10a- Your firm is evaluating a capital budgeting project. The estimated cash flows appear below. The...

10a- Your firm is evaluating a capital budgeting project. The estimated cash flows appear below. The board of directors wants to know the expected impact on shareholder wealth. Knowing that the estimated impact on shareholder wealth equates to net present value (NPV), you use your handy calculator to compute the value. What is the project's NPV? Assume that the cash flows occur at the end of each year. The discount rate (i.e., required rate of return, hurdle rate) is 14.4%. (Round to nearest penny)

Year 0 cash flow	-133,000
Year 1 cash flow	53,000
Year 2 cash flow	40,000
Year 3 cash flow	45,000
Year 4 cash flow	42,000
Year 5 cash flow	30,000

Answer:

10b- What is the discount rate at which the following cash flows have a NPV of $0? Answer in %, rounding to 2 decimals.

Year 0 cash flow = -132,000
Year 1 cash flow = 33,000
Year 2 cash flow = 37,000
Year 3 cash flow = 33,000
Year 4 cash flow = 39,000
Year 5 cash flow = 42,000
Year 6 cash flow = 31,000

Answer:

10c- US Robotics is evaluating a new product line. The CFO asks for an estimate of number of years to recover the initial investment, ignoring the time value of money. You realize that this is the payback period. The estimated cash flows from the new product line appear below. (Answer in years, round to 2 places)

Year 0 cash flow = -83,000
Year 1 cash flow = -41,000
Year 2 cash flow = 31,000
Year 3 cash flow = 33,000
Year 4 cash flow = 44,000
Year 5 cash flow = 37,000
Year 6 cash flow = 38,000
Year 7 cash flow = 34,000

Answer:

Solutions

Expert Solution

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

6a- Your firm is evaluating a capital budgeting project. The estimated cash flows appear below. The...

6a- Your firm is evaluating a capital budgeting project. The estimated cash flows appear below. The board of directors wants to know the expected impact on shareholder wealth. Knowing that the estimated impact on shareholder wealth equates to net present value (NPV), you use your handy calculator to compute the value. What is the project's NPV? Assume that the cash flows occur at the end of each year. The discount rate (i.e., required rate of return, hurdle rate) is 15.2%....

1A) Your firm is evaluating a capital budgeting project. The estimated cash flows appear below. The...

1A) Your firm is evaluating a capital budgeting project. The estimated cash flows appear below. The board of directors wants to know the expected impact on shareholder wealth. Knowing that the estimated impact on shareholder wealth equates to net present value (NPV), you use your handy calculator to compute the value. What is the project's NPV? Assume that the cash flows occur at the end of each year. The discount rate (i.e., required rate of return, hurdle rate) is 14.5%....

1. A corporation is evaluating the relevant cash flows for a capital budgeting project involving expansion...

1. A corporation is evaluating the relevant cash flows for a capital budgeting project involving expansion of the firm’s activities and must estimate the terminal cash flow for the project. The project will involve purchasing a machine for $120,000. The machine has a usable life of 6 years but would be disposed of after 5 years at an estimated sale price of $10,000. The machine will be depreciated under the prime cost (straight-line) method supposing a 6-year life. Net working...

Nano Specialist is considering an upgrade project. The estimated cash flows from the upgrade project appear below.

Nano Specialist is considering an upgrade project. The estimated cash flows from the upgrade project appear below. What is the project's payback period? Note that year 0 and year 1 cash flows are negative. (Answer in years, round to 2 places)Year 0 cash flow = -88,000Year 1 cash flow = -54,000Year 2 cash flow = 14,000Year 3 cash flow = 31,000Year 4 cash flow = 29,000Year 5 cash flow = 34,000Year 6 cash flow = 42,000Year 7 cash flow =...

Sigma Company is examining the cash flows of the capital budgeting project shown below. The project...

Sigma Company is examining the cash flows of the capital budgeting project shown below. The project is expected to cost $400,000. Sigma has a required rate of return of 12%, and a maximum acceptable payback period of 3 years. 0 1 2 3 4 5 ($400,000) $150,000 $150,000 $200,000 $100,000 $100,000 a. Calculate the NPV of the project. Based on the NPV analysis, should Sigma accept the project? Why or why not? b. Calculate the payback period of the...

Estimated cash flows appear below for an investment project. The project's required rate of return (RRR)...

Estimated cash flows appear below for an investment project. The project's required rate of return (RRR) is 11.40%. What is the discounted payback period for the project in years? Cash flows after Year 0 are assumed to be end-of-year cash flows. Year 0 cash flow = -67,000 Year 1 cash flow = 17,000 Year 2 cash flow = 20,000 Year 3 cash flow = 27,000 Year 4 cash flow = 30,000 Year 5 cash flow = 24,000 Select one: a....

Evaluating a capital budgeting project that costs $40,000 that is expected to generate after-tax cash flows...

Evaluating a capital budgeting project that costs $40,000 that is expected to generate after-tax cash flows of $15,000 per year for three years. If the required rate of return is 10 percent calculate the project’s (a) NPV and (b) IRR. Should the project be purchased? This is for a review Please show steps and rationale for project purchase.

Consider the below estimated cash flows for Project A. Assume the cost of capital is 8%.

Consider the below estimated cash flows for Project A. Assume the cost of capital is 8%. Year Project A 0 ($30,000) 1 $8,000 2 $9,000 3 $7,000 4 $10,000 8. Find the net present value (NPV) of Project A’s projected cash flows. a. $4,000 b. ($3,200) c. ($1,824) d. $1,754 e. ($1,969) 9. Find the Internal Rate of Return (IRR) Project A’s projected cash flows. a. 13.3% b. 8.0% c. 6.3% ...

FIN 331 – Homework – Capital Budgeting and Cash Flows Your firm is considering replacing a...

FIN 331 – Homework – Capital Budgeting and Cash Flows Your firm is considering replacing a machine that originally cost $275,000 with a new machine costing $340,000. It will also cost $10,000 to install the new machine. The new machine has a much higher output and would increase sales by $110,000 each year. The new machine is also more efficient and will save $10,000 in operating costs annually. The new machine would take more floor space causing the firm to...

You are evaluating a capital budgeting project for your company that is expected to last for...

You are evaluating a capital budgeting project for your company that is expected to last for six years. The project begins with the purchase of a $1,200,000 investment in equipment. You are unsure what method of depreciation to use in your analysis, straight-line depreciation or the 5-year MACRS accelerated method. Straight-line depreciation results in the cost of the equipment depreciated evenly over its life. The 5-year MACRS depreciation rates are 20%, 32%, 19%, 12%, 11%, and 6%. Your company's WACC...

Subjects