Perit Industries has $155,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Cost of equipment required Working capital investment required Annual cash inflows Salvage value of equipment in six years Life of the project Project A $155,000 SO $25,000 $9,600 6 years Net present value Required: a. Calculate net present value for each project. Project A Project B SO The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries' discount rate is 15%. $155,000 $57,000 Click here to view Exhibit 118-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables. Project B $0 6 years b. Which investment alternative (if either) would you recommend that the company accept? Project A Project B
Q: An investment will pay $150 at the end of each of the next 3 years, $300 at the end of Year 4, $600…
A: The present value is calculated using the formula
Q: 1. JL stock was priced at $24.7, $24.15, $23.99, and $24.26 at the end of Years 1 to 4,…
A: Stock price year 1= $24.7Year 2 = $24.15Year 3 = $23.99Year 4 = $24.26Annual dividend = $0.20
Q: A bond matures in 25 years, but is callable in 11 years at 123. The call premium decreases by 2…
A: 1.Face value of bond is also known as par value.2.Call premium is calculated as follows:-Call…
Q: Which factor is NOT considered when determining the suitability of investments for a client
A: To determine the investment suitability of a client, we need to determine the client's ability and…
Q: A bond with a face value of $7,000 pays quarterly interest of 2.5 percent each period. Twenty-two…
A: A bond is a kind of debt security issued by the government and private companies to the public for…
Q: If the spot FX rate for the Chinese Yuan (CNY) changes from CNY6.7855/$ to CNY6.652/$, has Chinese…
A: The spot FX rate for the Chinese Yuan (CNY) changed from CNY6.7855/$ (V1) to CNY6.652/$ (V2).The…
Q: A company issued $30 million of face value bonds, with a coupon rate of 5% payable semi-annually.…
A: Bonds are debt instruments issued by companies. The company that issues the bond pays periodic…
Q: New Business Ventures, Inc., has an outstanding perpetual bond with a coupon rate of 8 percent that…
A: Here,ParticularsValuesFace value of the bond $1,000.00Call premium $ 100.00Coupon rate8.00%YTM…
Q: Raiders Restaurant is considering the purchase of a $10,000,000 flat - top grill. The grill has an…
A: Npv is also known as Net present value. It is a capital budgeting technique which helps in decision…
Q: Sam earned a total of $135 000 in 2012. He saved 35% of his total income and invested his savings in…
A: Using the FV formula, we can determine the amount in the account in 3 years. The formula is as…
Q: A company’s stock price is $50 per share. The company has $15 billion in total assets. Its balance…
A: Book value refers to the value of the asset, security, or liability that the company has recorded…
Q: What was the contribution to the manager's value-added, in % (to three decimal places) from his…
A: We can determine the portfolio excess return attributed to security selection using the formula…
Q: You bought one of Great White Shark Repellant Company's 11 percent coupon bonds one year ago for…
A: A bond is a kind of debt security issued by the government and private companies to the public for…
Q: Rank the following three stocks by their level of total risk, highest to lowest.
A: The coefficient of variation represents a measure of the dispersion of the data points relative to…
Q: Suppose that investors cumulatively short-sell 6 million shares of a stock and the meantime, the…
A: In short sell one does not own stocks but promises to buy at lower prices but if prices goes up then…
Q: Time Left : 00 : 08 : 32 You want to buy a Honda Civic. The MSRP is $26,185. Honda offers a…
A: Present value is an estimate of the present value of future cash values that may be received at a…
Q: Record the amount for check #101 in her check register.
A: Since we are not given the current balance of Zoe's Account, the balance after recording the…
Q: (Related to Checkpoint 9.3) (Bond valuation) Pybus, Inc. is considering issuing bonds that will…
A: A bond is a kind of debt security issued by the government and private companies to the public for…
Q: You have borrowed $130,000 to buy a new c be repaid over 15 years at 6% compounded m table below,…
A: Time, the value of money refers to the concept used for determining the future value of an asset…
Q: (Computing the expected rate of return and risk) After a tumultuous period in the stock market,…
A: Risk and return are essential financial principles. The term “risk” refers to the uncertainty and…
Q: St. Margaret Beer Co. is considering a three-year project that will require an initial investment of…
A: Investment timing option:The investment timing option refers to the strategic decision made by…
Q: Study Abroad: Paris to Moscow. On your summer study abroad program in Europe you stay an extra two…
A: A currency exchange rate is the rate at which one currency can be exchanged for another currency. It…
Q: Arnold Inc. is considering a proposal to manufacture high-end protein bars used as food supplements…
A: Initial cost = $1,300,000Sales = $4,500,000Manufacturing cost and operating expenses = 80% of…
Q: Que Corporation pays a regular dividend of $1 per share. Typically, the stock price drops by $0.80…
A: When the company receives profits and distributes them among the shareholders. That share of profit…
Q: Consider the following information about two stocks (D and E) and two common risk factors (1 and 2)…
A: Fama-French factor models are financial models used to explain and predict stock returns based on…
Q: Which of the following tools is sometimes used to rank investment proposals?
A: Capital budgeting (or investment appraisal), is the process by which a company evaluates and selects…
Q: Pete Air wants to buy a used Jeep in 4 years. He estimates the Jeep will cost $17,200. Assume Pete…
A: Maturity value is that amount which includes the interest earned on the investment. It is that…
Q: An Austra ian companv has decided to issue a 90-dav bank-accepted bill domestically to raise…
A: Calculation of face value of bill = Amount borrowed + (yield rate/365)* Number of days * amount…
Q: Frostbite thermalwear has a zero coupon bond issue outstanding with a face value of 18,000 that…
A: A popular mathematical method in finance for pricing European-style options is the Black-Scholes…
Q: Branzini, Inc. has two divisions, Nord and Sud, the revenues of which constitute $60,000,000 and…
A: Business divisions refer to the organizational structure of the different segments in which the…
Q: What is the total future value six years from now of $80 received in one year, $300 received in two…
A: A financial concept known as future value (FV) shows how much money is expected to be worth at a…
Q: You are going to save money for your son’s education. You have decided to place $4,146 every half…
A: Variables in the question:Deposit (PMT)=$4146Rate=9.51% p.a.Semi-annual rate==4.755%N=3 yearsnper=3…
Q: Which of the following is most true about administrative agencies in the u.s. government? a)…
A: Examples of administrative agencies of US government areDepartment of StateDepartment of…
Q: The ask yield on a 6% coupon Treasury bond maturing in 8 years is 5.488%. If the face value is…
A: Present value of the bond refers to the present value of the interest and maturity value discounted…
Q: What is one share of this stock worth at a rate of return of 17 percent?
A: The constant growth model is a stock valuation method used in finance to determine a stock's…
Q: Nesmith Corporation's outstanding bonds have a $1,000 par value, a 6% semiannual coupon, 9 years to…
A: Bonds are debt instruments issued by companies. The issuing company pays periodic coupons or…
Q: Use the future value formula to compute the maturity value of the following promissory note. Ignore…
A: The future value of any investment refers to the compounded value which includes the interest…
Q: Suppose you deposited $39,000 in a bank account that pays 5.25% WI daily compounding based on a…
A: Future value is the amount initially deposited and amount of comounding interest accumulated over…
Q: The cost of retained earnings for Tangshan Mining would be 17.60 percent if the firm just paid a…
A: Solution:Cost of retained earnings refers to the rate of return required by the equity shareholders…
Q: What is the yield to call (YTC)? (Plea
A: Yield to call is the annual return that a bond holder would receive if the bond is called at the…
Q: Richard just entered a university, and his parents are planning to give him a car upon graduation.…
A: Future value is computed by following formula:-FV = A*(1+r)nwhereFV = future valueA = amount…
Q: Goodwin Technologies, a relatively young company, has been wildly successful but has yet to pay a…
A: Horizon value refers to the value of the cash flow at the start of the sustainable growth period, It…
Q: You want to buy a car. The loan amount will be $25,000. The company is offering a 4% interest rate…
A: When the borrower borrows a loan from the lender, he has to pay a rate of interest on the borrowed…
Q: If Oscar had an indemnity plan that pays 90 percent of his charges with a $1,000 deductible and a…
A: Indemnity Plan:An indemnity plan, also known as a fee-for-service (FFS) plan, is a type of health…
Q: Problem 8-6 Profitability Index (L03) The following are the cash flows of two projects: Project B $…
A: The profitability index is used to determine the attractiveness of an investment. It is computed by…
Q: The debtor-creditor relationship is one where the customer instructs the bank to act on its behalf…
A: In a debtor-creditor relationship, one party (the debtor) owes a debt or obligation to another party…
Q: Please explain with details also explain wrong options A Treasury bond has an 8% annual coupon and…
A: A bond will be selling at its par value if its Coupon rate = yield to maturityA bond will be selling…
Q: Income statements for the years ended 30 June 2018 £000 2,600 (1,560) 1,040 Sales revenue Cost of…
A: Financial ratios:Financial ratios are quantitative tools used to assess the financial health and…
Q: Consider the following information on large-company stocks for a period of y Arithmetic Mean 12.7%…
A: Arithmetic Mean =12.70%Inflation rate-3.3%Required:Arithmetic average annual return in nominal…
Q: You find the following corporate bond quotes. To calculate the number of years until maturity,…
A: The price of a bond is equal to the present value of coupon payments and the present value of the…
Step by step
Solved in 3 steps
- Exercise 14-7 (Algo) Net Present Value Analysis of Two Alternatives [LO14-2] Perit Industries has $115,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Project A Project B Cost of equipment required $ 115,000 $ 0 Working capital investment required $ 0 $ 115,000 Annual cash inflows $ 21,000 $ 69,000 Salvage value of equipment in six years $ 8,700 $ 0 Life of the project 6 years 6 years The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries’ discount rate is 15%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net present value of Project A. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.) 2. Compute the net present value of Project B. (Enter negative values with a minus sign. Round your…Exercise 14-7 (Algo) Net Present Value Analysis of Two Alternatives [LO14-2] Perit Industries has $210,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Cost of equipment required Working capital investment required Annual cash inflows Salvage value of equipment in six years Life of the project Project A $ 210,000 $0 $ 30,000 $ 9,100 6 years Project B $0 $ 210,000 $ 52,000 $0 6 years The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries' discount rate is 15%. Click here to view Exhibit 148-1 and Exhibit 148-2, to determine the appropriate discount factor(s) using tables. Required: . Compute the net present value of Project A. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.) 2. Compute the net present value of Project B. (Enter negative values with a minus sign. Round your final answer to the nearest…Exercise 12-7 (Algo) Net Present Value Analysis of Two Alternatives [LO12-2] Perit Industries has $200,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Cost of equipment required Working capital investment required. Annual cash inflows Salvage value of equipment in six years Life of the project 1. Net present value project A 2. Net present value project B 3. Which investment alternative (if either) would you recommend that the company accept? Project A $ 200,000 $0 $ 29,000 $ 9,000
- Coffer Company is analyzing two potential investments. Cost of machine Project X $ 97,090 Net cash flow: Year 1 Year 2 Year 3 Year 4 Project Y $ 72,000 36,500 3,700 36,500 33,500 36,500 33,500 0 13,000 If the company is using the payback period method, and it requires a payback period of three years or less, which project(s) should be selected? Multiple Choice ○ Project Y. ○ Project X. Both X and Y are acceptable projects. Neither X nor Y is an acceptable project. Project Y because it has a lower Initial Investment.Exercise 14-7 (Algo) Net Present Value Analysis of Two Alternatives [LO14-2) Perit Industries has $165,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Cost of equipment required working capital investment required Annual cash inflows Salvage value of equipment in six years Life of the project Project A $ 305,000 50 $ 21,000 1. Nat present valus project A 2. Net present value project B 3. Which investment alternative of either) would you recommend that the company accept? Project 8 $ 165,000 $ 56,000 years The working capital needed for project will be released at the end of six years for investment elsewhere. Perit Industries' discount rate is 14%. Click here to view Exhibit 148-1 and Exhibit 148-2, to determine the appropriate discount factors) using tables. Required: 1. Compute the net present value of Project A. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.) 2.…Question 10 An investment has an initial cost of $410,000 and will generate the net income amounts shown below. This investment will be depreciated straight line to zero over the 4-year life of the project. Should this project be accepted based on the average accounting rate of return if the required rate is 16 percent? Why or why not? Year Net Income 1 $21,000 2 24,800 3 37,500 4 45,000 Group of answer choices Yes; because the AAR is greater than 16 percent No; because the AAR is less than 16 percent Yes; because the AAR is less than 16 percent Yes; because the AAR is equal to 16 percent No; because the AAR is greater than 16 percent
- Required information Problem 14.056 The two machines shown are being considered for a chip manufacturing operation. Assume the MARR is a real return of 14% per year and that the inflation rate is 6.7% per year. A B Machine First Cost, $ -146,000 -820,000 -5,000 -70,000 M&O, $ per year Salvage Value, $ 40,000 200,000 Life, years 5 00 Problem 14.056.a: Compare two alternatives based on their AW values without inflation consideration Which machine should be selected on the basis of an annual worth analysis if the estimates are in constant-value dollars? What is the annual worth of the selected alternative? Select machine (Click to select]: wwwwwwwwwwww wwwwww... The annual worth of the alternative is $Coffer Company is analyzing two potential investments. Project X Cost of machine Net cash flow: Year 1 Year 2 $ 85,470 Project Y $ 65,000 33,000 33,000 3,000 30,000 Year 3 Year 4 33,000 0 • 30,000 25,000 If the company is using the payback period méthod, and it requires a payback period of three years or less, which project(s) should be selected? Multiple Choice Project Y. Project X. Both X and Y are acceptable projects. Neither X nor Y is an acceptable project.Question 4 Bell Manufacturing is considering investing in a new project. Two projects have been put forward for consideration. The following information has been gathered for each. Project A Project B Initial investment £500,000 £600,000 Life of project 4 years 4 years Estimated annual cash flows: Year Project A Project B Cash flow per year 1 160,000 180,000 170,000 190,000 3 110,000 100,000 4 90,000 150,000 Resale value of project 30,000 40,000 The company estimates its cost of capital at 12% and uses straight line depreciation method for its plant and machinery. Required a) Appraise the two Project using the following methods of investment appraisal: i. Payback period ii. Accounting Rate of Return iii. Net present value b) Discuss your findings and advise the company which project they should invest in if the projects are mutually exclusive (that is only one project may be undertaken).
- Practical Question The total investment required for two projects are estimated at OMR100, 000. The cash flows expected from the two projects for the first four years are explained in the table below. Year Project A Project B Year 1 15,000 15,000 Year 2 28,500 40,000 Year 3 40,000 21,500 Year 4 50,000 35,000 Use the above information and advise which project to select based on payback period method 11 直 hpExercise 14-14 (Algo) Comparison of Projects Using Net Present Value [LO14-2] Labeau Products, Limited, of Perth, Australia, has $21,000 to invest in one of the following two projects: Project Y $ 21,000 Investment required Annual cash inflows Single cash inflow at the end of 6 years Life of the project The company's discount rate is 18%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net present value of Project X. 2. Compute the net present value of Project Y. 3. Which project should the company accept? Project X Required 1 Required 2 Required 3 $ 21,000 $ 8,000 Complete this question by entering your answers in the tabs below. $ 50,000 6 yearsQuestion 16 The following information relates to three possible capital expenditure projects. Because of capital rationing only one project can be accepted. Project: A B C . Initial cost R100 000 R115 000 R90 000 Expected life 5 years 5 years 4 years Scrap value R5 000 R7 500 R4 000 Cash-inflows R R R End year 1 40 000 50 000 27 500 2 35 000 35 000 32 500…