The Harrington Corporation is considering investing in a project that will incur an initial investment of...

The Harrington Corporation is considering investing in a project that will incur an initial investment of $2,000,000.The project has a useful life of 5 years. The project's projected free after tax cash flow is $650,000 per year throughout the life of the projectt. The firm requires a rate of return for similar risk project at 18%. Based on the above information compute the following and determine each criteria f the firm should accept the project.

The NPV

The IRR

Payback period, the firm's minimum acceptable payback period is 3.5 years.

Discounted Payback Period. Minimum acceptable DPP is 4.0 years.

Compute the Profitability Index for the investment. What purpose does Profitability Index serve in capital budgeting processes?

Expert Solution

jeff jeffy answered 3 months ago

A company is considering investing in a project that will require an initial investment of $535k,...

A company is considering investing in a project that will require an initial investment of $535k, a dismantling cost after 10 years of $1.6M, and will bring in a positive cash flow at the end of each of the 11 years of $210k. The company has an expected internal return rate of 12%. Show using the Equivalent Rate of Return (ERR) method whether the company should make the investment.

Q Corporation is considering investing in the following projects: Project A Project B Initial cash outlay...

Q Corporation is considering investing in the following projects: Project A Project B Initial cash outlay $(200,000) $(140,000) Future cash inflows: Year 1 $ 50,000 $ - Year 2 50,000 - Year 3 50,000 - Year 4 50,000 40,000 Year 5 50,000 90,000 Year 6 50,000 140,000 Total cash inflows $300,000 $ 270,000 The company’s cost of capital is 8%, which is an appropriate discount rate. Required: Compute the net present value of each project. Use a clear presentation of...

Husky Corporation is considering an investment project in Canada. The project has an initial cost of...

Husky Corporation is considering an investment project in Canada. The project has an initial cost of CAD602,000 and is expected to produce cash inflows of CAD220,000 a year for four years. The project will be worthless after four years. The risk-free rate in the United States is 2 percent and the risk-free rate in Canada is 2.4 percent. The current spot rate is CAD1 = $.742. Husky's required return on dollar investments of this type is 12 percent. What is...

Lamar Advertising is considering investing in a project that requires an after-tax initial investment of $128...

Lamar Advertising is considering investing in a project that requires an after-tax initial investment of $128 million and is expected to produce after-tax cash inflows of $29 million in advertising revenue for each of the next five years. The firm's cost of capital is 11%. Based on this information, the NPV of the project is _________ million and the firm should _________ the project $12.2; accept -$12.2; reject $20.8; accept -$20.8; reject

You are investing in a project that requires an initial investment of $500,000. The project will...

You are investing in a project that requires an initial investment of $500,000. The project will last for 10 years with the following additional cash flows (CF) at the end of each year: If the discount rate is 10%, calculate the payback periods in Excel for both the methods below; Years 1 2 3 4 5 6 7 8 9 10 CF -500,000 80,000 100,000 100,000 120,000 140,000 150,000 150,000 150,000 150,000 a) Payback Method [10] b) Discounted Payback Method...

Kendall Corporation is considering a project that requires an initial investment of $900,000 and has a...

Kendall Corporation is considering a project that requires an initial investment of $900,000 and has a useful life of 12 years. The annual net cash receipts will be $175,000. The salvage value of the assets used in the project will be $50,000. The company’s tax rate is 35%. For tax purposes, the entire initial investment (without any reduction for salvage value) will be depreciated over 12 years. The company uses a discount rate of 20%. Provide the variables you entered...

Kuhn Corporation is considering a new project that will require an initial investment of $4,000,000. It...

Kuhn Corporation is considering a new project that will require an initial investment of $4,000,000. It has a target capital structure consisting of 45% debt, 4% preferred stock, and 51% common equity. Kuhn has noncallable bonds outstanding that mature in five years with a face value of $1,000, an annual coupon rate of 10%, and a market price of $1,050.76. The yield on the company’s current bonds is a good approximation of the yield on any new bonds that it...

A company is considering investing in a project with an initial cost of $250,000. The cost...

A company is considering investing in a project with an initial cost of $250,000. The cost of capital is 15%. The project will generate $100,000 every year for four years. Calculate the NPV & IRR & determine if they should invest in this project.

Haroldsen Corporation is considering a capital budgeting project that would require an initial investment of $350,000.

Haroldsen Corporation is considering a capital budgeting project that would require an initial investment of $350,000. The investment would generate annual cash inflows of $133,000 for the life of the project, which is 4 years. At the end of the project, equipment that had been used in the project could be sold for $32,000. The company's discount rate is 14%. (Note: For accuracy, use the appropriate discount factor(s) using Exhibits 13B-1 and 13B-2) The net present value of the...

Iris Company is considering a new investment project. The initial investment for the project is $200,000....

Iris Company is considering a new investment project. The initial investment for the project is $200,000. Iris is trying to estimate the net cashflows after tax for this investment. She has already figured out that the investment will generate an annual after-tax cash inflow of $54,000 from the operation. For tax purposes, the projected salvage value of the investment is $25,500. The government requires depreciating the vehicles using the straight-line method over the investment's life of 8 years. q1) Iris...

Question