A project has an initial capital investment of $420,000, and a four-year life, at the end...

A project has an initial capital investment of $420,000, and a four-year life, at the end of which it will be fully depreciated to zero. The forecasted incremental net income after tax from the project is $14,200, $18,600, $16,300, and $20,000, respectively, for each of the next four years. What is the average accounting return (AAR) for this project?

A. 4.1%
B. 8.2%
C. 9.9%
D. 16.4%

Expert Solution

jeff jeffy answered 2 years ago

A firm is considering a project that requires an initial investment of $420,000. The life of...

A firm is considering a project that requires an initial investment of $420,000. The life of this project is five years. Cash flows for each year are estimated as follows: Year 1 Year 2 Year 3 Year 4 Year 5 $180,000 $220,000 $160,000 -$20,000 -$80,000 If the cost of capital of this project is 8%, what is the payback period of this project?

(1) The foreign project has a life of three years. The initial investment on long-term capital...

(1) The foreign project has a life of three years. The initial investment on long-term capital is $60m. (2) Annual revenue in each of the three years will be ¥ 6000m. Annual costs of goods sold will be ¥ 3000m. (3) Japan: beta =1.2, Rf = 4%, Rm = 6%, Rd= 7%, 30% debt and 70% equity; US: beta =2, Rf = 3%, Rm = 7%, Rd= 4%, 30% debt and 70% equity. (4) Current spot rate: ¥100/$; Annual...

An investment has an initial cost of $1,000. The cash flows for the following four-year life...

An investment has an initial cost of $1,000. The cash flows for the following four-year life of project are $347, $394, $424, and $600. If discount rate is 14%, calculate the discounted payback period for this project. Round your answer to 4 decimal places.

A 5-year project has an initial fixed asset investment of $522,600, an initial net working capital...

A 5-year project has an initial fixed asset investment of $522,600, an initial net working capital investment of $13,200, and an annual operating cash flow of -$51,480. The fixed asset is fully depreciated over the life of the project and has no salvage value. The net working capital will be recovered when the project ends. The required return is 15.8 percent. What is the project's equivalent annual cost, or EAC?

What is the NPV of a project that has an initial investment of $7,300, with end...

What is the NPV of a project that has an initial investment of $7,300, with end of year cash flows as follows: year 1: $1,500 year 2: $2,500 year 3: $3,000 year 4: $2,500 year 5: $1,500 The interest rate is 8%

Consider a five-year project with the following information: initial fixed asset investment = $420,000; straight-line depreciation...

Consider a five-year project with the following information: initial fixed asset investment = $420,000; straight-line depreciation to zero over the five-year life; zero salvage value; price = $32/unit; variable costs = $15.60/unit; fixed costs = $148,000 per year; quantity sold = 100,000 units per year; tax rate = 25%. How sensitive is OCF to changes in quantity sold (i.e., how much does OCF change given an increase of one unit sold in a year)?

Consider a 3-year project with the following information: initial fixed asset investment = $420,000; straight-line depreciation...

Consider a 3-year project with the following information: initial fixed asset investment = $420,000; straight-line depreciation to zero over the 3-year life; zero salvage value; price = $29; variable costs = $16; fixed costs = $197,400; quantity sold = 78,960 units; tax rate = 35 percent. How sensitive is OCF to changes in quantity sold? (Do not round your intermediate calculations.) A) $6.00 B) $0.12 C) $10.90 D) $9.63 E) $8.45

"Consider the investment project below, which has a four-year investment life (n = 0 through 4)....

"Consider the investment project below, which has a four-year investment life (n = 0 through 4). Project ($) -3,300 -1,000 2,000 2,800 2,000 What is the discounted payback period at an interest rate of 16.7%? Enter your answer as an integer. If the project never pays itself back, enter a 0."

Dr. Chan is considering a four year project. The project requires an initial investment of $10,000,000...

Dr. Chan is considering a four year project. The project requires an initial investment of $10,000,000 to buy new equipment. The equipment will be depreciated straight line to zero over the project’s life. The company believes it can generate $5,000,000 in pretax revenues in year 1. Revenues will increase at 20% per year. Total pretax operating cost would be 40% of the pretax revenues. Net working capital will be 20% of the pretax revenue for the year. Net working capital...

A project with a life of 12 has an initial fixed asset investment of $21,420, an...

A project with a life of 12 has an initial fixed asset investment of $21,420, an initial NWC investment of $2,040, and an annual OCF of –$32,640. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required return is 13 percent, what is the project's equivalent annual cost, or EAC?

Question