The payback reciprocal is an estimate of the internal rate of return. NUBD Co. is considering the acquisition of a merchandise picking system to improve customer service. Annual cash returns on investment cost of P1.2 million is P240,000. Useful life is estimated at 8 years. The company’s cost of capital is 14% and income tax rate is 35%. Calculate NUBD’s payback reciprocal for this investment.
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The payback reciprocal is an estimate of the
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- The Tamarind Inc. is considering the acquisition of a merchandise picking system to improve customer service. Annual cash returns on investment cost of P1.2 million is P220,000. Useful life is estimated at 8 years. The company’s cost of capital is 14% and income tax rate is 35%. Calculate Tamarind, Inc.’s payback reciprocal for this investment. 18.3% 22.2% 11.9% 20.5%The BMW Company is considering to purchase a new machine. Annual cash returns on investment cost of P1,200,000 is expected to be at P220,000. Useful is estimated at 8 years. The company's cost of capital is 14% and income tax rate is 35%. What is the payback reciprocal of the investment? A. 20.5% B. 18.3% C. 11.9% D. 22.2%A company is thinking in investing in one of two potential new products for sale. The projections are as follows: year Revenue/cost £ (Product S) Revenue/cost £ (Product V) 0 (150,000) outlay (150,000) outlay 1 14000 15000 2 24000 25333 3 44000 52000 4 84000 63333 a) Calculate the IRR for Product V only using 1% and 17% to 2 d.p.b) Outline the advantages and disadvantages of the IRR and payback using appropriate academic sources.
- A company is thinking in investing in one of two potential new products for sale. The projections are as follows: year Revenue/cost £ (Product S) Revenue/cost £ (Product V) 0 (150,000) outlay (150,000) outlay 1 14000 15000 2 24000 25333 3 44000 52000 4 84000 63333 a) Calculate the payback period for both products in years and months, not as a decimal. Please present answer to nearest month.b) Calculate NPV of both products (to 1 d.p.) assuming a discount rate of 7%.c) Which product should be chosen and why?d) Calculate the IRR for Product V only using 1% and 17% to 2 d.p.e) Outline the advantages and disadvantages of the IRR and payback using appropriate academic sources.The firm provided the following data for the year: Selling price per unit- ₱40; Variable production cost per unit- ₱15; Fixed production cost- ₱100,000; Sales commission per unit- ₱5.00; Fixed Selling and administrative expenses- ₱60,000. The firm has an outstanding loan of ₱200,000 with an interest rate of 5% per annum. The breakeven point (in peso) would be? a. ₱300,000 b. ₱340,000 c. ₱272,000 d. ₱256,000 e. ₱320,000The Best Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated here. The corporate tax rate is 34 percent. Assume all sales revenue is received in cash, all operating costs and income taxes are paid in cash, and all cash flows occur at the end of the year. All net working capital is recovered at the end of the project. Investment Sales revenue Operating costs Depreciation Net working capital spending Net income Year O $27,000 Year 1 $ Cash flow 330 Year 1 $14,000 $14,500 3,000 6,750 380 280 a. Compute the incremental net income of the investment for each year. (Do not round intermediate calculations.) Year 2 Year 2 Year O $-27330 Year 3 3,100 3,200 6,750 6,750 430 330 3069 $15,000 $12,000 2,400 6,750 ? Year 1 $ Year 4 Year 3 b. Compute the incremental cash flows of the investment for each year. (Do not round intermediate calculations. A negative answer should be indicated by a minus sign.) 3333 Year 4 $ Year 2 $ c. Suppose the…
- The Best Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated here. The corporate tax rate is 24 percent. Assume all sales revenue is received in cash, all operating costs and income taxes are paid in cash, and all cash flows occur at the end of the year. All net working capital is recovered at the end of the project. Year 0 Year 1 Year 2 Year 3 Year 4 Investment $ 27,700 Sales revenue $ 14,800 $ 16,400 $ 17,800 $ 14,300 Operating costs 3,600 3,450 5,600 4,200 Depreciation 6,925 6,925 6,925 6,925 Net working capital spending 370 270 365 220 ? a. Compute the incremental net income of the investment for each year. (Do not round intermediate calculations.) b. Compute the incremental cash flows of the investment for each year. (Do not round intermediate calculations. A negative…Dinshaw Company is considering the purchase of a new machine. The invoice price of the machine is $87,306, freight charges are estimated to be $2,620, and installation costs are expected to be $7,370. The annual cost savings are expected to be $14,980 for 11 years. The firm requires a 20% rate of return. Ignore income taxes. What is the internal rate of return on this investment? Internal rate of return % Round to 0 decimal placeseBlanda Incorporated management is considering investing in two alternative production systems. The systems are mutually exclusive, and the cost of the new equipment and the resulting cash flows are shown in the accompanying table. If the firm uses a 7 percent discount rate for their production systems. Year System 1 System 2 0 -$12,800 -$42,700 1 12,800 32,300 2 12,800 32,300 3 12,800 32,300 What are the payback periods for production systems 1 and 2? (Round answers to 2 decimal places, e.g. 15.25.) Payback period of System 1 is years and Payback period of System 2 is years If the systems are mutually exclusive and the firm always chooses projects with the lowest payback period, in which system should the firm invest? The firm should invest in .system 1 system 2
- Tyler, Inc., is considering switching to a new production technology. The cost of the required equipment will be $3,727,533 . The discount rate is 12.86 percent. The cash flows that the firm expects the new technology to generate are as follows. Years CF 0 $(3,727,533) 1–2 0 3–5 $874,667 6–9 $1,546,005 a. Compute the payback and discounted payback periods for the project. b. What is the NPV for the project? Should the firm go ahead with the project? c. What is the IRR, and what would be the decision based on the IRR?Mason, Inc., is considering the purchase of a patent that has a cost of $85000 and an estimated revenue producing lite of 4 years. Mason has a required rate of return that is 12% and a cost of capital of 11%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?Assume a company is going to make an investment in a machine of $825,000 and the following are the cash flows that two different products would bring. Which of the two options would you choose based on the payback method?