Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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- B Assume the following information for a capital budgeting proposal with a five-year time horizon: Initial investment: Cost of equipment (zero salvage value) Annual revenues and costs: Sales revenues Variable expenses Depreciation expense Fixed out-of-pocket costs This proposal's simple rate of return is closest to: Multiple Choice O 27%. 16%. 19% 11% $ 485,000 $ 300,000 $ 130,000 $ 50,000 $ 40,000arrow_forwardPlease do not give solution in image format thankuarrow_forwardThe cost of capital for Project J is 10%. Compute the rate of return statistic for this project using appropriate capital budgeting technique. (Do not round intermediate calculations, Enter your answer in percentage and round your final answer to 2 decimal places.) Time: Cash flow: 1 -$2,500 $800 0 2 $2,230 3 -$670 4 $750 5 -$250arrow_forward
- Assume that a company is considering a $2,400,000 capital investment in a project that would earn net income for each of the next five years as follows: Sales Variable expenses Contribution margin $ 1,900,000 800,000 1,100,000 12:46 Fixed expenses: Out-of-pocket operating costs. $ 300,000 Depreciation 400,000 700,000 Net operating income $ 400,000 Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. If the company's discount rate is 21%, then the project's net present value is closest toarrow_forwardPlease help me with show all calculation thankuarrow_forwardRequired information A company that manufactures magnetic flow meters expects to undertake a project that will have the cash flows estimated. First cost, $. Equipment replacement cost in year 2, $ Annual operating cost, $/year Salvage value, $ Life, years -870,000 -300,000 -920,000 250,000 4 At an interest rate of 10% per year, what is the equivalent annual cost of the project? Find the AW value using tabulated factors. The equivalent annual cost of the project is $-1arrow_forward
- a- At 10%, find PW for the following Table Warehouse cost equipment cost Installation cost Annual maintenance costs Annual Revenues Salvage Machine life 0 1 2 3 -90,000 b- A project with an IRR = 20%, it has the following NCF (S) X X 4000 (SUS) 50,000 46.000 Find X? 6,500 8,000 45,000 15,000 15 yearsarrow_forward8. The director of capital budgeting for Big Sky Health System, Inc. has estimated the following cash flows for a new service and has a cost of capital of 8%. What is the project's MIRR? Year 0 123 Annual Cash Flows $ (125,000) 75,000 55,000 25,000 SASSAS $ 2 $ $ Choice: 11.2% Choice: 16.9% Choice: 13.3% Choice: 9.5% Project Cost of Capital 8%arrow_forwardDetermine feasibility of the project using FW Method. Use MARR = 10%. Alternatives А B C D Capital investment -$150,000 -$85,000 -$75,000 -$120,000 Annual revenues $28,000 $16,000 $15,000 $22,000 Annual expenses -$1,000 -$550 -$500 -S700 Market Value (EOL) $20,000 $10,000 $6,000 $11,000 Life (years) 10 10 10 10 Round off your answer to the NEAREST WHOLE NUMBER Ex. 12345 FW of Alt. A is Blank 1 FW of Alt. B is Blank 2 FW of Alt. C is Blank 3 FW of Alt. D is Blank 4arrow_forward
- Q1: For the machines indicated below. Consider i= 10% per year First cost Annual cost Salvage value Life duration Machine A 20,000 $ 5,000 $ 7,500 $ 3 Machine B 25,000 4,000 6,000 4 A- Draw cash flow diagram for each machine for one cycle of each project B- Draw cash flow diagram for each project considering the LCM life cycle (Hint: different project duration, need to have the LCM life cycle) C- Compare the machines to select best alternative one based on Present worth analysis method D- Repeat part B considering Future worth analysisarrow_forwardRequired information A company that manufactures magnetic flow meters expects to undertake a project that will have the cash flows estimated. First cost, $ Equipment replacement cost in year 2, $ Annual operating cost, $/year Salvage value, $ Life, years -880,000 -300,000 -930,000 250,000 14 At an interest rate of 10% per year, what is the equivalent annual cost of the project? Find the AW value using tabulated factors The equivalent annual cost of the project is $- 980,731.95arrow_forwardUsing 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%arrow_forward
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