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Net Present Value (NPV)

Investment decisions: ROR, NPV, cash discount

1.An investment costs $10,000 and offers and annual cash flow of $1,770 for ten years. According to the net present value method of capital budgeting, should the firm make this investment if its cost of capital is 10% 2.If and asset is bought for $10,000 and sold for $20,000 after ten years. What was the annual rate of retu

Reconcillation of net income to net cash provided by operating activities

Altobelli Auto Parts had a cash balance on December 31, 20X0, of $50,000. Its net income for 20X1 was $364,000. Its 20X1 transactions affecting income or cash were (in thousands): 1. Sales of $1,600, all on credit. Cash collections from customers, $1,450. 2. The cost of items sold, $850. Purchases of inventory totaled $900;

Jensen's Inequality and HMG Project Risk Analysis

Work in excel please. 3-2 JENSEN'S INEQUALITY Consider a simple situation where uncertain cash flows arise in two periods. Create a simulation model where revenues in Year 1 are mod-eled as Uniform (10,20) and costs in Year 1 are modeled as Uniform (2,12). Define net cash flow as the difference between revenues and costs. F

Capital Budgeting-unequal lives: Outcast, Inc., has hired you to advise the firm on a capital budgeting issue involving two unequal-lived, mutually exclusive projects, M and N. The cash flows for each project are presented in the table at the top of the facing page. Calculate the NPV and the annualized net present value (ANPV) for each project using the firm's cost of capital of 8%. Which project would you recommend?

E10-4 Outcast, Inc., has hired you to advise the firm on a capital budgeting issue involving two unequal-lived, mutually exclusive projects, M and N. The cash flows for each project are presented in the table at the top of the facing page. Calculate the NPV and the annualized net present value (ANPV) for each project using the


Assuming monetary benefits of an information system at $85,000 per year, one-time costs of $75,000, recurring costs of $35,000 per year, a discount rate of 12 percent, and a 5-year time horizon, calculate the net present value of these costs and benefits of an information system. Also calculate the overall return an investment o


Please find the attached problem. I am having trouble calculating the payback period & net present value. Caledonia is considering two additional mutually exclusive projects. The cash flows associated with these projects are as follows: YEAR PROJECT A PROJECT B 0 -$100,000 -$100,000 1 32,000 0 2 32,000 0 3 32,000 0 4

PDA Sim simulation

Module 04 - Session Long Project For the third and final run of this simulation, enter your decisions taking into account the changes in strategy you proposed in Module Three. Then in a 2-3 page paper discuss Your company's performance in this run. How it compares to the last run. Why you think you did better or wor

Buy Lottery winner 19 annual payments. NPV at 8%, or 4.2 million

In August 1994, the Wall Street Journal reported that the winner of tile Massachusetts State Lottery prize had the misfortune to be both bankrupt and in prison for fraud. The prize was $9,420,713, to be paid in 19 equal annual installments. (There were 20 installments, but the winner had already received the first payment.) The

Calculating NPV

Calculate the net present value of a $250,000 lottery win paid in equal annual installments over 5 years assuming a discount rate of 4%.

Calculating NPV and IRR for a Replacement

A firm is considering an investment in a new machine with a price of $2 million to replace its existing machine. The current machine has a book value of a $1 million and a market value of $9 million. The new machine is expected to have a four-year life, and the old machine has four years left in which it can be used. If the firm

Comparing Investment Criteria

Mario Brothers, a game manufacturer, has a new idea for an adventure game. It can market the game either as a traditional board game or as an interactive CD-ROM, but not both. Consider the following cash flows of the two mutually exclusive projects for Mario Brothers. Assume the discount rate Mario Brothers is 10 percent. Yea

NPV versus IRR

Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC). Both projects require an annual return of 15 percent. Year Deepwater Fishing New Submarine Ride 0 -$600,000 -$1,800,000 1 27

Finance: quick ratio, debt ratio, financial forecasting, asset turnover, FV, NPV

1. Which of the following transactions does not affect the quick ratio? a. Land held for investment is sold for cash. b. Equipment is purchased and is financed by a long-term debt issue. c. Inventories are sold for cash. d. Inventories are sold on a credit basis. 2. The debt ratio is a measure of a firm's: a. leverage.

Finance: PV, annual payment, NPV, capital structure, current ratio

See attached Excel file. SHOW YOUR WORK in order to get part credit if your answer is wrong on problems 1 Whats the PV of $5000 received 5 years from now; your personal investment track record is 10% 2 Whats the annual payment required on a 3 year $20,000 auto loan which has a

New machine: payback period, NPV. Should the project be accepted?

A manufacturer is considering the purchase of a new machine to speed production and save money. The net cost of the machine is $45,000. The annual cash flows are as follows: Year Cash Flow 1 15,000 2 20,000 3 25,000 4 10,000 5 5,000 What is the payback period? If the cost of capital i

Net Present Value and Net Cash Folws

The confectioner corner Inc. would like to buy a new machine that automatically dips chocolates. The dipping operation is currently done largely by hand. The machine the company is considering costs $100,000. The machine would be usable for 10 years but would requirement of several key parts at the end of the fifth year. These p

Continental Medical Supplies: Kelly McClung and I. M. Madd

Kelly McClung was recently hired as a cost analyst by Continental Medical Supplies Inc. One of Kelly's first assignments was to perform a net present value analysis for a new warehouse. Kelly performed the analysis and calculated a present value index of 0.75. The plant manager, I. M. Madd, is very intent on purchasing the wareh

Risk-adjusted discount rates and risk classes

The G. Wolfe Corporation is examining two capital-budgeting projects with 5-year lives. The first, project A, is a replacement project; the second, project B, is a project unrelated to current operations. The G. Wolfe Corporation uses the risk adjusted discount rate method and groups projects according to purpose, and then uses

After Tax Cash Flows in Net Present Value Analysis (LOB)

Kramer Corporation is considering two investment projects, each of which would require $50,000. Cost and cash flow data concerning the two projects are given below: Project A Project B Investment in high speed photocopier $50,000 Investment in working cap

Depreciation/Working Capital

1. XYZ Company is considering offering a cash discount to speed up the collection of accounts receivable. Currently the firm has an average collection period of 65 days, annual sales are 35,000 units, the per-unit price is $40, and the per-unit variable cost is $29. A 2% cash discount is being considered. XYZ estimates tha

Rate of return

An investment that costs $48,000 provided annual cash flows of $9,000 per year for six years. The desired rate of return is 10%. The actual return from the investment was: a) less than the desired rate of return, b) equal to the desire ROI c) greater than the desired ROI, d) or it cannot be determined.

Yonan Inc. is considering Projects S and L

Yonan Inc. is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. In this particular case, if the decision is made by choosing the project with the shorter payback, some value (in terms of NPV) may be forgone. How much value will be los

NPV (Net Present Value) of a Project

A project has an initial cost of $52,125, expected net cash inflows of $12,000 per year for 8 years, and a cost of capital of 12%. What is the project's NPV?

You have just purchased vacant lot for $8,000

1. You have just purchased vacant lot for $8,000. After clearing it, you expect sell it for $12,000 two years from today. What is the net present value of this investment if you expected to earn a 12% return a. $9,917.36 b. $2,909.09 c. $10,909.09 d. $1,566.33 2. What is the net present value of a project that required an