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Net Present Value (NPV)

Pleasant Company: Payback period, accounting rate of return, net present value

Pleasant Company has an opportunity to invest in one of two new projects. Project Y requires a $700,000 investment for new machinery with a four- year life and no salvage value. Project Z requires a $700,000 investment for new machinery with a three- year life and no salvage value. The two projects yield the following predicted

Payback Period, Accounting Rate of Return, and NPV

Elite Company is planning to add a new product to its line. To manufacture this product, the company needs to buy a new machine at a $ 300,000 cost with an expected four- year life and a $20,000 salvage value. All sales are for cash, and all costs are out of pocket except for depreciation on the new machine. Additional informati

Geico Problem: Capital Budgeting Decisions

Geico Geico is considering expanding an existing plant on a piece of land it already owns. The land was purchased 15 years ago for $325,000, and its current market appraisal is $820,000. A capital budgeting analysis shows that the plant expansion has a net present value of $130,000. The expansion will cost $1.73 million, and t

Textile Mills: What to pay for a share of stock; NPV of a project

3. The common stock of Textile Mills pays an annual dividend of $1.65 a share. The company has promised to maintain a constant dividend even though economic times are tough. How much are you willing to pay for one share of this stock if you want to earn a 12 percent annual return? A) $13.75 B) $14.01 C) $14.56

Calculate NPV and IRR values for the given projects.

XYZ is evaluating two mutually exclusive projects with the following net cash flows: Project A 0 years=-$2000 1 year =$300 2 year=$500 3 year=$800 4 year=$1200 Project B 0 years=-$2000 1 year =$1000 2 year=$800 3 year=$500 4 year=$200 1) XYZ's WACC is 10.3% and both projects have the same risk as the firms

Net Present Value in capital budgeting techniques: Proposal

Determine the proposal's appropriateness and economic viability. Assume spending occurs on the first day of each year and benefits or savings occurs on the last day. Assume the discount rate or weighted average cost of capital is 10%. Ignore taxes and depreciation. Proposal: New Factory A company wants to build a new fa

Metro Video Case Study: Two proposal Analysis

Shown below is the current monthly income statement of Metro Video, by profit centers: METRO VIDEO Income Statement by Profit Centers For the Month Ended April 30, 20__ On the basis of this information, compute the increase in monthly income from operations that may be expected to result from each of the following a

Impact of inflation on investments: NPV of investment

You are interest in an investment project that costs $7,500 initially. The investment has a 5-year horizon and promises future end-of-year cash inflows of $2,000, $2,000, $2,000 $1,500 and $1,500, respectively. Your current opportunity cost is 6.5% per year. However, the Fed has stated that inflation may rise by 1% or may fall

Johnson Investments: Excel Integer Optimization - Maximize NPV and Optimal NPV

See attached file. Johnston Investments is considering a couple of investment possibilities. Each investment considered will draw on the capital account during each of its first 3 years. In the long run, each investment is predicted to have a positive NPV. Posted in the spreadsheet are the investment choices, its NPV's, and c

Computing Cash Payback and NPV for a Proposed Investment.

Dobbs Corporation is considering purchasing a new delivery truck. The truck has many advantages over the company's current truck (not the least of which is that it runs). The new truck would cost $56,000. Because of the increased capacity, reduced maintenance costs, and increased fuel economy, the new truck is expected to genera

NPV of proposed investment for the Tower Division of Thunder Corporation

1. On January 2, 2010, Thunder Corporation's board of directors considered the acquisition of a new line of equipment for its new Tower Division. Details surrounding the proposed investment are shown below, opportunity cost is 12.5% compounded continuously. Tower's board has asked you to evaluate N

Should the Firm Purchase the New Machine?

See the attached file. Levelhead Company is considering the purchase of a new machine which will cost $1,000,000 (including installation and freight costs). The machine has an estimated useful life of five years, after which it can be sold for $350,000. If the new machine is purchased, the company estimates that the after-tax c

Purchase of Two New Machines

Wompac Company is considering the purchase of a new machine and must decide between two possible machines. The relevant data associated with each machine is shown below. Machine A Machine B Initial cost $275,000 $350,000 Installation cost $20,000 $30,000 Life (years) 4 7 Increase in revenues pa $180,000 $225,000 Increase i

Find Net Present Value, Return on Investment & Break Even Point

See the attachment. Pine valley furniture recently implemented a new internship program and has begun recruiting interns from nearby university campuses. As part of this program, interns have the opportunity to work alongside a systems analysis. This shadowing opportunity provides invaluable insights into the systems analysi

3 Questions: Measurement methods and metrics

Here are the three questions: A ____ is a specific, measurable standard against which actual performance is compared. They are used to describe costs, benefits, or the ratio between them. Metrics that deal directly with performance (e.g., sales, profits) are frequently measured by _____, which are the quantitative expressi

Finance: 8 Multiple choice questions

1. A company planning to market a new model of motor scooter analyzes the effect of changes in the selling price of the motor scooter, the number of units that will be sold, the cost of making the motor scooter, the effect on Net Working Capital, and the cost of capital for the project. They predict that the break-even point fo

Net Present Value

A company has to make a choice between two projects because the available resources in money and kind are not sufficient to run both at the same time. Each project would take nine months and would cost $250,000. The first project is a process optimization which would result in a cost reduction of $120,000 per year. This benef

Deciding Whether to Acquire or Liquidate Procras Corporation

Sharon Scotia, CFO of Rome Industries, must decide what to do about Procras Corporation, a major customer that is technically insolvent. Rome Industries is a large plastic-injection-molding firm that produces plastic products to customer order. Procras Corporation is a major customer of Rome Industries that designs and marke

Clyne Industries - Net Present Value

Clyne Industries is considering whether it should produce its newly invented Slammin Jammin Basketball Goal Set. To bring this product to the market will require the purchase of equipment costing $600,000. Shipping and installation expenses associated with the equipment are estimated to be $50,000. In addition, net working capit


Master 34. As a bank loan officer, you want to reference detailed columnar loan portfolio data with a list of past-due loans. Which of the following is the most effective tool for doing so? a. Pivot table b. H Lookup c. Search function d. Scatter plot e. V Lookup 35. Suppose that you are approached with an offer to pur


JB enterprises purchased a new molding machine for $75,000. The company paid $6,000 for the shipping and another $4,000 to get the machine integrated with the existing assets.The company purchased a supply of oil for $2,000. The machine was to be depreciated on a straight line basis over its expected useful life of 10 years. JB

15-17 perpetual projects

15-17 attached 15-17 Consider another perpetual project like the crusher described in Section 15- 1. Its initial investment is $ 1,000,000, and the expected cash inflow is $ 95,000 a year in perpetuity. The opportunity cost of capital with all- equity financing is 10%, and the project allows the firm to borrow at 7%. The tax

Sub-Prime Loan Company: Project's NPV for new office

Sub-Prime Loan Company is thinking of opening a new office, and the key data are shown below. The company owns the building that would be used, and it could sell it for $100,000 after taxes if it decides not to open the new office. The equipment for the project would be depreciated by the straight-line method over the project'

Conch Republic Electronics Case

Conch Republic Electronics is a midsized electronics manufacturer located in Key West, Florida. The company president is Shelly Couts, who inherited the company. When it was founded over 70 years ago, the company originally repaired radios and other household appliances. Over the years, the company expanded into manufacturing an

Atlas Corp. is considering two mutually exclusive projects: Value of NPVL - NPVS

Atlas Corp. is considering two mutually exclusive projects. Both require an initial investment of $10,000 at t = 0. Project S has an expected life of 2 years with after-tax cash inflows of $6,000 and $8,000 at the end of Years 1 and 2, respectively. Project L has an expected life of 4 years with after-tax cash inflows of $4,3

Cannibalization NPV Calculations

Which statement is correct? If cannibalization is determined to exist, then this means that the calculated NPV considering cannibalization will be higher than the NPV that does not recognize these effects. If a firm is found guilty of cannibalization in a court of law, then it is judged to have taken unfair advantage of it

Accounting 5

Choose the correct answer: 18. Which of the following is a true statement regarding the net present value method in capital budgeting? a. It calculates the present value of future cash flows. b. It calculates the proposal's rate of return. c. It provides the same basic information as the accounting rate of return. d. I