You are a consultant to a large manufacturing corporation considering a project with the following net after-tax cash flows (in millionsof dollars)Years from Now After-Tax CF01 to 10The project's beta is 1.6. Assuming ry 4% and 8(M) - 14%-$27$16Required:a. What is the net present value of the project? (Do not round intermediate calculations. Enter your answer in millions rounded to 2decimal places.)Net present valuemillion

You are a consultant to a large manufacturing corporation considering a project with the following net after-tax cash flows (in millions of dollars) Years from Now 1 to 10 The project's beta is 16. Assuming ry 4% and e(r) -14% After-Tax CF -$27 $ 16 Required: a. What is the net present value of the project? (Do not round intermediate calculations, Enter your answer in millions rounded to 2 decimal places.) Net present value

You are a consultant to a large manufacturing corporation considering a project with the following net after-tax cash flows (in millions of dollars) Years from Now 1 to 10 The project's beta is 16. Assuming ry 4% and e(r) -14% After-Tax CF -$27 $ 16 Required: a. What is the net present value of the project? (Do not round intermediate calculations, Enter your answer in millions rounded to 2 decimal places.) Net present value

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 4EA: Assume a company is going to make an investment of $450,000 in a machine and the following are the...

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You are a consultant to a large manufacturing corporation considering a project with the following net after-tax cash flows (in millions of dollars): Years from Now After-Tax CF 0 −$ 22 1 to 10 $ 10 The project's beta is 1.6. Assuming rf = 5% and E(rM) = 15% Required: a. What is the net present value of the project? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) b. What is the highest possible beta estimate for the project before its NPV becomes negative? (Do not round intermediate calculations. Round your answer to 3 decimal places.)
Consider a project with an initial investment (today, t = 0) of $200,975. This project will generate cash flows of $49,500 per year for the next 8 years, at which time (end of Year 8) the company will pay $50,000 to another for clean-up and disposal. What is the Profitability Index (PI) of the project if shareholders demand a 16.295% return? Answer with a number rounded to three decimal places, e.g., 4.0877% should be entered as 4.088.
You are asked to evaluate two projects X and Y. The cash flow for each is listed below. The firmAc€?cs cost of capital is 12%. Year X Y 0 (10,000) (10,000) 1 6,500 3,500 2 3,000 3,500 3 3,000 3,500 4 1,000 3,500 Calculate the NPV of each project? [rounded to the nearest tens] Which project would you select? c) Compute the IRR for project X. [up to two decimal places] Based on the IRR criterion, should project X be accepted? Compute the IRR for project Y. [up to two decimal places] Based on the IRR criterion, should project Y be accepted?
Soul Corp. management is expecting a project to generate an after-tax income of $77,270 in each of the next three years. The average book value of the project’s equipment over that period will be $200,120. If the firm’s investment decision on any project is based on an ARR of 37.5 percent. (Round answer to 1 decimal place, e.g. 5.2%.)What is the project’s accounting rate of return?______% Should the firm accept this project?_________
Consider a project with an initial investment (today, t = 0) of $225,000. This project will generate cash flows of $68,750 per year for the next 6 years. The company will pay $50,000 to another for clean-up and disposal in Year 6. What is the Profitability Index (PI) of the project if shareholders demand 8.25% return? Answer in whole numbers, rounded to three decimal places.
Can you show me how this is done? Kepner Inc, is considering a capital investment project. that will provide annual cash flows of $31,248, requires an initial investment of $62,241, and the PV of cash flows is $106,796. What is the profitability index of the project? Round your answer 2 decimal places Selected Answer: 76 Correct Answer: 1.72 ± 0.01
A firm wants to invest in a project whose financial information is below. The tax rate is 30%, and the MARR (Minimum Attractive Rate of Return) is 16%. Answer the following questions based on the information given in the table. Initial investment cost (TL) 155,000 Operating expenses (TL/year) 42,000 General maintenance cost (TL) (end of 3rd year) 26,500 Income (TL/year) 65,000 Salvage value (TL) 41,000 Economic life (year) 5 Taking into account the net cash flows of the project after tax; a) Calculate the annual depreciation amount required by the company for the project using the straight-line (SL) depreciation method. b) What is the project's net cash flow amount in the initial period? c) What is the project’s net cash flow amount in the operating periods? d) What is the project's net cash flow amount in the last period? e) Calculate the Net Present Value of the project and evaluate it from an economic point of view.
A company is considering a project with the following cash flows: Initial investment of £130,000, Income in 1st year of £0, Income in 2nd year of £80,000, and Income in 3rd year of £120,000 This income is expected to be received half-way through the year. Which of the following gives the INTERNAL RATE OF RETURN for the project? (correct answer = 23.08%, no tables, ONY formulas)
Perez Company is considering an investment of $30,485 that provides net cash flows of $9,000 annually for four years. (a) What is the internal rate of return of this investment? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your present value factor to 4 decimals.) (b) The hurdle rate is 6%. Should the company invest in this project on the basis of internal rate of return? See photo for additional information
The Sloan Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow(I) Cash Flow(II) 0 –$ 55,000 –$ 18,900 1 25,000 10,150 2 25,000 10,150 3 25,000 10,150 a-1 If the required return is 10 percent, what is the profitability index for both projects? (Do not round intermediate calculations. Round your answers to 3 decimal places, e.g., 32.161.) a-2 If the company applies the profitability index decision rule, which project should the firm accept? Project I Project Il b-1 What is the NPV for both projects? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b-2 If the company applies the NPV decision rule, which project should it take? Project I Project II
Let's say you have the opportunity to invest in a project that will require you to invest $133,292.00 today. You will receive positive after tax cash flows of $37,000 at the end of each of the next six years. At the end of that sixth year, you will also receive a terminal value payment of $22,000 after tax. Your cost of capital is 11.0%. What is the NPV of the project? Round to the nearest $ and use the $ symbol..and use a comma in your number if applicable. No decimals.
As assistant to the CFO of Boulder Inc., you must estimate the Year 1 cash flow for a project with the following data. What is the Year 1 cash flow? Do not round the intermediate calculations and round the final answer to the nearest whole number. Sales revenues $11,900 Operating costs $5,430 Tax rate 20.0%