Question
In: Finance
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
jeff jeffy answered 2 years agoRelated 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...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- . Use the following information to calculate your company's expected return State Probability Return Boom 20%...
- You are considering the following two projects and can only take one. Your cost of capital...
- C++: Write a program that produces truth tables for the following compound propositions. Write the header...
- 1. What is the historical role of investment bankers ? Has this role changed ? Why...
- How were the original Internet requirements met through its design? What are the two main requirements...
- discuss crowdfunding on platforms: What features of the services incorporate virality? What are some of the...
- A textbook of mass 2.08 kg rests on a frictionless, horizontal surface. A cord attached to...
ADVERTISEMENT