Question

In: Finance

Please answer them correctly. Here are short 3 problems. Please solve all 3 problems. I would...

Please answer them correctly. Here are short 3 problems. Please solve all 3 problems. I would really appreciate your effort. Thanks.

1). Sandhill Communication Corp. is investing $8,373,700 in new technologies. The company’s management expects significant benefits in the first three years after installation (as can be seen by the following cash flows), and smaller constant benefits in each of the next four years.

Excel Template
(Note: This template includes the problem statement as it appears in your textbook. The problem assigned to you here may have different values. When using this template, copy the problem statement from this screen for easy reference to the values you’ve been given here, and be sure to update any values that may have been pre-entered in the template based on the textbook version of the problem.)

Year
1 2 3 4-7
Cash Flows $2,020,000 $4,090,000 $2,972,100 $1,033,500

What is the discounted payback period for the project assuming a discount rate of 10 percent? (Round answer to 2 decimal places, e.g. 15.25. If discounted payback period exceeds life of the project, enter 0 for the answer.)

The discounted payback period for the project is _______years.

2). Management of Cullumber, Inc., an aviation firm, is considering purchasing three aircraft for a total cost of $166,023,819. The company would lease the aircraft to an airline. Cash flows from the proposed leases are shown in the following table.

Years Cash Flow
1–4 $20,855,000
5–7 75,950,000
8–10 94,550,000

What is the IRR of this project? (Round answer to 2 decimal places, e.g. 15.25%.)

The IRR of this project is _______%

3). Ivanhoe Specialties just purchased inventory-management computer software at a cost of $1,449,950. Cost savings from the investment over the next six years will produce the following cash flow stream: $199,340, $304,240, $348,600, $524,250, $734,320, and $484,740. What is the payback period on this investment? (Round answer to 2 decimal places,e.g. 15.25.)

Payback Period is _______?

Solutions

Expert Solution

1. discounted payback = 4 + 218,293.949/641,722.19 = 4.34 years

Discount rate 10.0000%
Cash flows Year Discounted CF= cash flows/(1+rate)^year Cumulative cash flow
     (8,373,700.000) 0                     (8,373,700.00)                 (8,373,700.00)
       2,020,000.000 1                       1,836,363.64                 (6,537,336.36)
       4,090,000.000 2                       3,380,165.29               (3,157,171.074)
       2,972,100.000 3                       2,232,982.72                   (924,188.355)
       1,033,500.000 4                           705,894.41                   (218,293.949)
       1,033,500.000 5                           641,722.19                       423,428.24
       1,033,500.000 6                           583,383.81                 1,006,812.046
       1,033,500.000 7                           530,348.92                    1,537,160.96

2. IRR = 22.52%

Use IRR function in Excel

3. Payback = 4 + 73,520/734,320 = 4.10

Discount rate 0.0000%
Cash flows Year Discounted CF= cash flows/(1+rate)^year Cumulative cash flow
       (1,449,950.000) 0                     (1,449,950.00)                 (1,449,950.00)
             199,340.000 1                           199,340.00                 (1,250,610.00)
             304,240.000 2                           304,240.00                   (946,370.000)
             348,600.000 3                           348,600.00                   (597,770.000)
             524,250.000 4                           524,250.00                     (73,520.000)
             734,320.000 5                           734,320.00                       660,800.00
             484,740.000 6                           484,740.00                 1,145,540.000

Related Solutions

Please answer them correctly. Here are short 3 problems. Please solve all 3 problems. I would...
Please answer them correctly. Here are short 3 problems. Please solve all 3 problems. I would really appreciate your effort. Thanks. 1. Linda Williams is looking to invest in a three-year bond that makes semi-annual coupon payments at a rate of 5.475 percent. If these bonds have a market price of $982.63, what yield to maturity can she expect to earn? (Round intermediate calculations to 5 decimal places, e.g. 1.25145 and final answer to 2 decimal places, e.g. 15.25%.) Excel...
Please answer them correctly. Here are short 3 problems. Please solve all 3 problems. I would...
Please answer them correctly. Here are short 3 problems. Please solve all 3 problems. I would really appreciate your effort. Thanks. 1. You invest $260 in a mutual fund today that pays 6.30 percent interest annually. How long will it take to double your money? (If you solve this problem with algebra round intermediate calculations to 6 decimal places, in all cases round your final answer to 0 decimal place, e.g. 545) Number of Years ______? 2. You decide to...
Please answer them correctly. Here are short 3 problems. Please solve all 3 problems. I would...
Please answer them correctly. Here are short 3 problems. Please solve all 3 problems. I would really appreciate your effort. Thanks. 1. Cullumber Corp had sales of $336,000 in 2017. If management expects its sales to be $476,450 in 6 years, what is the rate at which the company’s sales are expected to grow? (If you solve this problem with algebra round intermediate calculations to 4 decimal places, in all cases round your final answer to 2 decimal places, e.g....
Please answer them correctly. Here are short 3 problems. Please solve all 3 problems. I would...
Please answer them correctly. Here are short 3 problems. Please solve all 3 problems. I would really appreciate your effort. Thanks. 1). Crane, Inc., is a fast-growing technology company. Management projects rapid growth of 30 percent for the next two years, then a growth rate of 17 percent for the following two years. After that, a constant-growth rate of 8 percent is expected. The firm expects to pay its first dividend of $2.56 a year from now. If dividends will...
Please answer them correctly. Here are short 4 problems. Please solve all 4 problems. I would...
Please answer them correctly. Here are short 4 problems. Please solve all 4 problems. I would really appreciate your effort. Thanks. 1. Margaret Moore is a sales executive at a Baltimore firm. She is 25 years old and plans to invest $3,900 every year in an IRA account, beginning at the end of this year until she reaches the age of 65. If the IRA investment will earn 11.35 percent annually, how much will she have in 40 years, when...
Please answer them correctly. Here are 2 short problems. Please solve all 2 problems. I would...
Please answer them correctly. Here are 2 short problems. Please solve all 2 problems. I would really appreciate your effort. Thanks. 1). You are buying a sofa. You will pay $200 today and make three consecutive annual payments of $300 in the future. The real rate of return is 17.0 percent, and the expected inflation rate is 4 percent. What is the actual price of the sofa? (Do not round factor values. Round final answer to 2 decimal places, e.g....
Please answer them correctly. Here are 2 short problems. Please solve all 2 problems. I would...
Please answer them correctly. Here are 2 short problems. Please solve all 2 problems. I would really appreciate your effort. Thanks. 1). Given the soaring price of gasoline, Ford is considering introducing a new production line of gas-electric hybrid sedans. The expected annual unit sales of the hybrid cars is 40,000; the price is $25,000 per car. Variable costs of production are $14,000 per car. The fixed overhead including salary of top executives is $80 million per year. However, the...
Please answer them correctly. Here are 2 short problems. Please solve all 2 problems correctly. Make...
Please answer them correctly. Here are 2 short problems. Please solve all 2 problems correctly. Make sure the answers are correct. I would really appreciate your effort. Thanks. 1). Sunland, Inc., is considering investing in a new production line for eye drops. Other than investing in the equipment, the company needs to increase its cash and cash equivalents by $10,000, increase the level of inventory by $27,000, increase accounts receivable by $25,000, and increase accounts payable by $5,000 at the...
Please answer it correctly. Here is a short problems. Please solve all problems correctly. Make sure...
Please answer it correctly. Here is a short problems. Please solve all problems correctly. Make sure the answers are correct. I would really appreciate your effort. Thanks. 1). The Oriole Products Co. currently has debt with a market value of $275 million outstanding. The debt consists of 9 percent coupon bonds (semiannual coupon payments) which have a maturity of 15 years and are currently priced at $1,429.26 per bond. The firm also has an issue of 2 million preferred shares...
Please answer it correctly. Here is a short problems. Please solve all problems correctly. Make sure...
Please answer it correctly. Here is a short problems. Please solve all problems correctly. Make sure the answers are correct. I would really appreciate your effort. Thanks. 1). The Oriole Products Co. currently has debt with a market value of $275 million outstanding. The debt consists of 9 percent coupon bonds (semiannual coupon payments) which have a maturity of 15 years and are currently priced at $1,429.26 per bond. The firm also has an issue of 2 million preferred shares...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT