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Net Present Value (NPV)

Terminal cash flow, payback, NPV, IRR, MIRR. Accept or reject

Please provide in an excel file. Your company is evaluating new equipment that will cost $1,000,000. The equipment is in the MACRS 3-year class and will be sold after 3 years for $100,000. Use of the equipment will increae net working capital by 100,000. The equipment will save $450,000 per year in operating costs. The c

The problems relates to different topics which includes calculation of net present value, company's margin, turnover, and return on investment, residual income, elimination of a product, buy & sell decision, acceptance of special order, computation of ratios.

1. Bill Anders retires in 8 years. He has $650,000 to invest and is considering a franchise for a fast-food outlet. He would have to purchase equipment costing $500,000 to equip the outlet and invest an additional $150,000 for inventories and other working capital needs. Other outlets in the fast-food chain have an annual n

Determine Net Cash Flows and NPV

As an alternative to a lease, William and Bart Co. decided to buy a piece of equipment for $250,000, with a useful life of 10 years. Afterwards it can be sold for $20,000. Using the three year MACRS method for depreciation and William and Bart Co estimates cost of capital @ 12% and a tax rate of 20%. How do determine the net

Purchase of Computer-Aided Manufacturing System, NPV, IRR

49. Winona Miller, president of CLJ Products, is considering the purchase of a computer-aided manufacturing system that requires and initial investment of $4,000,000 and is estimated to have a useful life of 10 years, CLJ Products' cost of capital is currently 12 percent. The annual after-tax cash benefits/saving associated with

MSI, SDI, sales revenues, NPV and NMC

Question1. Couch-potato Cable TV competes in a regional market of 5,000,000 cable users in the Pennsylvania area. Their price is $30 per month. They have achieved the following results and have the following objectives for their marketing program. Objective Actual Awareness .85 .77 Like

Exercise: /Cash conversion cycle, debt and firm value

EXERCISES 1) Suppose the following accounts' balances for M&T Production Inc.: Accounts Periods X1 X2 Cash $50 $62 Inventory $25 $20 Account Receivable $20 $16 Supply $6 $12 Account Payable $10 $15 Notes Payables $30 $28 Sales $150 Cost of Goods Sold $70 Order Cost $50 Carrying Cost $20 A) Calculate the

Bond refunding: NPV

Please show steps. A firm is considering the refunding of an outstanding 30-year bond issue. The original issue consists of $20 million in 12% callable bonds with $300,000 in flotation costs and a call premium of 10%. The firm can replace the old bonds now (10 years after the original issue date) with a new 20-year issue

What is the net present value of this project in US dollars?

You are analyzing a project with an initial cost of 48,000 pounds. The project is expected to return 11,000 pounds the first year, 36,000 pounds the second year and 38,000 pounds the third and final year. There is no salvage value. The current spot rate is 0.6211 pounds. The nominal return relevant to the project is 12 percent i

NPV vs. Sales: Resulting Function

Assume you graph a project's net present value given various sales quantities. Which one of the following is correct regarding the resulting function? a. The steepness of the function relates to the projects degree of operating leverage. b. The steeper the function the less sensitive the project is to changes in the sales qu

Sorenson Stores' project NPV

9. Sorenson Stores is considering a project that has the following cash flows: Year Cash Flows (end of period) 1 $2,000 2 $3,000 3 $3,000 4

Differences / similarities - sensitivity & scenario analysis

Discuss differences and similarities between sensitivity analysis and scenario analysis. Which method would you use if the purpose of analysis is to identify one or two key variables that have largest impact on the estimated NPV of a small project under consideration?

Project sales to reach: NPV break even, cash flow break even

MBC Corporation is considering investing in a new project. The project has a life of 10 years requires an initial investment of $180,000. The fixed operating cost is expected to be $36,000 and variable cost is expected to be 40% of sales. The required rate of return is 11%. a) How much annual sales the project must produ

NPV and Standard Deviation of a project

A 4-year project can be purchased for $10,000. Net cash benefits per year have an expected value of $4,000 and a standard deviation of $2,000. The required rate of return is 10%. a) Expected NPV of the project. b) Standard deviation of NPV assuming perfect correlation of cash flows. c) Standard deviation of

Probability of positive NPV after competitors response

If competitors do not respond to a new product, there is a 0.9 probability of a positive net present value. If competitors do respond, there is a 0.4 probability of a positive net present value. There is a 0.8 probability that competitors will respond. What is the probability of a positive net present value?

Proposed project and value of firm

Which of the following methods determines the amount of the change a proposed project will have on the value of a firm? net present value discounted payback internal rate of return profitability index payback

Cash Flow analysis, NPV and IRR to evaluate replacement of existing machine

A company is considering the replacement of an existing machine. Develop the relevant cash flows to analyze the proposed replacement. Determine the net present value, the IRR of the proposal and make a recommendation to accept or reject the replacement proposal. What is the highest cost of capital that the firm could have and

Sum of their present value

The company's new project will generate the following cash flows at the end of each of the stated years: Year 2 543; Year 4 219; Year 7 879. If these cash flows are discounted at 12%, what is the sum of their present value? Show all calculations.

Investment Costs and Annual Cash Inflow

An investment costs $10,000 and offers annual cash inflow of $1,770 for ten years. According to both the net present value and internal rate of return methods of capital budgeting, should the firm make this investment if its cost of capital is (a) 10 percent or (b) 14 percent?

In business the calculation of the present value

In business the calculation of the present value of a future rate of return is a critical piece of information. Why is this critical and what are some of the areas where the present value calculation is used in business? If you can, provide an example from your place of work or home

Taxi driver get a new cab every 200,000 miles

A taxi driver drives a taxi 50,000 miles a year. A new cab costs $12,000. He can drive the cab 200,000 miles with original engine and transmission. (It lasts longer than an ordinary car because he changes oil every 3,000 miles and because a taxi engine never gets cold, he explains.) Repair cost will average $0.04 a mile for the

Net Present Value and Economic Profit for $1M capital investment

A $1 million capital investment will generate cash flows of $700,000 at the end of each year for 2 years, after which it will be worthless. (a) Compute the net present value using a 10% required rate of return. (b) Assume depreciation of $600,000 the first year and $400,000 the second year, compute the economic profit fo

Calculating net present value and profitability index

Please help with the following solution with step by step calculations. Calculate the net present value and profitability index of an uneven cash flow. Investment A Initial Investment is $180,325 Net cash flow year 1 = $45,000 year 2 = $50,000 year 3 = $82,295 year 4 = $86,400 year 5 = $64,000 Investment B

NPV and lease payment calculations for new project

Click Inc. is considering investing in a new project to produce and sell clips. New machinery costing $1 million in total will be required and the machines are expected to have a resale value of $450,000 at the end of the project's five-year life. Sales of clips, all at $5 each, are forecast to be as follows: Year

Regina Cost of capital, NPV, IRR of project

1. Regina is analyzing the acquisition of another car which would require an initial investment of $95,000. It expects cash flows of $35,000/year over the next four years. a. On a cost of capital of 14% is the investment worth making? b. Would your decision change if the cash flows were adjusted for less than 100%

Walton Company: calculate net income, contribution margin

PLEASE USE MS EXCEL. The Walton Company produces a specific item with the following information: Sales Price $400 per unit Variable Costs $100 per unit Fixed Costs $150,000 Units Produced and Sold 2,000 Please use MS EXCEL to: 1) Calculate Net Income 2) Calculate the Contribution Margin per unit