Chapter 9 Question 5Please help me find the answer with an explanation. APPENDIX 9.1 Present value of $1 received in n periods.Periods4%5%6%7%8%9%10%11%12%13%14%16%18%20%10.96150.95240.9434 0.9346 0.9259 0.91740.9091 0.9009 0.8929 0.88500.87720.8621 0.84750.83330.92460.90700.89000.87340.8573 0.84170.8264 0.8116 0.7972 0.78310.76950.7432 0.71820.694430.88900.86380.83960.81630.79380.77220.7513 0.7312 0.7118 0.69310.67500.64070.60860.578740.85480.82270.79210.7629 0.73500.70840.6830 0.6587 0.6355 0.61330.59210.55230.5158 0.48230.82190.78350.7473 0.7130 0.6806 0.64990.6209 0.5935 0.56740.54280.51940.4761 0.43710.40196.0.79030.74620.70500.66630.63020.59630.56450.53460.50660.48030.45560.41040.37040.334970.75990.71070.66510.62270.58350.54700.51320.48170.45230.42510.39960.35380.31390.27910.73070.67680.62740.58200.54030.5019 0.46650.43390.40390.37620.35060.30500.26600.23260.70260.64460.59190.54390.50020.46040.42410.39090.36060.33290.30750.26300.22550.1938100.67560.61390.55840.50830.46320.42240.38550.35220.32200.29460.26970.22670.19110.1615110.64960.58470.52680.47510.42890.3875 0.3505 0.3173 0.28750.26070.23660.19540.16190.1346120.62460.55680.49700.44400.39710.3555 0.3186 0.2858 0.25670.23070.2076 0.1685 0.1372 0.1122130.60060.53030.46880.41500.36770.3262 0.2897 0.2575 0.2292 0.20420.18210.1452 0.11630.0935140.57750.50510.44230.38780.34050.29920.26330.23200.20460.18070.1597 0.12520.09850.0779150.55530.48100.41730.3624 0.31520.2745 0.23940.20900.18270.15990.14010.1079 0.0835 0.0649160.53390.45810.39360.33870.29190.2519 0.21760.18830.16310.14150.1229 0.0930 0.0708 0.0541170.51340.43630.37140.31660.27030.2311 0.19780.16960.1456 0.1252 0.1078 0.0802 0.06000.0451180.49360.41550.35030.29590.25020.2120 0.17990.15280.13000.11080.09460.06910.05080.0376190.47460.39570.33050.2765 0.23170.1945 0.1635 0.13770.11610.09810.0829 0.0596 0.0431 0.0313200.45640.37690.31180.25840.21450.1784 0.14860.12400.10370.08680.07280.05140.03650.0261$1PVn.(1+ i)" The Pina Colada Company is planning to purchase $458,000 of equipment with an estimated 7-year life and no estimated salvagevalue. The company has projected the following annual cash flows for the investment:Projected CashYearFlows1.$236,000141,0003125,000455,500560,400644,800746,900Total$709,600Click here to view the factor table.Calculate the net present value of the proposed equipment purchase. Pina Colada uses a 7% discount rate. (For calculation purposes,use 4 decimal places as displayed in the factor table provided and round final answer to O decimal place, e.g. 58,971.)Net present value$

Net present value is a concept that is used by the managers in order to make decisions whether to…

The Pina Colada Company is planning to purchase $458,000 of equipment with an estimated 7-year life and no estimated salvage value. The company has projected the following annual cash flows for the investment: Projected Cash Year Flows $236,000 2 141,000 3 125,000 4 55,500 60,400 44,800 7 46,900 Total $709,600 Click here to view the factor table. Calculate the net present value of the proposed equipment purchase. Pina Colada uses a 7% discount rate. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to O decimal place, eg. 58,971.) Net present value

The Pina Colada Company is planning to purchase $458,000 of equipment with an estimated 7-year life and no estimated salvage value. The company has projected the following annual cash flows for the investment: Projected Cash Year Flows $236,000 2 141,000 3 125,000 4 55,500 60,400 44,800 7 46,900 Total $709,600 Click here to view the factor table. Calculate the net present value of the proposed equipment purchase. Pina Colada uses a 7% discount rate. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to O decimal place, eg. 58,971.) Net present value

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 22E

See similar textbooks

Similar questions

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.
Gallant Sports s considering the purchase of a new rock-climbing facility. The company estimates that the construction will require an initial outlay of $350,000. Other cash flows are estimated as follows: Assuming the company limits its analysis to four years due to economic uncertainties, determine the net present value of the rock-climbing facility. Should the company develop the facility if the required rate of return is 6%?
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)?
San Lucas Corporation is considering investment in robotic machinery based upon the following estimates: a. Determine the net present value of the equipment, assuming a desired rate of return of 10% and annual net cash flows of 700,000. Use the present value tables appearing in Exhibits 2 and 5 of this chapter. b. Determine the net present value of the equipment, assuming a desired rate of return of 10% and annual net cash flows of 500,000, 700,000, and 900,000. Use the present value tables (Exhibits 2 and 5) provided in the chapter in determining your answer. c. Determine the minimum annual net cash flow necessary to generate a positive net present value, assuming a desired rate of return of 10%. Round to the nearest dollar. d. Interpret the results of parts (a), (b), and (c).
he Novak Company is planning to purchase $502,100 of equipment with an estimated seven-year life and no estimated salvage value. The company has projected the following annual cash flows for the investment. Year Projected Cash Flows 1 $193,500 2 141,500 3 94,500 4 79,200 5 79,200 6 45,000 7 45,000 Total $677,900 (a) Calculate the payback period for the proposed equipment purchase. Assume that all cash flows occur evenly throughout the year. Payback period years and months. (b) If Novak requires a payback period of three years or less, should the company make this investment? The company should notshould make this investment.
A project requires an initial investment of $500,000. The following cash flows have beenestimated for the life of the project:Year Cash flow ($)1 120,0002 150,0003 180,0004 160,000 a. The company uses NPV to appraise projects. Using a discount rate of 7%, calculate the NPVof the project and recommend whether the project should be undertaken.
The Marigold Company is planning to purchase $577,000 of equipment with an estimated seven-year life and no estimated salvage value. The company has projected the following annual cash flows for the investment. Year 1 2 3 456 7 Total Projected Cash Flows $214,000 169,500 124,500 Payback period 55,200 55,200 48,500 The company 48,500 (a) Calculate the payback period for the proposed equipment purchase. Assume that all cash flows occur evenly throughout the year. $715,400 years and (b) If Marigold requires a payback period of 4 years or less, should the company make this investment? months. make this investment.
The Amani Company is planning a $200,000 equipment investment that has an estimated eight-year life with no estimated salvage value. The company has projected the following annual cash flows for the investment. Year Cash Inflows $120,000 $70,000 $60,000 $60,000 $60,000 Total $370,000 1 4. Assuming that the cash inflows occur evenly over the year, what is the payback period for the investment? (Ignore income taxes in this problem.)
Stomberg Corporation has provided the following data concerning an investment project that it is considering: Initial investment Annual cash flow Salvage value at the end of the project Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using the tables provided. The life of the project is 4 years. The company's discount rate is 10%. The net present value of the project is closest to: $184,000 $579,982 O$29,982 $20,420 $ 550,000 $ 180,000 per year 14,000
What is the accounting rate of return for Project B? (Round your answer to two decimal places. Martin Production Co. is considering investing in specialized equipment costing $975,000. The equipment has a useful life of five years and a residual value of $75,000. Depreciation is calculated using the straight-line method. The expected net cash inflows from the investment are given below: Year 1 $275,000 Year 2 220,000 Year 3 200,000 Year 4 200,000 Year 5 180,000 $1.075.000 Compute the accounting rate of return on the investment, Show your calculations.
Tucker Manufacturing is considering investing in specialized equipment costing $841,000. The equipment has a useful life of five years and a residual value of $80,000. Depreciation is calculated using the straight-line method. The expected net cash inflows from the investment are given below. Year 1 2 3 4 5 $315,000 356,000 368,000 196,000 237,000 $1,472,000 Total What is the average annual operating income from the asset? A. $294,400 OB. $142,200 OC. $126,200 OD. $110,200
The management of Advanced Alternative Power Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows: Year Wind Turbines Biofuel Equipment $250,000 $530,000 250,000 530,000 250,000 530,000 4. 250,000 530,000 Present Value of an Annuity of $1 at Compound Interest 1.