Question
In: Accounting
You are the CFO of a business and have the opportunity to evaluate two different investment...
You are the CFO of a business and have the opportunity to evaluate two different investment opportunities. Information related to these investments follows:
|
Investment 1 |
Investment 2 |
|
|
Investment Cost |
$ 800,000 |
$ 500,000 |
|
Salvage Value |
$ 40,000 |
$ 50,000 |
|
Useful Life |
8 years |
15 years |
|
Required Rate of Return |
10% |
10% |
|
Sales |
$ 450,000 |
$ 400,000 |
|
Variable Costs |
$ 150,000 |
$ 175,000 |
|
Fixed Costs (excluding depreciation) |
$ 100,000 |
$ 150,000 |
|
Tax Rate |
35% |
35% |
Your company has a required rate of return of 10% for all new investments and is subject to a tax rate of 35%
- Recalculate the Net Present Value for INVESTMENT #1 ONLY but assume that the required/target rate of return is 6%, 12%, and 20%.
Solutions
ekkarill92 answered 3 years agoRelated Solutions
You are the CFO of a business and have the opportunity to evaluate two different investment...
You are the CFO of a business and have the opportunity to
evaluate two different investment opportunities. Information
related to these investments follows:
Investment 1
Investment 2
Investment Cost
$ 800,000
$ 500,000
Salvage Value
$ 40,000
$ 50,000
Useful Life
8 years
15 years
Required Rate of Return
10%
10%
Sales
$ 450,000
$ 400,000
Variable Costs
$ 150,000
$ 175,000
Fixed Costs (excluding depreciation)
$ 100,000
$ 150,000
Tax Rate
35%
35%
Your company has a required rate...
You are the CFO of ABC, LLC. You have been given data for two different projects....
You are the CFO of ABC, LLC. You have been given data for two
different projects. You can only choose one. Calculate the Net
Present Value, Internal Rate of Return, Profitability Index and Pay
Back Period for each of the projects. Make a recommendation based
on your findings. You must do all calculations in Excel and use
formulas. You must also explain why you chose the project. All of
this should be on one tab of an excel spreadsheet.
Here...
You have the opportunity to make an investment that costs $900,000. If you make this investment...
You have the opportunity to make an investment that costs
$900,000. If you make this investment now, you will receive
$100,000 one year from today, $250,000 and $800,000 two and three
years from today, respectively. The appropriate discount rate is
12%. Should you make the investment?
You, the CFO of a large corporation, are evaluating the value of three different investment opportunities:...
You, the CFO of a large corporation, are evaluating the
value of three different investment opportunities:
Project A: We expect this project to yield cash flows of
$5 million over the next ten years.
Project B: We expect this project to yield zero cash
flows for the first four years but then a $50 million dollar cash
flow at the end of the fifth year.
Project C: We expect this project to yield cash flows of
$500,000 forever.
If we...
You are trying to evaluate a private firm’s potential as a good investment opportunity. Your mentor...
You are trying to evaluate a private firm’s potential as a good
investment opportunity. Your mentor at the investment bank you
interned during the summer told you to collect information on
comparable firms, which will help you find the WACC of the private
firm. The private firm has ND/E ratio of 2. The risk free rate is
2%. Market risk premium is 5%. Cost of debt for the private firm is
assumed is 6%. The tax rate is 50%. The...
You have the opportunity to buy a business for $35,000. The business is a portable car...
You have the opportunity to buy a business for $35,000. The
business is a portable car washing business. It comes with a truck
and trailer that has everything needed to wash cars anywhere. The
owner hired students to wash the cars. The business owner is
graduating from college and wants to sell. The business has paid
the owner’s tuition, books, fees, and rent for the last three
years. The net income was $13,000 per year. You have the $35,000 in...
You have been asked by the CFO of your company to evaluate the proposed expansion project....
You have been asked by the CFO of your company to evaluate the
proposed expansion project. You collected the following data:
Investment outlays: $200,000 ($25,000 for nondepreciable land,
$175,000 for equipment) Life of the project: 5 years Depreciation
for equipment: Your firm uses an accelerated depreciation method,
and the equipment is MACRS (modified accelerated cost recovery
system) 3-year property with depreciation rates of 33.33% in Year
1, 44.45% in Year 2, 14.81% in Year 3, and 7.41% in Year 4....
As a financial analyst for ABC Co. you have been asked to evaluate two capital investment...
As a financial analyst for ABC Co. you have been asked to
evaluate two capital investment opportunities submitted by the
production department of the firm. Before beginning your analysis,
you note that the company has set the cost of capital at 10 percent
for all proposed projects. ABC Co. pays corporate taxes at the rate
of 30 percent.
The proposed capital project calls for developing new computer
software to facilitate partial automation of production in the
Company’s plant. Alternative A...
You have had an opportunity to use two application software packages to complete three different projects....
You have had an opportunity to use two application
software packages to complete three different projects.
Name the two application packages.
For each package, define its primary purpose and provide two
examples of how you would use the product in either a personal or a
business setting.
Question 6. You have just joined the investment banking firm. They have offered you two different...
Question 6.
You have just joined the investment banking firm. They have offered
you two different salary arrangements. You can have $95,000 per
year for the next two years, or you can have $70,000 per year for
the next two years, along with a $45,000 signing bonus today. The
bonus is paid immediately, and the salary is paid at the end of
each year. If the interest rate is 10% compounded monthly, which do
you prefer?
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- The correlation between X and Y ______________. Question options: measures the variation around the predicted regression...
- Will iron(III) hydroxide precipitate from a pH = 1.00 solution with [Fe3+] = 1.0 x 10-5?...
- What do you believe happens during the final scene of the story between the brothers at....
- A 5.171 g sample of a solid, weak, monoprotic acid is used to make a 100.0...
- 1. Creep is one of deformation that occurred in concrete structure. Give one example that can...
- Why does a particular codon represent only one specific amino acid?
- Write a function template sort that takes two references to generic objects and switches them if...
ADVERTISEMENT