Jasper Metals is considering installing a new molding machine which is expected to produce operating cash flows of $56,000 per year for 7 years. At the beginning of the project, inventory will decrease by $16,800, accounts receivables will increase by $21,400, and accounts payable will increase by $15,300. At the end of the project, net working capital will return to the level it was prior to undertaking the new project. The initial cost of the molding machine is $252,000 The equipment will be depreciated straight-line to a zero book value over the life of the project. The equipment will be salvaged at the end of the project creating an aftertax cash flow of $50,000. What is the net present value of this project given a required return of 101 percent? Multiple Choice $57.974 $50143 $60 963 D 150,475 $48.201

Jasper Metals is considering installing a new molding machine which is expected to produce operating cash flows of $56,000 per year for 7 years. At the beginning of the project, inventory will decrease by $16,800, accounts receivables will increase by $21,400, and accounts payable will increase by $15,300. At the end of the project, net working capital will return to the level it was prior to undertaking the new project. The initial cost of the molding machine is $252,000 The equipment will be depreciated straight-line to a zero book value over the life of the project. The equipment will be salvaged at the end of the project creating an aftertax cash flow of $50,000. What is the net present value of this project given a required return of 101 percent? Multiple Choice $57.974 $50143 $60 963 D 150,475 $48.201

Name: Jasper Metals is considering installing a new molding machine which i
Uploaded: 2024-03-20T06:50:59.000Z
Channel: Bartleby
Description: Jasper Metals is considering installing a new molding machine which is expected to produce operating cash flows of $56,000 per year for 7 years. At thebeginning of the project, inventory will decrease by $16,800, accounts receivables will increase b

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 4P

See similar textbooks

Similar questions

Jasmine Manufacturing is considering a project that will require an initial investment of $52,000 and is expected to generate future cash flows of $10,000 for years 1 through 3, $8,000 for years 4 and 5, and $2,000 for years 6 through 10. What is the payback period for this project?
Manzer Enterprises is considering two independent investments: A new automated materials handling system that costs 900,000 and will produce net cash inflows of 300,000 at the end of each year for the next four years. A computer-aided manufacturing system that costs 775,000 and will produce labor savings of 400,000 and 500,000 at the end of the first year and second year, respectively. Manzer has a cost of capital of 8 percent. Required: 1. Calculate the IRR for the first investment and determine if it is acceptable or not. 2. Calculate the IRR of the second investment and comment on its acceptability. Use 12 percent as the first guess. 3. What if the cash flows for the first investment are 250,000 instead of 300,000?
Garnette Corp is considering the purchase of a new machine that will cost $342,000 and provide the following cash flows over the next five years: $99,000, $88,000, $92,000. $87,000, and $72,000. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return in Excel. see Appendix C.
Consolidated Aluminum is considering the purchase of a new machine that will cost $308,000 and provide the following cash flows over the next five years: $88,000, 92,000, $91,000, $72,000, and $71,000. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return in Excel, see Appendix C.
Roberts Company is considering an investment in equipment that is capable of producing more efficiently than the current technology. The outlay required is 2,293,200. The equipment is expected to last five years and will have no salvage value. The expected cash flows associated with the project are as follows: Required: 1. Compute the projects payback period. 2. Compute the projects accounting rate of return. 3. Compute the projects net present value, assuming a required rate of return of 10 percent. 4. Compute the projects internal rate of return.
If a copy center is considering the purchase of a new copy machine with an initial investment cost of $150,000 and the center expects an annual net cash flow of $20,000 per year, what is the payback period?
Your company is planning to purchase a new log splitter for is lawn and garden business. The new splitter has an initial investment of $180,000. It is expected to generate $25,000 of annual cash flows, provide incremental cash revenues of $150,000, and incur incremental cash expenses of $100,000 annually. What is the payback period and accounting rate of return (ARR)?
Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided manufacturing system. The annual net cash benefits and savings associated with the system are described as follows: The system will cost 9,000,000 and last 10 years. The companys cost of capital is 12 percent. Required: 1. Calculate the payback period for the system. Assume that the company has a policy of only accepting projects with a payback of five years or less. Would the system be acquired? 2. Calculate the NPV and IRR for the project. Should the system be purchasedeven if it does not meet the payback criterion? 3. The project manager reviewed the projected cash flows and pointed out that two items had been missed. First, the system would have a salvage value, net of any tax effects, of 1,000,000 at the end of 10 years. Second, the increased quality and delivery performance would allow the company to increase its market share by 20 percent. This would produce an additional annual net benefit of 300,000. Recalculate the payback period, NPV, and IRR given this new information. (For the IRR computation, initially ignore salvage value.) Does the decision change? Suppose that the salvage value is only half what is projected. Does this make a difference in the outcome? Does salvage value have any real bearing on the companys decision?
Gardner Denver Company is considering the purchase of a new piece of factory equipment that will cost $420,000 and will generate $95,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further Instructions on internal rate of return in Excel, see Appendix C.
Germaine Metals is considering installing a new molding machine which is expected to produce operating cash flows of $52,200 per year for 7 years. At the beginning of the project, inventory will increase by $19,800, accounts receivables will increase by $15,400, and accounts payable will increase by $19,000. At the end of the project, net working capital will return to the level it was prior to undertaking the new project. The initial cost of the molding machine is $262,000. The equipment will be depreciated straight-line to a zero book value over the life of the project. The equipment will be salvaged at the end of the project creating an aftertax cash flow of $42,400. What is the net present value of this project given a required return of 12.7 percent? Change in NWC = $ CFO = $ CF7 = $ NPV = $
Moscow Metals is considering installing a new molding machine which is expected toproduce operating cash flows of $73,000 a year for 7 years. At the beginning of theproject, inventory will decrease by $16,000, accounts receivables will increase by$21,000, and accounts payable will increase by $15,000. All net working capital will berecovered at the end of the project. The initial cost of the molding machine is $249,000.The equipment will be depreciated straight-line to a zero book value over the life of theproject. The equipment will be salvaged at the end of the project creating a $48,000 aftertax cash flow. At the end of the project, net working capital will return to its normal level.What is the net present value of this project given a required return of 14.5 percent?
A new molding machine is expected to produce operating cash flows of $109,000 per year for 4 years. At the beginning of the project, inventory will decrease by $8,700, accounts receivables will increase by $9,500, and accounts payable will decrease by $5,200. All net working capital will be recovered at the end of the project. The initial cost of the molding machine is $319,000. The equipment will be depreciated straight-line to a zero book value over the life of the project. No bonus depreciation will be taken. The equipment will be salvaged at the end of the project, creating an aftertax cash inflow of $51,600. What is the net present value of this project given a required return of 14.2 percent?