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Net Present Value (NPV)

MBA 540 Valuation Exercise

The terminal value is going to be a large number but please keep in mind you need to calculate the present value of the terminal value. As far as net present value is concerned, please refer to Excel Help section per "NPV" function. If you would like to use a formula, then use the following: PV = Cash Flow at n th yea

Evaluating the proposed purchase of a truck for your company - net investment in the truck, operating cash flow, total value of terminal year non-operating cash flows, and NPV of truck.

I'm getting ready to start a Finance class. I'm reading ahead in the book to try and prepare myself for the course. I have a 4.0 GPA and really want to maintain it through graduation; however, this finance book seems like it is pretty daunting! I'm trying to understand these finance concepts and there are a few problems that I w

Questions in Accounting

1. Blinkone Company's material handling costs and kilo of materials for two recent months appear below. Materials Handling Handled Costs January 80,000 kilos $160,000 February 60,000 kilos $132,000 What is the best estimate of the materials handling costs for 75,000 kilos? (Assume that this activi

Capital Budgeting Technique

Use the capital budgeting technique to justify India's alternate investment decisions. Also, support your choice of the discount rate used in the calculation of of NPV...

Net Investment Calculations

A firm is considering an investment of $28 million (purchase price) in new equipment to replace old equipment with a book value of $12 million and a market value of $20 million. If the firm replaces the old equipment with the new equipment, it expects to save $17.5 million in operating costs the first year.The amount of these sa

Your company wants to buy an oil pipeline

Your company wants to buy an oil pipeline which will generate a $2 million in after tax operating cash flow over the coming year. The pipeline oil flow is expected to last for 25 years at which time your company will need to remove the pipeline and repair the land at a cost of $7 million. Your company will need to pay legal and

Net Present Value, Payback, IRR and time value of money

1. Heritage Corp is considering a new machine that will cost $1,000,000. Net cash inflows expected are $125,000 per year for 20 years. a. Determine (Simple) Payback b. Determine Internal Rate of Return c. Assuming cost of funds is 8%, determine Net Present Value (NPV) of project, as well as profitability (Benefits to

Interest Rates and NPV

T or F: Interest rates and corporate profits are the most important determinants of stock and market direction. The higher the discount rate used in project analysis the higher the NPV.

The Datum Co Marketing Study

The Datum Co. has recently completed a $200,000, two-year marketing study. Based on the results of the study, Datum has estimated that 6,000 units of its new electro-optical data scanner could be sold annually over the next 8 years, at a price of $8,000 each. Variable costs per unit are $4,400, and fixed costs total $5.4 million

Investments - Payback Period and NPV

You are considering an investment in a project with a life of eight years, an initial outlay $120,000, and annual after-tax cash flows of $52,000. The project also requires an increase in inventories of $22,000. This $22,000 investment in inventory is required at the outset of the project and will be released when the project

Evaluating a Milling Machine Proposal

You must evaluate a proposal to buy a new milling machine. The base price is $108,000, and shipping and installation costs would add another $12,500. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $65,000. The applicable depreciation rates are 33, 45, 15, and 7%. The machine would require

Analysis of Investing Activities

At the end of its most recent fiscal year, Shangri-La Company., owned the following investments: Investment Historical Cost Fair Market Value Company A $650,000 $765,000 Company B $840,000 $730,000 Other Shangri-La assets: Book Value: $2.4 million Other Shangri-La

Capital Budgeting Question for James Company

The James Company is considering investing in a new project. The project's forecasted net cash flows are the following: YEAR PROJECT'S FORECASTED NET CASH FLOW ($) 0 -150,000 1 2,000 2 8,000 3 15,000 4 35,000 5 20,000 6 30,000 7 11,000 8 14,000 9 18,000 10 60,000 The project's cost of capital is 11%. Should th

Appraisal Investment

BC plc is considering the introduction of a new breakfast cereal on which it has already spent £50,000 on technical and feasibility studies. The new product will be a variation of our current breakfast cereal, Crunch Stuff, with the exception that it will contain sugar-coated roasted nuts. Consequently, it will be called Crunc

What is the NPV for Real Time Inc.?

Please provide detailed answer in MS Excel file and text file Given the information in the attachment, what is the NPV? The president of Real Time Inc. has asked you to evaluate the proposed acquisition of a new computer. The computer's price is $40,000, and it falls into the MACRS 3-year class. Purchase of the comput

Explaining NPV on Projects

Foreign investments are conventionally assumed to involve additional costs of distance and costs due to unfamiliarity with foreign governments, languages, legal systems, and distribution channels. In a domestic context, positive net present value (NPV) typically originates from economic rents on a firm's competitive advantages,

A Discussion On Net Present Value and Internal Rate of Return

Julie Kowalis, an investment analyst, wants to know if her investments during the past four years have earned at least a 12% return. Four years ago, she had the following investments: 1. She purchased a small building for $50,000 and rented space in it. She received rental income of $8,000 for each of the four years and then

Cost Accounting

Cost of equipment 50,000 working capital required 30,000 salvage value 0 annual cash inflows 20,000 required rate of return 20% life of project 8 years NPV= A 3730 B 0 C 32,450 D 88,370

Find Net Present Value for investment analyst's investment.

An Investment analyst wants to know if the investments during the past four years have earned at least a 12% return. Four years ago she had the following investments A) She purchased a small building for $50,000 and rented space in it. She received rental income of $8,000 for each of the four years. The buildi

Net Operating Cash Flow - Acquisition of a New Machine

The Mars Company is evaluating the proposed acquisition of a new machine. The machine's base price is $600,000 plus shipping costs of $20,000. The machine falls into the MACRS 3-year class, and it would be sold after 5 years for $10,000. The machine would require an increase in net working capital of $25,000. The machine would

NPV

You have estimated 3 possible NPV outcomes for an investment under analysis, the expected NPV, the best case NPV and the worst case NPV. You have also gotten estimates from management on the probability of each of these three cases. What do you need to do to find the expected NPV for the investment?

Fundamentals of Corporate Finance - NPV

Emperor's Clothes Fashions can invest $5 million in a new plant for producing invisible makeup. The plant has an expected life of 15 years, and expected sales are 6 million jars of makeup a year. Fixed costs are $2 million a year, and variable costs are $1 per jar. The product will be priced at $2 per jar. The plant will be depr

Important information about Deer Valley Lodge

Deer Valley Lodge, has plans to add 5 new chairlifts. Suppose that one lift costs $2 million & preparing the slope & installation is additional $1.3 million. The lift will allow 300 additional skiers but there are only 40 days when the additional capacity is needed.(Assume Deer Park will sell all 300 lift tickets on those 40 d

Simple and Compound Interest; Present and Future Values

Part A: What is the difference between "simple" and "compound" interest? What are some of the uses of compound interest in business? What are some of the effects of using compound interest when evaluating future value transactions and calculations? Part B: Describe the concepts of PV, FV, PV of an annuity, and FV of an annui

Using Rate of Return to Select a Project

Company X is debating a project. The sales are expected to be 15 000 units for each of 5 years after that the machinery will be discarded (assume zero value at that time). The price of the unit might be either $13.50 or $13.70 with equal probabilities. Variable costs are $4.30 per unit and Fixed costs are $49 000 per year. The i