Question

In: Finance

Bruno's Lunch counter is expanding and expects operating cash flows of $20,500 a year for 5...

Bruno's Lunch counter is expanding and expects operating cash flows of $20,500 a year for 5 years as a result. This expansion requires $54,000 in new fixed assets. These assets will be worthless at the end of the project. In addition, the project requires $4,800 of net working capital throughout the life of the project. What is the net present value of this expansion project at a required rate of return of 13 percent?

Solutions

Expert Solution

Ans $ 15908.49

Year Project Cash Flows (i) DF@ 13% DF@ 13% (ii) PV of Project ( (i) * (ii) )
0 -58800 1 1                    (58,800.00)
1 20500 1/((1+13%)^1) 0.885                     18,141.59
2 20500 1/((1+13%)^2) 0.783                     16,054.51
3 20500 1/((1+13%)^3) 0.693                     14,207.53
4 20500 1/((1+13%)^4) 0.613                     12,573.03
5 20500 1/((1+13%)^5) 0.543                     11,126.58
5 4800 1/((1+13%)^5) 0.543                       2,605.25
NPV                     15,908.49

jeff jeffy answered 3 months ago
Next > < Previous

Related Solutions

Bruno's Lunch Counter is expanding and expects operating cash flows of $20,800 a year for 5...
Bruno's Lunch Counter is expanding and expects operating cash flows of $20,800 a year for 5 years as a result. This expansion requires $57,000 in new fixed assets. These assets will be worthless at the end of the project. In addition, the project requires $5,000 of net working capital throughout the life of the project. What is the net present value of this expansion project at a required rate of return of 14 percent? $14,408 $12,005 $15,609 $17,653 $16,724
An investment project costs $20,500 and has annual cash flows of $4,300 for six years. Required...
An investment project costs $20,500 and has annual cash flows of $4,300 for six years. Required : (a) What is the discounted payback period if the discount rate is zero percent? (b) What is the discounted payback period if the discount rate is 3 percent? (c) What is the discounted payback period if the discount rate is 19 percent?
Cash Flows from Operating Activities—Direct Method The cash flows from operating activities are reported by the...
Cash Flows from Operating Activities—Direct Method The cash flows from operating activities are reported by the direct method on the statement of cash flows. Determine the following: a. If sales for the current year were $509,900 and accounts receivable decreased by $32,600 during the year, what was the amount of cash received from customers? $ b. If income tax expense for the current year was $44,200 and income tax payable decreased by $4,400 during the year, what was the amount...
A new molding machine is expected to produce operating cash flows of $109,000 a year for...
A new molding machine is expected to produce operating cash flows of $109,000 a year for 4 years. At the beginning of the project, inventory will decrease by $8,700, accounts receivables will increase by $9,500, and accounts payable will decrease by $5,200. All net working capital will be recovered at the end of the project. The initial cost of the molding machine is $319,000. The equipment will be depreciated straight-line to a zero book value over the life of the...
A project is expected to create operating cash flows of $37,600 a year for 3 years....
A project is expected to create operating cash flows of $37,600 a year for 3 years. The initial cost of the fixed assets is $98,000. These assets will be worthless at the end of the project. Also, $3,200 of net working capital will be required throughout the life of the project. What is the project's net present value if the required rate of retum is 14 percent?
A project is expected to create operating cash flows of $37,600 a year for 3 years....
A project is expected to create operating cash flows of $37,600 a year for 3 years. The initial cost of the fixed assets is $98,000. These assets will be worthless at the end of the project. Also, $3,200 of net working capital will be required throughout the life of the project. What is the project's net present value if the required rate of return is 14 percent?
An office building is expected to create operating cash flows of $26,500 a year for three...
An office building is expected to create operating cash flows of $26,500 a year for three years, based on tenants' rental income. The purchase of the fixed assets for this building will cost $55,000. These assets will have no value at the end of the project. An additional $5,000 of net working capital will be required throughout the life of the project. Calculate the net present value of this project if the required rate of return is 15 percent? Multiple...
Statement of Cash Flows—A method of reporting the cash flows from operating activities as the net...
Statement of Cash Flows—A method of reporting the cash flows from operating activities as the net income from operations adjusted for all deferrals of past cash receipts and payments and all accruals of expected future cash receipts and payments.Indirect Method The comparative balance sheet of Yellow Dog Enterprises Inc. at December 31, 20Y8 and 20Y7, is as follows: Dec. 31, 20Y8 Dec. 31, 20Y7 Assets Cash $74,970 $91,680 Accounts receivable (net) 115,190 123,590 Merchandise inventory 164,570 153,180 Prepaid expenses 6,700...
Statement of Cash Flows—A method of reporting the cash flows from operating activities as the net...
Statement of Cash Flows—A method of reporting the cash flows from operating activities as the net income from operations adjusted for all deferrals of past cash receipts and payments and all accruals of expected future cash receipts and payments.Indirect Method List the errors you find in the following statement of cash flows. The cash balance at the beginning of the year was $240,000. All other amounts are correct, except the cash balance at the end of the year. Shasta Inc....
Statement of Cash Flows—A method of reporting the cash flows from operating activities as the net...
Statement of Cash Flows—A method of reporting the cash flows from operating activities as the net income from operations adjusted for all deferrals of past cash receipts and payments and all accruals of expected future cash receipts and payments.Indirect Method The comparative balance sheet of Merrick Equipment Co. for December 31, 20Y9 and 20Y8, is as follows: Dec. 31, 20Y9 Dec. 31, 20Y8 Assets Cash $244,410 $227,360 Accounts receivable (net) 88,540 81,660 Inventories 249,940 241,760 Investments 0 93,660 Land 128,200...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT