Question
In: Finance
Siegmeyer Corp. is considering a new inventory system, Project A will cost $750,000. The system is...
Siegmeyer Corp. is considering a new inventory system, Project A will cost $750,000. The system is expected to generate positive cash flows over the next four years in the amounts of $350,000 in year one, $325,000 in year two, $150,000 in year three, and $180,000 in year four. Siegmeyer’s required rate of return is 8%. Suppose Siegmeyer identifies another mutually exclusive project, Project B, with a net present value of $98,525.50 and IRR of 17.33%. If neither project can be replaced, compared to the values calculated in Problems 7 (NPV = $104,089.40) and 8 (IRR = 15.13%)
Siegmeyer should accept which project(s) (A, B, both or neither) and why?
Solutions
jeff jeffy answered 2 years agoRelated Solutions
Siegmeyer Corp. is considering a new inventory system, Project A will cost $750,000. The system is...
Siegmeyer Corp. is considering a new inventory system, Project A
will cost $750,000. The system is expected to generate positive
cash flows over the next four years in the amounts of $350,000 in
year one, $325,000 in year two, $150,000 in year three, and
$180,000 in year four. Siegmeyer’s required rate of return is 8%.
what is the internal rate of return of this project?
DYI Construction Co. is considering a new inventory system that will cost $750,000. The system is...
DYI Construction Co. is considering a new inventory system that
will cost $750,000. The system is expected to generate positive
cash flows over the next four years in the amounts of $350,000 in
year one, $325,000 in year two, $150,000 in year three, and
$180,000 in year four. DYI's required rate of return is 11%. What
is the modified internal rate of return of this project?
DYI Construction Co. is considering a new inventory system that will cost $750,000. The system is...
DYI Construction Co. is considering a new inventory system that
will cost $750,000. The system is expected to generate positive
cash flows over the next four years in the amounts of $350,000 in
year one, $325,000 in year two, $150,000 in year three, and
$180,000 in year four. DYI's required rate of return is 10%. What
is the modified internal rate of return of this project?
DYI Construction Co. is considering a new inventory system that will cost $750,000. The system is...
DYI Construction Co. is considering a new inventory system that
will cost $750,000. The system is expected to generate positive
cash flows over the next four years in the amounts of $350,000 in
year one, $325,000 in year two, $150,000 in year three, and
$180,000 in year four. DYI's required rate of return is 11%. What
is the modified internal rate of return of this project?
11.57%
14.35%
10.87%
13.06%
A company is considering a new inventory system that will cost $120,000. The system is expected...
A company is considering a new inventory system that will cost
$120,000. The system is expected to generate positive cash flows
over the next four years in the amounts of $35,000 in year 1,
$55,000 in year 2, $65,000 in year 3, and $40,000 in year 4. The
firm’s required rate of return is 9%. What is the payback period of
this project?
1.95 years
2.46 years
2.99 years
3.10 years
--------- What is the net present value (NPV) of...
Rent-to-Own Equipment Co. is considering a new inventory system that will cost $450,000. The system is...
Rent-to-Own Equipment Co. is considering a new inventory system
that will cost $450,000. The system is expected to generate
positive cash flows over the next four years in the amounts of
$250,000 in year one, $125,000 in year two, $110,000 in year three,
and $80,000 in year four. Rent-to-Own's required rate of return is
10%. What is the internal rate of return of this project?
a. 10.07% b. 11.89% c. 12.26% d. 12.69%
5. A new operating system for an existing machine is expected to cost $750,000 and have...
5.
A new operating system for an existing machine is expected to
cost $750,000 and have a useful life of six years. The system
yields an incremental after-tax income of $235,000 each year after
deducting its straight-line depreciation. The predicted salvage
value of the system is $14,800.
A machine costs $460,000, has a $31,700 salvage value, is
expected to last eight years, and will generate an after-tax income
of $74,000 per year after straight-line depreciation.
Assume the company requires a...
MHI Corp. is considering a capital budgeting project developing a new and improved home management system...
MHI Corp. is considering a capital budgeting project developing
a new and improved home management system that will allow customers
to easily inventory frequently purchased items for their home and
to receive reminders when these items need to be repurchased. The
firm’s WACC is 6.7%. The project is slightly more risky that the
average project of the firm. You have been advised to add a 3.1%
premium to the firm’s WACC for the discount rate for this project.
The project...
MHI Corp. is considering a capital budgeting project developing a new and improved home management system...
MHI Corp. is considering a capital budgeting project developing
a new and improved home management system that will allow customers
to easily inventory frequently purchased items for their home and
to receive reminders when these items need to be repurchased. The
firm’s WACC is 6.7%. The project is slightly more risky that the
average project of the firm. You have been advised to add a 3.1%
premium to the firm’s WACC for the discount rate for this project.
The project...
MHI Corp. is considering a capital budgeting project developing a new and improved home management system...
MHI Corp. is considering a capital budgeting project developing
a new and improved home management system that will allow customers
to easily inventory frequently purchased items for their home and
to receive reminders when these items need to be repurchased. The
firm’s WACC is 6.7%. The project is slightly more risky that the
average project of the firm. You have been advised to add a 3.1%
premium to the firm’s WACC for the discount rate for this project.
The project...
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