Ysabelle Industries, Inc. has an opportunity to acquire a new equipment to replace one of its existing equipments. The new equipment would cost P900,000 and has a five-year useful life, with a zero terminal disposal price. Variable operating costs would be P1 million per year. The present equipment has a book value of P500,000 and a remaining life of five years. Its disposal price now is P50,000 but would be zero after five years. Variable operating costs would be P1,250,000 per year. Considering the five years in total, but ignoring the time value of money and income taxes. Ysabelle should Select the correct response: Replace due to P350,000 advantage. Not replace due to P100,000 disadvantage. Not replace due to P100,000 disadvantage. Not replace due to P150,000 disadvantage.

Blur Corp. is looking at investing in a production facility that will require an initial investment of $500,000. The facility will have a three-year useful life, and it will not have any salvage value at the end of the project’s life. If demand is strong, the facility will be able to generate annual cash flows of $250,000, but if demand turns out to be weak, the facility will generate annual cash flows of only $120,000. Blur Corp. thinks that there is a 50% chance that demand will be strong and a 50% chance that demand will be weak. If the company uses a project cost of capital of 13%, what will be the expected net present value (NPV) of this project? -$66,346   -$63,187   -$34,753   -$44,231     Blur Corp. could spend $510,000 to build the facility. Spending the additional $10,000 on the facility will allow the company to switch the products they produce in the facility after the first year of operations if demand turns out to be weak in year 1. If the…

ThreeRivers Corp. is considering the purchase of a new piece of equipment with a life of 12 years. The internal rate of return of the project is 20%.  ThreeRivers has a required rate of return (hurdle rate) of 17%.   The project would have:       Multiple Choice   a net present value greater than zero.   a payback period more than 12 years.   a net present value of zero.   an accounting rate of return greater than 17%.

The Susan Company is debating if they should purchase a new machine for its factory operations at a cost of $745,200. The investment is expected to generate $150,000 in annual cash flows for a period of eight years. The required rate of return is 10%. The old machine has a remaining life of eight years. The new machine is expected to have zero value at the end of the eightminus-year period. The disposal value of the old machine at the time of replacement is zero. (Click the icon to view the Future Value of $1 factors.) (Click the icon to view the Future Value of Annuity of $1 factors.) (Click the icon to view the Present Value of $1 factors.) (Click the icon to view the Present Value of Annuity of $1 factors.) Requirement 1: What is the Internal Rate of Return of this investment that Susan Company is making? O A. 14% В. 8% С. 10% D. 12% Requirement 2: Should Susan Company purchase the new machine? Why? O A. Yes, as the internal rate of return is more than their required rate return B.…

You are considering a new product launch. The project will cost $960,000, have a 5-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 350 units per year; price per unit will be $15,955, variable cost per unit will be $12,000, and fixed costs will be $625,000 per year. The required return on the project is 10 percent, and the relevant tax rate is 23 percent. Based on your experience, you think the unit sales, variable cost, and fixed cost projections given here are probably accurate to within +10 percent. a. What are the best-case and worst-case NPVs with these projections? Note: 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. What is the base-case NPV? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. c. What is the sensitivity of your base-case NPV to changes in fixed costs? Note: A…

YOU ARE A FINANCIAL ANALYST FOR A COMPANY THAT IS CONSIDERING A NEW PROJECT. IF THE PROJECT IS ACCEPTED, IT WILL USE A FRACTION OF A STORAGE FACILITY THAT THE COMPANY ALREADY OWNS BUT CURRENTLY DOES NOT USE. THE PROJECT IS EXPECTED TO LAST 10 YEARS, AND THE ANNUAL DISCOUNT RATE IS 10% (COMPOUNDED ANNUALLY). YOU RESEARCH THE POSSIBILITIES, AND FIND THAT THE ENTIRE STORAGE FACILITY CAN BE SOLD FOR €100,000 AND A SMALLER (BUT BIG ENOUGH) FACILITY CAN BE ACQUIRED FOR €40,000. THE BOOK VALUE OF THE EXISTING FACILITY IS €60,000, AND BOTH THE EXISITING AND THE NEW FACILITIES (IF IT IS ACQUIRED) WOULD BE DEPRECIATED STRAIGHT LINE OVER 10 YEARS (DOWN TO A ZERO BOOK VALUE). THE CORPORATE TAX RATE IS 40%. DISCUSS WHAT IS THE OPPORTUNITY COST OF USING THE EXISTING STORAGE CAPACITY?

We are evaluating a project that costs RM604,000, has an 8-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 55,000 units per year. Price per unit is RM36, variable cost per unit is RM17, and fixed costs are RM685,000 per year. The tax rate is 21 percent and we require a return of 15 percent on this project. (i) Calculate the base-case cash flow and NPV., (ii) Assume the sales figure increases to 56,000 units per year, calculate the sensitivity of NPV to changes in the sales figure?

Kunkel Company is considering the purchase of a $29,000 machine that would reduce operating costs by $6,500 per year. At the end of the machine's five-year useful life, it will have zero salvage value. The company's required rate of return is 16%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table. Required: 1. Calculate the net present value of the investment in the machine. 2. What is the difference between the total, undiscounted cash inflows and cash outflows over the entire life of the machine? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Calculate the net present value of the investment in the machine. Note: Negative amounts should be indicated by a minus sign. Round your final answer to the nearest whole dollar amount. Use the appropriate table to determine the discount factor(s). Net present value

The Bruin's Den Outdoor Gear is considering a new 7-year project to produce a new tent line. The equipment necessary would cost $1.83 million and be depreciated using straight-line depreciation to a book value of zero. At the end of the project, the equipment can be sold for 10 percent of its initial cost. The company believes that it can sell 29,000 tents per year at a price of $75 and variable costs of $34 per tent. The fixed costs will be $505,000 per year. The project will require an initial investment in net working capital of $237,000 that will be recovered at the end of the project. The required rate of return is 11.8 percent and the tax rate is 21 percent. What is the NPV?

XYZ Corporation is studying a project that would have a ten-year life and would require a $450,000 investment in equipment which has no salvage value. The project would provide net operating income each year as follows for the life of the project (Ignore income taxes.): Sales $ 500,000 Less cash variable expenses 200,000 Less cash fixed expenses 150,000 Less depreciation expenses 45,000 Net operating income $ 105,000 The company's required rate of return is 12%. Compute the payback period for this project Enter your answer