Question

In: Finance

JS: Capital budgeting JS company is considering an investment that requires an outlay of $100,000 today....

JS: Capital budgeting JS company is considering an investment that requires an outlay of $100,000 today. Cash inflow from the investment are expected to be $10,000 for year 1-3, and $40,000 for year 4, 5, 6, 7, and 8. You require a 20% rate of return on this type of investment. Answer the following questions: First draw the time line and specify the cash outflow and inflow for each period. Calculate the net present value. Calculate the Internal rate of return of this investment. Calculate the payback periods Shall the investment be undertaken?

Please report the answer in the following multiple choices.

a. Discoutn rate 0.20 year cash flow 0 ?? 1 ?? 2 ?? 3 ?? 4 ?? 5 ?? 6 ?? 7 ?? 8 ??

b. pv of cash flow since yr 1 ??

c. npv ??

d. IRR ??

e. payback perioe ??

f. accept the project - yes or no? ??

Solutions

Expert Solution


Related Solutions

Wise Company is considering an investment that requires an outlay of $600,000 and promises an after-tax...
Wise Company is considering an investment that requires an outlay of $600,000 and promises an after-tax cash inflow of $693,000 one year from now. The company's cost of capital os 10%. 1. Break the $693,000 future cash inflow into three components: (a) the return of the original investment, (b) the cost of capital and, (c) the profit earned on the investment. Now compute the present value of the profit earned on the investment. 2. Conceptual Connection: Compute the NPV of...
An investment project requires an initial outlay of $100,000, and is expected to generate annual cash...
An investment project requires an initial outlay of $100,000, and is expected to generate annual cash inflows of $28,000 for the next 5 years. The cost of capital is 12 percent. Determine the internal rate of return for the project (to the nearest tenth of one percent). a. 12.0% b. 12.6% c. 3.6% d. 12.4%
A firm is considering a project that requires a time t=0 cash outlay of $100,000 for...
A firm is considering a project that requires a time t=0 cash outlay of $100,000 for a piece of equipment. The firm will depreciate this equipment to zero via straight line depreciation over an eight year economic life. The project will require the purchase of an additional $8,000 of inventory at time t=0. The inventory purchase will result in an account payable of $3,500 at time t=0. The firm's tax rate is 40%. What is the net cash flow at...
An investor is considering investing in a capital project. The project requires an outlay of £500,000...
An investor is considering investing in a capital project. The project requires an outlay of £500,000 at outset and further payments at the end of each of the first 5 years, the first payment being £100,000 and each successive payment increasing by £10,000.The project is expected to provide a continuous income at a rate of £80,000 in the first year, £83,200 in the second year, and so on, with income increasing each year by 4% per annum compound. The income...
Buena Vision Clinic is considering an investment that requires an outlay of $600,000 and promises a...
Buena Vision Clinic is considering an investment that requires an outlay of $600,000 and promises a net cash inflow one year from now of $810,000. Assume the cost of capital is 10 percent. Required: 1. Break the $810,000 future cash inflow into the three components shown below. Enter all your answers as positive amounts. a. The return of the original investment is 600,000 b. The cost of capital is 60,000 c. The profit earned on the investment 150,000 2. Now,...
PDQ Corporation is considering an investment proposal that requires an initial investment of $100,000 in equipment....
PDQ Corporation is considering an investment proposal that requires an initial investment of $100,000 in equipment. Fully depreciated existing equipment may be disposed of for $30,000 pre-tax. The proposed project will have a five-year life and is expected to produce additional revenue of $45,000 per year. Expenses other than depreciation will be $12,000 per year. The new equipment will be depreciated to zero over the five-year useful life, but it is expected to actually be sold for $25,000. PDQ has...
PADICO is considering an investment project. The project requires an initial $5 million outlay for equipment...
PADICO is considering an investment project. The project requires an initial $5 million outlay for equipment and machinery. Sales are projected to be $2.5 million per year for the next four years. The equipment will be fully depreciated straight-line by the end of year 4. The cost of goods sold and operating expenses (not including depreciation) are predicted to be 30% of sales. The equipment can be sold for $500,000 at the end of year 4.Padico also needs to add...
PADICO is considering an investment project. The project requires an initial $5 million outlay for equipment...
PADICO is considering an investment project. The project requires an initial $5 million outlay for equipment and machinery. Sales are projected to be $2.5 million per year for the next four years. The equipment will be fully depreciated straight-line by the end of year 4. The cost of goods sold and operating expenses (not including depreciation) are predicted to be 30% of sales. The equipment can be sold for $500,000 at the end of year 4.Padico also needs to add...
PADICO is considering an investment project. The project requires an initial $5 million outlay for equipment...
PADICO is considering an investment project. The project requires an initial $5 million outlay for equipment and machinery. Sales are projected to be $2.5 million per year for the next four years. The equipment will be fully depreciated straight-line by the end of year 4. The cost of goods sold and operating expenses (not including depreciation) are predicted to be 30% of sales. The equipment can be sold for $500,000 at the end of year 4.Padico also needs to add...
18 A firm is considering an investment project which requires the initial outlay of $10 million....
18 A firm is considering an investment project which requires the initial outlay of $10 million. The 12-year project is expected to generate annual net cash flows each year of $1 million and have the expected terminal value at the end of the project of $5 million. The cost of capital is 6 percent, and its marginal tax rate is 40 percent. Calculate the profitability index of this project. 0.84 0.09 1.70 1.34 1.09
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT