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# Net Present Value (NPV)

### Evaluating Mutually Exclusive Projects

As the director of capital budgeting for ABC Corporation, you are evaluating two mutually exclusive projects with the following net cash flows: Cash Flows A B -\$200,000 -\$125,000 1 \$65,000 \$60,000 2 \$60,000 \$40,000 3 \$50,000 \$40,000 4 \$65,000 \$35,000 5 \$50,000 \$45,000 If ABC Corporation's cost of capital is 12 percent

### Lazy Mower case study: questions number 3, 5, 6, 7, 8, 9, 10

See attached file for Lazy Mower case study. I would like to get help with the following questions that are highlighted in green questions number 3,5,6,7,8,9,10

### NPV-Investment in Technology

Investment in Technology Lexington Auto Parts is considering installation of a CIM as part of its implantation of a CIM system as part of its implementation of a JIT philosophy. Carley Rupp, company president is convinced that the new system is necessary; and approval at board level is required. Leah Rupp, Carleyâ??s daughte

### Finance Problems (Fixed costs, Net present value, yield to maturity and more)

Below is a wide range of Finance problems. There are a total of 8 problems. Please show all work so I can get an understanding of how you solved each problem. 1.) Dominic's Italian Cafe sells pizzas at \$18.00 each. Fixed costs total \$12,000 per month and Dominic's variable costs total \$6.00 per pizza. Calculate the bre

### Single Discount Rate for NVP & Straight-Line Depreciation

1) A firm uses a single discount rate to compute the NPV of all its potential capital budgeting projects, even though the projects have a wide range of nondiversifiable risk. The firm then undertakes all those projects that appear to have positive NPVs. Briefly explain why such a firm would tend to become riskier over time. 2

### Accounting rate of return, payback, and NPV

Busy Beaver Corp. is interested in reviewing its method of evaluating capital expenditure proposals using the accounting rate of return method. A recent proposal involved a \$ 50,000 investment in a machine that had an estimated useful life of five years and an estimated salvage value of \$ 10,000. The machine was expected to incr

### Determining Cash Flow and Net Present Value

Assume that Baps Corporation is considering the establishment of a subsidiary in Norway. The initial investment required by the parent is \$5,000,000. If the project is undertaken, Baps would terminate the project after four years. Bapsâ?? cost of capital is 13%, and the project is of the same risk as Bapsâ?? existing projects.

### Cash conversion cycle, NPV for credit, Economic order quantity

Chapter 22, Problems A 3. (Cash conversion cycle) Dennis Lasser has collected some information about a food wholesaler in order to estimate its cash conversion cycle. The accumulated information is given. What will Dennis find the cash conversion cycle to be? Inventory turnover = 10x Inventory conversion period = 365/1

### Ocean Carriers Case Study

Harvard Business Case: 9-202-027 April 18, 2002 Angela Chao Ocean Carriers I need help with the mathematical analysis along with an explanation of the analysis and the conclusion.

### NPV analysis

Sink, Inc., plans to merge with Swim Corp. The capital market places a value on Sink of \$7.875 million and Swim is valued at \$500,000, when they are evaluated separately. After the merger, economies of scale will result in additional cash flows, the present of which is \$250,000. Sink will buy Swim for \$600,000 in cash. Sink has

### Spending down a growing sum, Declining balance depreciation

1.Return to the Diversified Electronics case covered in class. (file attached) Suppose the annual lease payment is revised to \$180,000. Then, relative to the alternative of buying the equipment, the after-tax cash inflows to Diversified are A.greater when the equipment is purchased. B.greater when the equipment is leased.

### Net Present Value and Other Investment Criteria

Can you help me get started on this assignment? Chapter 9: Net Present Value and Other Investment Criteria 1. An investment project requires an initial investment of \$400 and produces a cash inflow of \$460 in 1 year. The internal rate of return (IRR) on this project is 15%. If the cost of capital is 10%, then the NPV of th

### Retirement Plan / NPV

1. You are thinking of retiring. Your retirement plan will pay you either \$250,000 immediately on retirement or \$350,000 five years after the date of your retirement. Which alternative should you choose if the interest rate is: A)0% per year, B) 8% per year, C) 20% per year? 2. You have been offered a unique investment opport

### Management and Org Accounting

Deer Valley Lodge, a ski resort in the Wasatch Mountains of Utah, has plans to eventually add five new chairlifts. Suppose that one lift costs \$2 million, and preparing the slope and installing the lift costs another \$1.3 million. The lift will allow 300 additional skiers on the slopes, but there are only 40 days a year when the

### Return on investment,NPV analysis

1. The CEO of a highly profitable company, noticing that the excess cash not needed to fund business operations has accumulated in a company bank account that pays no interest, contemplates declaring and paying a cash dividend to common shareholders before year's end. The likely effect of paying the dividend would be to A.have

### NPV (WACC)

As the director of capital budgeting for ABC Corporation, you are evaluating two mutally exclusive projects with the following net cash flows: A B 200,000 -125,000 65,000 60,000 60,000 40,000 50,000 40,000 65,000 35,000 50,000 45,000 If ABC corp cost capital is 12%, defend which project would

### Payments and Present Value

Payments of 5000 and 7000 are due 3 and 5 yrs respectively from today. They are to be replaced by two payments due 1 1/2 and 4 yrs from today. the first payment is to be half the amount of the 2nd payment. what should the payments if money can earn 7.5% compounded semiannually?? ans: 3711.68 7423.35 Manuela purchased a bo

### Cash Flow and Capital Budgeting Minicase

ACE Rental Cars, Incorporated (ACE) is analyzing whether to enter the discount used rental car market. This project would involve the purchase of 100 used, late-model, mid-sized automobiles at the price of \$9,500 each. In order to reduce their insurance costs, ACE will have a LoJack Stolen Vehicle Recovery System installed in

### Finance solutions

1. Pierre Imports is evaluating the proposed acquisition of new equipment at a cost of \$95,000. In addition the equipment would require modifications at a cost of \$10,000 plus shipping costs of \$2,000. The equipment falls into the MACRS 3-year class, and will be sold after 3 years for \$35,000. The equipment would require an

### Determining the Rate of Return on the Given Investment

An investment costs \$500 and is expected to produce cash flows of \$50 at the end of year 1, \$60 at the end of year 2, \$70 at the end of year 3, and \$516 at the end of year 4. What rate of return would you earn if you bought this investment?

### Health Care Constraints

Write a summary identifying the possible revenue constraints and financial factors that influence the decision to keep or close a pharmacy.

### Capital Budgeting Scenarios

Using net present value, determine the proposal's appropriateness and economic viability. Prepare a report explaining your calculations and conclusions. Answer the following in your report: o Explain the effect of a higher or lower cost of capital on a firm's long-term financial decisions. o Analyze the use of cap

### Calculating a Project's NPV: Sorenson Stores

Sorenson Stores is considering a project that has the following cash flows: Year Cash Flow 0 CF0 = ? 1 \$2,000 2 3,000 3 3,000 4 1,500 The project has a payback of 2.5 years, and the firm's cost of capital is 12%. What is the project's NPV? a. \$577.68 b. \$765.91 c. \$1,049.80 d. \$2,761.32

### Wachowicz Inc: Increasing the Firm's Value

Question: Wachowicz Inc. is considering two average-risk alternative ways of producing its patented polo shirts. Process S has a cost of \$8,000 and will produce net cash flows of \$5,000 per year for 2 years. Process L will cost \$11,500 and will produce cash flows of \$4,000 per year for 4 years. The company has a contract that re

### Calculate the REO

Konika Ltd. is considering manufacturing a new product. This requires machinery costing Tk. 20,000 with a life of four years and a terminal value of Tk.5,000. Profits before depreciation from the project will be Tk.8,000 per annum. An investment of working capital of Tk.2,000 will be required for the duration of the project. T

### Text Problem Sets

Text Problem Sets ? Navigate to the MBA preparatory companion website at http://www.pearsoncustom.com/uop/mba/ ? Select the Introduction to Finance. ? Read the Welcome. ? Select from the pull down menu Ch. 1, 2, 3, 4, 5, 6, 7, or 8 and begin the Readiness Assessment Quiz on the left-hand menu once you select a chapter.

### What is the project's NPV

Sorenson Stores is considering a project that has the following cash flows: Year Cash Flow 0 CF0 = ? 1 \$2,000 2 3,000 3 3,000 4 1,500 The project has a payback of 2.5 years, and the firm's cost of capital is 12%. What is the project's NPV?

### NPV Required Up Front Costs

17. Walker & Campsey wants to invest in a new computer system, and management has narrowed the choice to Systems A and B. System A requires an up-front cost of \$100,000, after which it generates positive after-tax cash flows of \$60,000 at the end of each of the next 2 years. The system could be replaced every 2 years, and the

### Increase the firm's value

Wachowicz Inc. is considering two average-risk alternative ways of producing its patented polo shirts. Process S has a cost of \$8,000 and will produce net cash flows of \$5,000 per year for 2 years. Process L will cost \$11,500 and will produce cash flows of \$4,000 per year for 4 years. The company has a contract that requires it

### What is the project's NPV?

1. Edmondson Electric Systems is considering a project that has the following cash flow and WACC data. What is the project's NPV? Note that if a project's projected NPV is negative, it should be rejected. WACC: 10.00% Year: 0 Cash flows:-\$1,000 WACC: 10.00% Year: 0 1 2