so sales would rise by 1,000 per year; even so, the new machines much greater efficiency would cause operating expenses to decline by 1,500 per year The new machine would require that inventories be increased by 2,000, but accounts payable would simultaneously increase by 500. Dautens marginal federal-plus-state tax rate is 25%, and its WACC is 11%. Should it replace the old machine?Super Apparel wants to replace an old machine with a new one. The new machine would increase annual revenue by $200,000 and annual operating expenses by $80,000. The new machine would cost $400, 000. The estimated useful life of the machine is 10 years with zero salvage value. i. Compute the Accounting Rate of Return (ARR) of the machine using the above information. ii. Should Super Apparel purchase the machine if management wants an Accounting Rate of Return (ARR) of 19% on all capital investments? Hint: Use Average Income or Profit after deducting tax, depreciation, and operating expenses.
- BAK Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided below. Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Click here to view the factor table. Net present value Machine A Profitability index $78,200 8 years Which machine should be purchased? $19,800 $5,130 Machine A 0 Machine A should be purchased. Machine B Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round answer for present value to O decimal places, e.g. 125 and profitability index to 2 decimal places, e.g. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) $182,000 8 years 0 $39,600…BAK Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided below. Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Click here to view the factor table. Net present value Machine A Profitability index $78,200 8 years Which machine should be purchased? $19,800 $5,130 Machine A 0 Machine A should be purchased. Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round answer for present value to O decimal places, e.g. 125 and profitability index to 2 decimal places, e.g. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) 2996 Machine B 1.03 $182,000 8 years 0…The management of Ballard MicroBrew is considering the purchase of an automated bottling machine for $69,000. The machine would replace an old piece of equipment that costs $17,000 per year to operate. The new machine would cost $7,000 per year to operate. The old machine currently in use could be sold now for a salvage value of $23,000. The new machine would have a useful life of 10 years with no salvage value. Required: 1. What is the annual depreciation expense associated with the new bottling machine? 2. What is the annual incremental net operating income provided by the new bottling machine? 3. What is the amount of the initial investment associated with this project that should be used for calculating the simple rate of return? 4. What is the simple rate of return on the new bottling machine? (Round your answer to 1 decimal place i.e. 0.123 should be considered as 12.3%.) 1. Depreciation expense 2. Incremental net operating income 3 Initial…
- The management of Ballard MicroBrew is considering the purchase of an automated bottling machine for $55,000. The machine would replace an old piece of equipment that costs $14,000 per year to operate. The new machine would cost $6,000 per year to operate. The old machine currently in use could be sold now for a salvage value of $20,000. The new machine would have a useful life of 10 years with no salvage value. Required: 1. What is the annual depreciation expense associated with the new bottling machine? 2. What is the annual incremental net operating income provided by the new bottling machine? 3. What is the amount of the initial investment associated with this project that should be used for calculating the simple rate of return? 4. What is the simple rate of return on the new bottling machine? (Round your answer to 1 decimal place i.e. 0.123 should be considered as 12.3%.)Henrie's Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost $113.730. including freight and installation. Henrie's estimated the new machine would increase the company's cash inflows, net of expenses, by $30,0o00 per year. The machine would have a five-year useful life and no salvage value. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table. Required: 1. What is the machine's internal rate of return? (Round your final answer to the nearest whole percentage.) 2 Using a discount rate of 10%, what is the machine's net present value? 3. Suppose the new machine would increase the company's annual cash inflows, net of expenses, by only $27,000 per year. Under these conditions, what is the internal rate of return? (Round your final answer to the nearest whole percentege.) 1. Internal rate of return 2. Net present value 3. Internal rate of returnBAK Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided below. Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Click here to view the factor table. Net present value Profitability index Machine A $78,200 8 years Which machine should be purchased? Machine B Machine A CTCALDOOK and Media $19,800 $5,130 Machine A 0 should be purchased. Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round answer for present value to 0 decimal places, e.g. 125 and profitability index to 2 decimal places, e.g. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Machine B…
- 2. Super Apparel wants to replace an old machine with a new one. The new machine would increase annual revenue by $200,000 and annual operating expenses by $80,000. The new machine would cost $400,000. The estimated useful life of the machine is 10 years with zero salvage value. i. Compute Accounting Rate of Return (ARR) of the machine using above information. ii. Should Super Apparel purchase the machine if management wants an Accounting Rate of Return of 19% on all capital investments? Hint: Use Average Income or Profit after deducting tax, depreciation, and operating expenses.BAK Corp. is considering purchasing one of two new diagnostic machines, Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided below. Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Net present value Machine A Profitability Index $77,000 8 years Which machine should be purchased? $19,900 $4,800 Machine A 0 should be purchased. Machine B $188,000 Click here to view the factor table. Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative, use either a negative sign preceding the number eg-45 or parentheses eg (45). Round answer for present value to 0 decimal places, e.g. 125 and profitability index to 2 decimal places, eg. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) 8 years 0 $40,200 $9,860 Machine BBAK Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided here Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Machine A $75,500 8 years 0 Net present value Profitability index $20,000 $5,000 Click here to view PV table. Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses es (45). Round answer for present value to 0 decimal places, eg. 125 and profitability index to 2 decimal places, eg. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Machine A Which machine should be purchased? Machine A should be purchased Machine B $180,000 8 years 0 $40,000 $10,000 Machine B…