Payback, Accounting Rate of Return, Net Present Value, Internal Rate of ReturnWoodard Company wants to buy a numerically controlled (NC) machine to be used in producing specially machined parts formanufacturers of trenching machines. The outlay required is $800,000. The NC equipment will last five years with no expected salvagevalue. The expected after-tax cash flows associated with the project follow:Year Cash Revenues Cash Expenses12345$1,600,0001,600,0001,600,0001,600,0001,600,000$1,300,0001,300,0001,300,0001,300,0001,300,000Required:Compute the payback period for the NC equipment. Round your answer to one decimal place.Payback period =years Payback, Accounting Rate of Return, Net Present Value, Internal Rate of ReturnWoodard Company wants to buy a numerically controlled (NC) machine to be used in producing specially machined parts formanufacturers of trenching machines. The outlay required is $800,000. The NC equipment will last five years with no expected salvagevalue. The expected after-tax cash flows associated with the project follow:Year Cash Revenues Cash Expenses12345$1,300,0001,300,0001,300,0001,300,0001,300,000$1,016,0001,016,0001,016,0001,016,0001,016,000Required:Compute the NC equipment's ARR. Enter as a percent and round your answer to one decimal place.Accounting rate of return =%

Payback period refers to the time period usually in years at which the initial capital outlay would…

value. The expected after-tax cash flows associated with the project follow: Year Cash Revenues Cash Expenses $1,300,000 1,300,000 1,300,000 1,300,000 1,300,000 1 2 3 4 5 $1,600,000 1,600,000 1,600,000 1,600,000 1,600,000 Required: Compute the payback period for the NC equipment. Round your answer to one decimal place. Payback period = years

value. The expected after-tax cash flows associated with the project follow: Year Cash Revenues Cash Expenses $1,300,000 1,300,000 1,300,000 1,300,000 1,300,000 1 2 3 4 5 $1,600,000 1,600,000 1,600,000 1,600,000 1,600,000 Required: Compute the payback period for the NC equipment. Round your answer to one decimal place. Payback period = years

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Duo Corporation is evaluating a project with the following cash flows: Year Cash Flow 0 -$ 29,300 11,500 12345 14,200 16,100 13,200 -9,700 The company uses a discount rate of 11 percent and a reinvestment rate of 8 percent on all of its projects. a. Calculate the MIRR of the project using the discounting approach. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the MIRR of the project using the reinvestment approach. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. Calculate the MIRR of the project using the combination approach. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Discounting approach MIRR % b. Reinvestment approach MIRR 14.18 % c. Combination approach MIRR 13.68 %
Compute the payback statistic for Project A if the appropriate cost of capital is 7 percent and the maximum allowable payback period is four years. (Round your answer to 2 decimal places.) Project A Time: 0 1 2 3 4 5 Cash flow: −$1,400 $510 $600 $600 $380 $180 Payback years: _______.__
Compute the payback period statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown in the chart if the maximum allowable payback is four years. year 0-(-$1,450) Year 1-$250 Year 2-$380 Year 3-$620 Year 4-$1,000 Year 5-$100
(IRR calculation) Determine the IRR on the following projects: a. An initial outlay of $8,000 resulting in a free cash flow of $1,901 at the end of each year for the next 10 years b. An initial outlay of $8,000 resulting in a free cash flow of $2,152 at the end of each year for the next 20 years c. An initial outlay of $8,000 resulting in a free cash flow of $1,045 at the end of each year for the next 12 years d. An initial outlay of $8,000 resulting in a free cash flow of $2,894 at the end of each year for the next 5 years a. What is the IRR of a project with an initial outlay of $8,000 resulting in a free cash flow of $1,901 at the end of each year for the next 10 years? % (Round to two decimal places.)
A project is expected to produce cash inflows of $5,000 for seven years. What is the maximum amount that can be spent on costs to initiate this project and still consider the project as acceptable, given an 11% discount rate? Select one: Oa. $15,884.15 Ob. $23,340.13 Oc. $25,900.63 O d. $23,560.98 Oe. $26,984.02
In your first job with TBL Inc. your task is to consider a new project whose data are shown below. What is the project's Year 1 cash flow? The annual operating cash flows of the project can be calculated as follows: OCF = {[Sales - Operating Costs]*(1-Tax Rate)} + (Depreciation * Tax Rate) Sales revenues $225,250 Depreciation $72,602 Other operating costs $92,000 Tax rate 28%
Calculate the NPVs of both Project X and Project Y. Show the NPVs for each project. If the Projects are Independent which would you approve? If the Projects are Mutually Exclusive which would you approve?
Calculate the payback period, the discounted payback period and the NPV for the following project using a rate of 5%. Time Cash Flow 0 - $63,000 $ 21,000 $ 21,000 $ 21,000 $ 21,000 Payback = Discounted Payback =
Below are information relating to three (3) possible projects. Evaluate the projects by filling up the blanks provided for the final answers. Show computations in the yellow pad. Net Cash outlay Annual net cash inflows Annual depreciation expense Expected recovery period Cost of capital Discounted payback period Internal rate of return (approximate) Net Present Value (NPV) Simple Accounting Rate of Return Ranking May P300,000 50,000 20,000 10 years 16% June P120,000 35,000 18,000 6 years 18% Dianay P150,000 55,000 25,000 5 years 22%
An investment project provides cash inflows of $740 per year for 9 years. What is the project payback period if the initial cost is $1,480? A. 2.00 years B. 2.02 years C. 1.90 years D. 1.94 years E. 2.04 years What is the project payback period if the initial cost is $4,958? A. 6.70 years B. 6.77 years C. 6.37 years D. 6.83 years E. 6.50 years What is the project payback period if the initial cost is $7,400? A. 3.01 years B. Never C. 4.95 years D. 5.25 years E. 1.35 years
3) Consider the following two projects: Net Cash Flow Each Period Initial Outlay 1 2 3 4 Project A $4,000,000 $2,003,000 $2,003,000 $2,003,000 $2,003,000 Project B $4,000,000 0 0 0 $11,000,000 Calculate the net present value of each of the above projects, assuming a 14 percent discount rate. What is the internal rate of return for each of the above projects? Compare and explain the conflicting rankings of the NPVs and IRRs obtained in parts a and b above. If 14 percent is the required rate of return, and these projects are independent, what decision should be made? If 14 percent is the required rate of return, and the projects are mutually exclusive, what decision should be made?
Accounting Draw the cash flow diagram for the given project below and then calculate the project net profit. The following table shows the activities description, dependency, duration, and cost elements. Assume the followings: Project overhead 8%. Tax 3%. Bond 1.25%. Profit 6%. Interest rate 9% per year. Down payment 10% with a guarantee letter, which costs 0.25% per month paid to the bank at the project start date. A performance guarantee letter of 10% will be submitted from contractor at the project begin. Invoices are submitted every month and will be paid a month later. Retention 10% and will be paid at the last invoice. Subcontractors: retention 10% will be paid at the last invoice, down payment 20%. Labor: labor expenses to be paid bi-weekly. Equipment: equipment expenses

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