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Foundations Of Finance
- The management of Ryland International Is considering Investing in a new facility and the following cash flows are expected to result from the investment: A. What Is the payback period of this uneven cash flow? B. Does your answer change if year 6s cash inflow changes to $920,000?arrow_forwardTwo new software projects are proposed to a young, start-up company. The Delta project will cost $150,000 to develop and is expected to have annual net cash flow of $40,000. The Echo project will cost $200,000 to develop and is expected to have annual net cash flow of $50,000. The company is very concerned about their cash flow. Using the payback period, which project is better from a cash flow standpoint? Why? Present the payback period for each project. Use this formula: Payback period = Investment/Annual Savingsarrow_forwardHome Innovations is evaluating a new product design. The estimated receipts and disbursements associated with the new product are shown below. MARR is 10%/yr. Solve, a. What is the external rate of return of this investment? b. What is the decision rule for judging the attractiveness of investments based on external rate of return? c. Should Home Innovations pursue this new product?arrow_forward
- If the company uses a project cost of capital of 13%, what will be the expected net present value (NPV) of this project? (Mote: Do not round Intermediate calculations and round your answer to the nearest whole dollar.) -$7,874 Ⓒ-$6,630 -$8,288 O-$9,531 St. Margaret Beer Co. has the option to delay starting this project for one year so that analysts can gather more information about whether demand will be strong or weak. If the company chooses to delay the project, it will have to give up a year of cash flows, because the project will then be only a two-year project. However, the company will know for certain if the market demand will be strong or weak before deciding to invest in it. What will be the expected NPV If St. Margaret Beer Co. delays starting the project? (Note: Do not round Intermediate calculations and round your answer to the nearest whole dollar.) $1,880 Ⓒ$1,410 What is the value of St. Margaret Beer Co's option to delay the start of the project? (Note: Do not round…arrow_forwardTwo new software projects are proposed to a young, start-up company. The Alpha project will cost $150,000 to develop and is expected to have annual net cash flow of $40,000. The Beta project will cost $200,000 to develop and is expected to have annual net cash flow of $50,000. The company is very concerned about their cash flow. Using the payback period, which project is better from a cash flow standpoint ? Why?arrow_forwardPlease help to solve all the below :) What is the average return per year for a project that has an initial investment of $75,000 with an average return of $12,000 per year over 10 years? a) $1,080 b) $10,800 c) $4,500 d) $11,000 e) $3,200 Based on previous answer, what is the Return on investment (ROI) of this project? a) 8.5 b) 6 c) 4 d) 5.5 e) 3 Which of the following best describes a cost-bound project? a) A project that is constrained by a hard deadline in which the delivery timing is as important as the delivery itself b) A project that is constrained by safety standards in which the safety aspect of the project is as important as the delivery itself c) A project that is constrained by a hard budget in which the cost of the project is as important as the delivery itself d) A and C e) All of the above What would be the discount factor at year 3 of a 4-year project, if the discount rate is 6%? a) 0.78 b) 0.84 c) 0.89 d) 0.96 e) None of the abovearrow_forward
- Use this information for this and the next 2 questions. HCB, Inc. is considering investing in a new 'We're # 1' foam hand cutting facility. If UT has a successful year, then demand will be high and cash flows will be $100,000 per year for 3 years starting in Year 1. If UT has a bad year, then demand will be low and cash flows will be $30,000 per year for 3 years starting in Year 1. The probability of UT having a good year and demand being high is 60% and the probability of a bad year and low demand is 40%. It will cost $150,000 to purchase the equipment. HCB's WACC is 10%. Calculate the expected NPV of this project. $26,412 $29,053 ***correct answer $31,959 $35,155 $38,670 If HCB waits a year to invest, it will know which demand scenario is going to occur and therefore which cash flows will occur. These cash flows will occur in Years 2, 3, and 4. HCB will only invest in Year 1 if it is optimal to do so. Use a decision tree to find the expected NPV of the project, which is an…arrow_forwardTwo new software projects are proposed to a young, start-up company. The Alpha project will cost $320,000 to develop and is expected to have annual net cash flow of $40,000. The Beta project will cost $115,000 to develop and is expected to have annual net cash flow of $11,000. The company is very concerned about their cash flow.Calculate the payback period for each project. Which project is better from a cash flow standpoint. (Round your answers to 2 decimal places.)Payback period for project Alpha8 yearsPayback period for project Beta10.45 yearsarrow_forwardTechnology Innovations is planning to purchase one of two chip insertion machines. Due to the pace of technological change in this area, it is realistic to assume that these are one-shot investments. The expected cash flows for each machine are shown below. MARR is 8%/year. Based on a present worth analysis, which machine is preferred?arrow_forward
- Viera Corporation is considering investing in a new facility. The estimated cost of the facility is $1,911,898. It will be used for 12 years, then sold for $718,600. The facility will generate annual cash inflows of $399,500 and will need new annual cash outflows of $152,600. The company has a required rate of return of 7%. Click here to view PV table.Calculate the internal rate of return on this project. (Round answer to 0 decimal place, e.g. 13%.) Internal rate of return is _________? % Whether the project should be accepted. The project SHOULD OR SHOULD NOT??? - be accepted.arrow_forwardHogsmeade village is evaluating the proposal of opening a new shop. Hogsmeade’s required rate of return is 10%. Should the project be accepted if Hogsmeade wants to make atleast a profit of $6,000 as in today’s value? Explain why? Which technique have you applied to make decision and why? The estimated cashflows (in $) from the project are given below: (Round off your values. No need to put digits after decimal) Year Zonko’s Joke Shop 0 (30,000) 1 7,500 2 7,500 3 7,500 4 7,500 5 7,500arrow_forwardAnta networks want to modernize their networking system. Proposals have been received from two major software companies. The first proposal cost OMR9million but will raise the firm’s annual cash flows by OMR5million. The second proposal cost OMR8million and provides cash flow of OMR5.5million a year. Both projects have a life span of 4 years. Assuming that the cost of capital is 9%, which proposal may be recommended on the basis of Net Present Value criteria.arrow_forward
- Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage LearningPrinciples of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College