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# Net Present Value (NPV)

### Dell: Working capital needs, revenue growth rate, operating income, cash flows, NPV

Please see attached excel file You have just been hired by Dell Computers in its capital budgeting division. Your first assignment is to determine the net cash flows and NPV of a proposed new type of portable computer system similar in size to a Blackberry handheld, but which has the operating power of a high-end desktop syst

### Compound Interest and NPV

3 short calculations 1. Johnny deposited \$2,000 in a bank account that pays 12% interest annually. What will the dollar amount be in four years? 2. If Johnny wants to have \$1,700 in seven years, how much money must you put in a savings account today? Assume that the savings account pays 6% and it is compounded q

### New project: if the required return is 12%, what is the NPV?

10. A project has an initial investment of \$25,000, with \$6,500 annual inflows for each of the subsequent 5 years. If the required return is 12%, what is the NPV? a. -\$6,500.00 b. -\$2,447.02 c. -\$1,568.95 d. \$ 215.46 e. \$1,763.81

### NPV and Cash Flow

Tobacco Company of America is a very stable billion dollar company with sales growth of about 5 percent per year in good or bad economic conditions. Because of this stability (a correlation coefficient with the economy of + .3, and a standard deviation of sales of about 5 percent from the mean), Mr. Weed, the vice president of

### Review

It is a review for a final and I need a solution to check my answer to see if its correct. 1. Which of the following is not a reason why financial analysts use ratio analysis? a. Ratios help to pinpoint a firm's strengths. b. Ratios restate accounting data in relative terms. c. Ratios are ideal for smoothing out the di

### Explain the intuition, the concept, and the logic behind both APV and behavioral APV

We discussed Adjusted Present Value (APV) and then discussed and applied what Shefrin labeled as Behavioral APV. So this question is about that topic and as follows. Simply explain the intuition, the concept, and the logic behind both APV and behavioral APV. Moreover, explain how APV and behavioral APV help managers and investor

### Capital Budgeting

Assume the expected return on the market portfolio is 15% and the riskless return is 9%. Also assume that all of the projects listed here are perpetuies with annual cash flows (in \$) and betas as indicated. None of the projects requires or precludes any of the other projects, and each project costs \$2,000. a.What is the NPV o

### How do you calculate the value forgone if IRR is used to select the project instead of NPV?

A firm is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. The CEO wants to use the IRR criterion, while the CFO favors the NPV method, and you were hired to advise the firm on the best procedure. If the CEO's preferred criterion is used,

### Calculate payback period and NPV

Calculating payback period and NPV. Incosoft, Inc., has the following mutually exclusive projects. YEAR PROJECT A PROJECT B 0 -£ 7,500 -£5,000 1 £ 4,000 £2,500 2 £ 3,500 £ 1,200 3 £ 1,500 £ 3,000 a.- Suppose Incosoft's payback period cutoff is two years. Which of this

### Capital Budgeting

Down Under Boomerang , Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of ZAR 2.7 million. The fixed asset will be depreciated straight-line to zero over its three year tax life, after which it will be worthless. The project is estimated to generate ZAR 2,400,000 in annual

### Business questions: general decision rule for NPV, use of inflation when evaluating firms, NPV vs real options and more...

Answer the below questions with at least five sentences each, >>>thoroughly and in your own words<<< ? Present the general decision rule for NPV. If a project has NPV = 0, should a manager accept the project? ? Define purchasing power parity. What is the importance of purchasing power parity to an analyst attempting to e

### Wexler Company: Present Value of Project

The Wexler Company is considering the purchase of a new machine costing \$250,000. This machine is estimated to cost \$5,000 per year in operating expenses but it will allow the company to earn an additional \$100,000 per year in revenues and at the end of 3 years the machine will have a salvage value of \$40,000. If the required ra

### Net Income: Calculate the Net Income for Ball Corp

Please help with the following problem. Consider the following information for Ball Corp. Selling and administrative expense................................ \$ 50,000 Depreciation expense.................................................. 80,000 Sales................................................................

### Payback and NPV methods

See attached file. Nonesuch Nursery is considering growing poinsettias for sale in December. Using the data below, use the payback and net present value methods to determine if this is a good idea.

### Calculating the NPV of New Equipment

Photographic laboratories recover and recycle the silver used in photographic film. Stikine River photo is considering purchase of improved equipment for their laboratory at Telegraph Creek. Here is the information they have: - The equipment costs \$100,000 and will cost \$80,000 per year to run. - It has an economic life of 1

### Cash Flows and NPV: Johnny's Lunches

Cash Flows and NPV. Johnny's Lunches is considering purchasing a new, energy-efficient grill. The grill will cost \$40,000 and will be depreciated according to the 3-year MACRS schedule. It will be sold for scrap metal after 3 years for \$10,000. The grill will have no effect on revenues but will save Johnny's \$20,000 in energy ex

### Corporate Finance Net Advantage to Leasing Problem

B6. (Net advantage to leasing) Empire Excavation Corporation plans to acquire a fleet of 10 dump trucks. Each truck costs \$75,000. Empire can borrow \$750,000 on a secured basis at a pretax cost of 14%. The dump trucks can be depreciated for tax purposes on a straightline basis to zero over a five-year useful life. Truck Leasing

### Sensitivity analysis

The Rustic Welt Company is proposing to replace its old welt-making machinery with more modern equipment. The new equipment cost \$9 million (the existing equipment has zero salvage value). The attraction of the new machinery is that it is expected to cut manufacturing costs from their current level of \$8 a welt to \$4. However, a

### Project NPV and Payback Period

I am evaluating the project with cash inflows as shown below. My boss has asked me to calculate the projects NPV. I don't know the projects initial cost, but I have been informed that the project's payback period is 3.5 years If the project's WACC is 9.9% what is its NPV Cashflows CF = 0 CF1 = 500 CF2 = 800 CF3 = 800

### Expected Gain from Acquisition

Hampshire-Cathaway (H-C), a large established corporation with no growth in its real earnings, is considering acquiring 100% of the shares of Trilennium Corporation, a young firm with a high growth rate of earnings. The acquisitions analysis group at H-C has produced the following table of relevant data:

### Investment Proposal: Calculating NPV for Varying Costs of Capital

Question: Dane Cosmetics is evaluating a new fragrance-mixing machine. The machine requires an initial investment of \$24,000 and will generate after-tax cash inflows of \$5,000 per year for 8 years. For each of the costs of capital listed, 1) calculate the net present value (NPV), 2) indicate whether to accept or reject the machi

### Income statement form - Vincent Corporation

Vincent Corporation had income from continuing operations of \$800,000 (after taxes) in 2007. In addition, the following information, which has not been considered, is as follows. 1. In 2007, Vincent experienced an uninsured earthquake loss in the amount of \$200,000. 2. A machine was sold for \$140,000 cash during the year a

### Superior Manufacturing: Analyze incremental cash flows for project, Payback, NPV

See file attached. Superior Manufacturing is thinking of launching a new product. The company expects to sell \$950,000 of the new product in the first year and \$1,500,000 each year thereafter. Direct costs including labor and materials will be 55% of sales. Indirect incremental costs are estimated at \$80,000 a year. The p

### NPV and Collection Time using a lockbox for receipts. Should the project be accepted?

Your firm has an average receipt size of \$95. A bank has approached you concerning a lockbox service that will decrease your total collection time by two days. You typically receive 9,400 checks per day. The daily interest rate is .016 percent. If the bank charges a fee of \$190 per day, should the lockbox project be accepted

### Expected Rate of Return: NPV of cash flow stream

An investment is expected to pay the following annual cash flows: 0 1: \$600 2: \$600 3: \$800 4: \$1200 5: \$1500 If the investor thinks the apppropriate interest rate of this investment is 9.3%, what is the net present value of the above cash flow stream? Suppose your are informed that the price of this investment is

### Common size ratios, 2/10 N/30, NPV, FV, WACC, capital structure

Question 1 (2 points) Regarding the term 2/10 N/30, which one of the following is true? a. the first part says: if payment is received within 10 days, only 98% of the balance needs to be paid b. the second part says: a 30% discount is available if a minimum number (N) of items are purchased c. the second pa

### Multiple choice questions

Mark the correct answer or fill in the answer sheet at the end 1. Which of the following statements best represents what finance is about? a. How political, social, and economic forces affect corporations b. Maximizing profits c. Creation and maintenance of economic wealth d. Reducing risk 2. Which of the followin

### Calculating Net Income when selling price changes...

I am trying to find the income when selling price changes from \$6.00 to \$4.50 ------------- Sales 60,000 gallons Variable CGS \$150,000 Fixed Cost \$40,000 Corporate Cost \$110,000 Cost per Ga \$5.00 How to calculate income when it was sold for \$6.00

### Risk Adjusted NPV: The Hokie Corporation

The Hokie Corporation is considering two mutually exclusive projects. Both require an initial outlay of \$10,000 and will operate for 5 years. Project A will produce expected cash flows of \$5,000 per year for years 1 through 5, whereas project B will produce expected cash flows of \$6,000 per year for years 1 through 5. Because pr

### NPV

United Pigpen is considering a proposal to manufacture high protein hog feed. The project would make use of an existing warehouse, which is currently rented out to a neighboring firm. The next year's rental charge on the warehouse is \$100,000 and thereafter the rent is expected to grow in line with inflation at 4% a year. In add