How much is the after tax cash flows of Project 1? (Answer format: P123,456) *Your answerHow much is the net benefit of investing in Project 2? (Answer format:P123,456)Your answerWhich between the 2 projects will the company benefit more? *Project 1O Project 2 The Company is considering two independent projects. One project involves anew product line, and the other involves the acquisition of a special equipmentfor the Materials Handling Department. The projected annual operating revenuesand expenses are as follows:Project 1 ( Investment in a new product)P 750,000RevenuesExpected annual cash expensesDepreciation325,00030,000Income tax – 30%Required investment outlay, P1,200,000. The equipment is expected tobe used for 5 years then to be disposed at its estimated salvage value ofP50,000. The income trend is expected to continue for the next 5 years.Project 2 ( Acquisition of a special equipment)P 800,000250,000Cost of special equipmentExpected cash savingsfrom overhead expensesThe equipment has an estimated life of 8 years but will be used only for6 years then to be sold at book value.

Introduction In order to identify which project serves best financially, then the particular…

How much is the after tax cash flows of Project 1? (Answer format: P123,456) Your answer How much is the net benefit of investing in Project 2? (Answer format: P123,456) Your answer Which between the 2 projects will the company benefit more? * Project 1 Project 2

How much is the after tax cash flows of Project 1? (Answer format: P123,456) Your answer How much is the net benefit of investing in Project 2? (Answer format: P123,456) Your answer Which between the 2 projects will the company benefit more? * Project 1 Project 2

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 17E: Postman Company is considering two independent projects. One project involves a new product line,...

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Postman Company is considering two independent projects. One project involves a new product line, and the other involves the acquisition of forklifts for the Materials Handling Department. The projected annual operating revenues and expenses are as follows: Required: Compute the after-tax cash flows of each project. The tax rate is 40 percent and includes federal and state assessments.
Edelman Engineering is considering including two pieces of equipment, a truck and an overhead pulley system, in this year’s capital budget. The projects are independent. The cash outlay for the truck is $17,100, and that for the pulley system is $22,430. The firm’s cost of capital is 14%. After-tax cash flows, including depreciation, are as follows: Calculate the IRR, the NPV, and the MIRR for each project, and indicate the correct accept/reject decision for each.
Optomics Ltd. is investigating an expansion of its services. After consultation with industry, the following two projects are available for investment: Project B $21,000,000 Project A CAPEX / Initial Outlay Project life Revenue (per year) $10,000,000 8 years $6,000,000 $2,000,000 7 years $9,000,000 Variable costs $1,500,000 $2,000,000 Operating expense Investment in Net Working Capital (Year 0) $1,000,000 $1,500,000 $2,500,000 The company's tax rate is 30% and uses a straight-line depreciation method. There will be no 'salvage' value associated with these projects at the end of their project life. Official Liquidators has a required rate of return of 10% per annum. a) Determine the Free Cash Flows, for each year, to the firm for both projects. b) Identify which project you recommend the company invest in. What is meant by incremental cash flows from a capital budgeting perspective? Why should only incremental cash flows be included in the project valuation process? c)
[The following information applies to the questions displayed below.] Project Y requires a $306,000 investment for new machinery with a five-year life and no salvage value. The project yields the following annual results. Cash flows occur evenly within each year. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income Project Y $ 390,000 174,720 61,200 28,000 $ 126,080 2. Determine Project Y's payback period. Project Y Payback Period Numerator: 1 Denominator: = = Payback Period 0
n the design of a chemical plant, the following expenditures and revenues are estimated after the plant has achieved its desired production rate. Total capital investment (TCI) : $10 000 000 Working capital investment (WCI) : $1 000 000 Annual sales : $8 000 000 /year Annual expenditures : $2 000 000 /year Assuming straight-line depreciation over a 10-year project analysis period, determine a) The return on the investment after taxes b) The payback period
Required Information [The following information applies to the questions displayed below.] Project Y requires a $327,000 investment for new machinery with a four-year life and no salvage value. The project yields the following annual results. Cash flows occur evenly within each year. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income Project Y $ 360,000 161,280 81,750 26,000 $ 90,970 2. Determine Project Y's payback period. Project Y Payback Period Numerator: 1 Denominator: 1 Payback Period = 0
A posed capital expenditure project involves purchasing and installing new equipment. The equipment will cost $40.000, with an addiuonal S2.00 e for delivery. Installation is estimated to be $5000. The equipment has an expected life of 6 years and estimated salvage value of 520,000. The prctrequires an additional working capital investment of $10.000. The project revenues are forecast at $30.000 per year and cash expenses are estimated at $10.000 per year. The firm has a 35 marginal tax rate and a 10is weighted average cost of capital. Annual depreciation is expected t increase by $7,833.33 per year, assuming simplified straight-line depreciation. Calculate the one-time, end of project cash fiows from this propose project. $23,000 $30,000 O$13,000 O $20,000 None of the listed items is correct
I need help filling out the empty fields. Can you please include the formulas: Laurman, Incorporated is considering the following project: Required investment in equipment $2,205,000 Project life 7 Salvage value 225,000 The project would provide net operating income each year as follows: Sales $2,750,000 Variable expenses 1,600,000 Contribution margin $1,150,000 Fixed expenses: Salaries, rent and other fixed out-of pocket costs $520,000 Depreciation 350,000 Total fixed expenses 870,000 Net operating income $280,000 Company discount rate 18% Required: (Use cells A4 to C18 from the given information, as well as B24, and A30 to D46 to complete this question. Negative amounts or amounts to be deducted should be input as negative values and will display in…
Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $135,000. Project 2 requires an initial investment of $98,000. Assume the company requires a 10% rate of return on its investments. (PV of $1. FV of $1, PVA of $1. and FVA of $1) (Use appropriate factor(s) from the tables provided.) Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income Years 1-7 Project 1 Net present value Years 1-5 Compute the net present value of each potential investment. Use 7 years for Project 1 and 5 years for Project 2. (Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals. Round your answers to the nearest whole dollar.) Project 2 Net present value Net Cash Flows Net Cash Flows X x Present Value of Annuity at 10% Project 1 $ 100,000 Present Value of Annuity at…
Required information [The following information applies to the questions displayed below.] Project Y requires a $331,500 investment for new machinery with a five-year life and no salvage value. The project yields the following annual results. Cash flows occur evenly within each year. (PV of $1. EV of $1. PVA of $1. and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Annual Amounts Sales of new product Expenses Project Y Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income 3. Compute Project Y's accounting rate of return. Numerator: Accounting Rate of Return Denominator: Project Y $ 400,000 179,200 66,300 29,000 $ 125,500 Accounting Rate of Return
Required information [The following information applies to the questions displayed below.] Project Y requires a $315,000 investment for new machinery with a five-year life and no salvage value. The project yields the following annual results. Cash flows occur evenly within each year. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income Project Y $ 365,000 163,520 63,000 26,000 $ 112,480 3. Compute Project Y's accounting rate of return. Numerator: Annual income Project Y $ Accounting Rate of Return Denominator: / Average investment 112,480 = Accounting Rate of Return 0
Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $133,000. Project 2 requires an initial investment of $99,900. Assume the company requires a 10% rate of return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation Machinery Selling, general, and administrative expenses Income Years 1-7 Project 1 Net present value Years 1-5 Compute the net present value of each potential investment. Use 7 years for Project 1 and 5 years for Project 2. (Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals. Round your answers to the nearest whole dollar.) Project 2 Net present value Net Cash Flows Net Cash Flows X X Present Value of Annuity at 10% Present Value of Annuity at 10% = Project 1…