Waterway Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevantdata on each project are as follows.Project BonoProject EdgeProject ClaytonCapital investment$164,800$180,250$206,000Annual net income:Year 114,42018,54027,810214,42017,51023,690314,42016,48021,630414,42012,36013,390514,4209,27012,360Total$72,100$74,160$98,880Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 15%. (Assume that cashflows occur evenly throughout the year.)Click here to view PV table.(a)Compute the cash payback period for each project. (Round answers to 2 decimal places, eg. 10.50.)Project BonoyearsProject EdgeyearsProject Claytonyears

To compute the cash payback period for each project, we need to determine how long it will take for…

Answered: Waterway Company is considering three…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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A company is looking at five different potential projects, but it can only do one of them. Which project should the company select? For this question, use the following information: Project A B D E Initial Investment -3,300 -6,500 -5,300 -7,000 -5,500 Annual Benefit 650 1,200 950 1,250 1,000 Salvage Value 150 425 300 1,000 200 Useful life 10 10 10 10 10 IRR 14.99% 13.51% 12.74% 13.26% 12.93% E-A C-A В-А D-A D-B Delta IRR 9.68% 8.88% 11.97% 11.78% 10.90% C-E B-E D-E В-С D-C Delta IRR 18.90% 16.44% 14.29% 16.79% 14.71% Which project should be selected if MARR is 10% (mutually exclusive)? D OA Oc OB
The cost of the project is $100,000. You expect the project to make $500,000 in 7years (CF of year 7 = $500,000). Youjr cost of capital is 15%. The IRR for this project equals___. A)25.85%B)23.94%C)22.01%D)17.85%
An Investment project provides the cash flow inflows of $615 per year for 8 years. a) What is the project payback period if the initial cost is $1,750? X years. b) What is the project payback period if the initial cost is $3,400? X years. c) WHat is the project payback period if the initial cost is $5,100 X years.
Consider an investment project in which you invest $3,500 today in order to receive $525 at the end of each of the next 10 years. If the cost of capital is 12% per year, what is the IRR and should the project be accepted? 7.23%, accept project 7.23%, reject project 5.28%, accept project 5.28%, reject project 8.14%, reject project 8.14%, accept project a. b. C. d. e. O f.
The Fizzy Beverage Co. is considering two alternative capital projects. Project 1: expansion of its existing traditional line of Fizzy beverages. Project 2: introduction of a new “healthy” line of beverages. The company has already spent $1,400,000 on research into the feasibility of these projects and has arrived at the following financial projections. · Both projects are estimated to have a life of 5 years. The required fixed asset investment or capital spending for project 1 is $30,000,000 and for project 2 is $35,000,000. Fixed assets will be depreciated straight line to zero. Fixed asset salvage value estimate for project 1 is $6,200,000 and for project 2 is $8,500,000 · In order to support anticipated sales, either project will require an increase in inventory of $8,600,000, an increase in accounts receivable of $2,800,000, and an increase in accounts payable of $6,300,000 · Cost of goods sold is projected at 35% of sales for either project. Selling,…
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calculate the capitalized cost of a project that has an initial cost of 8 000 000 and an additional cost of 250,000 at the end of every 8 years the annual operating costs will be 150,000 at the end of every year for the first 5 years and 200,000 thereafter in addition there is expected to be recurring major rework cause of 500,000 every 13 years. Assume i=12%. draw the complete diagram.
Jacob Inc. is considering a capital expansion project. The initial investment of undertaking this project is $188,500. This expansion project will last for five years. The net operating cash flows from the expansion project at the end of year 1, 2, 3, 4 and 5 are estimated to be $28,500, $38,780, $58,960, $77,680 and $95,380 respectively. Jacob has a weighted average cost of capital of 18%. What is the modified internal rate of return if Jacob undertakes this project. Assuming that the positive cash inflow from undertaking this project will be reinvested at the weighted average cost of capital.
Use the following information for problems 4, 5, 6, and 7 A project initially costs $40,000 and has a 10 year lifetime. The project returns benefits of S10,000 at the end of the first year, increasing by 12% in each of the following years. Costs are incurred at a rate of S4,000 per year. The anticipated salvage value is S7,000. MARR = 15%. 4. The benefit/cost ratio is closest to ... a) 1.24 b) 1.27 c) 1.30 O 1.33 e) 1.37 ) 1.41 g) 1.43 h) 1.45 5. The simple payback period is closest to ... D4.7 years b) 3.5 years c) 8.1 years d) 4.9 years e) 4.5 years f) 4.1 years g) 8.4 years h) 5.7 years i) a payback period does not occur
There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $34,000 and is expected to generate the following cash flows: First Year Second Year Third Year Total Alpha Project $32,000 $22,000 $5,000 $59,000 Beta Project 8,000 23,500 28,000 59,500 Present value and future values table: https://openstax.org/books/principles-managerial-accounting/pages/time-value-of-money A. If the discount rate is 12%, compute the NPV of each project. Round your present value factor to three decimal places and final answer to answer to 2 decimal places. Alpha Project $_________ Beta Project $________ B. Which project should be recommended. _____________
Given the following attributes of an investment project with a 5-year life and an after-tax discountrate of 12%, calculate both the IRR and MIRR of the project using the built-in functions in Excel:investment outlay, time 0, $5,000; after-tax cash inflows, year 1, $800; year 2, $900; year 3, $1,500;year 4, $1,800; and year 5, $3,200. What accounts for the difference in these two measures?
Projects A and B have first costs of $5,000 and $9,000 respectively. Project A has net annual benefits of $2,500 during each year of its 5-year useful life, after which it can be replaced identically. • Project B has net annual benefits of $3,300 during each year of its 10-year life. Use present worth analysis, an interest rate of 30% per year, and a 10-year analysis period to determine which project to select. Project A Project B

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