Blossom Inc., management is expecting a new project to start paying off, beginning at the end...

Blossom Inc., management is expecting a new project to start paying off, beginning at the end of next year. Cash flows are expected to be as follows: 0 1 2 3 4 5 $439,676 $488,452 $465,455 $467,326 $546,444 If Blossom can reinvest these cash flows to earn a return of 8.7 percent, what is the future value of this cash flow stream at the end of 5 years? What is its present value?

Expert Solution

1]	FUTURE VALUE OF THE CASH FLOW STREAM:
	Year	Cash flows	FVIF at 8.7%	FV at 8.7%
	0
	1	$ 4,39,676	1.39611	$ 6,13,834
			[1.087^4]
	2	$ 4,88,452	1.28437	$ 6,27,351
			[1.087^3]
	3	$ 4,65,455	1.18157	$ 5,49,967
	4	$ 4,67,326	1.08700	$ 5,07,983
	5	$ 5,46,444	1.00000	$ 5,46,444
	Future value of the cash flow stream	$ 28,45,579
	FVIF = 1.087^t, where t = 4, 3, 2, 1 and 0
2]	PRESENT VALUE OF THE CASH FLOW STREAM:
	Year	Cash flows	PVIF at 8.7%	PV at 8.7%
	0
	1	$ 4,39,676	0.91996	$ 4,04,486
			[1/1.087]
	2	$ 4,88,452	0.84633	$ 4,13,393
			[1/1.087^2]
	3	$ 4,65,455	0.77859	$ 3,62,401
	4	$ 4,67,326	0.71628	$ 3,34,735
	5	$ 5,46,444	0.65895	$ 3,60,079
	Present value of the cash flow stream	$ 18,75,094
	PVIF = 1/1.087^t, where t = 1, 2, 3, 4 and 5.

jeff jeffy answered 1 year ago

Pharoah Inc., management is expecting a new project to start paying off, beginning at the end...

Pharoah Inc., management is expecting a new project to start paying off, beginning at the end of next year. Cash flows are expected to be as follows: 0 1 2 3 4 5 $436,676 $474,452 $463,455 $465,326 $537,444 If Pharoah can reinvest these cash flows to earn a return of 7.2 percent, what is the future value of this cash flow stream at the end of 5 years? What is its present value?

Carla Vista Inc., management is expecting a new project to start paying off, beginning at the...

Carla Vista Inc., management is expecting a new project to start paying off, beginning at the end of next year. Cash flows are expected to be as follows: 0 1 2 3 4 5 $421,676 $469,452 $482,455 $465,326 $527,444 If Carla Vista can reinvest these cash flows to earn a return of 7.9 percent, what is the future value of this cash flow stream at the end of 5 years? What is its present value? (Round answers to 2 decimal...

what is required from the management team when start new project?

Tegan and James are planning to start a new business together. They are expecting annual taxable...

Tegan and James are planning to start a new business together. They are expecting annual taxable income of $250,000 from their business, but they are concerned about the expected tax burden. They know that the corporate tax rate is 30% and individual tax is payable as per the following table: Taxable income Tax on this income 0 - $18,200 Nil $18,201 - $37,000 19c for each $1 over $18,200 $37,001 - $80,000 $3,572 plus 32.5c for each $1 over $37,000...

Blossom Company management is considering a project that will require an initial investment of $48,500 and...

Blossom Company management is considering a project that will require an initial investment of $48,500 and will last for 10 years. No other capital expenditures or increases in working capital are anticipated during the life of the project. What is the annual EBIT that will make the project economically viable if the cost of capital for the project is 8 percent and the firm will depreciate the investment using straight-line depreciation and a salvage value of $0? Assume that the...

Singer inc is about to start a 4 year project. A new plant will be built....

Singer inc is about to start a 4 year project. A new plant will be built. The plant will require an amount of 40 million to acquire new fixed assets that will be depreciated straight-line through the life of the project. The company also possesses a building that it bought for 5 million and has a net book value of 0. Todays market value for the building is 4.1 million while it can be rented for 220,000 yearly. The company...

Singer inc. is about to start a 4-year project. A new plant will be built. The...

Singer inc. is about to start a 4-year project. A new plant will be built. The plant will require an amount of $40 million to acquire new fixed assets that will be depreciated straight-line through the life of the project. The company also possesses a building that it bought for $5 million and has a net book value of 0. Today's market value for the building is $4.1 million, while it can be rented for $220,000 yearly. The company wants...

Tom wants to start a new project. A project requires a start up cost of $11000...

Tom wants to start a new project. A project requires a start up cost of $11000 today and 20 annual cost of $4500 starting in one year. Starting at the end of the 21th year, the project returns 10 annual payments of $Y. Find Y so that the project yields an annual effective rate of 5% over the 30 years. PLZ by hand and not excel

A) Capitol Corp. management is expecting a project to generate after-tax income of $66,190 in each...

A) Capitol Corp. management is expecting a project to generate after-tax income of $66,190 in each of the next three years. The average book value of the project’s equipment over that period will be $212,570. If the firm’s investment decision on any project is based on an ARR of 37.5 percent Accounting rate of return is : B) Hathaway, Inc., a resort management company, is refurbishing one of its hotels at a cost of $7,053,259. Management expects that this will...

Problem 16-1 The stockholders’ equity section of Blossom Inc. at the beginning of the current year...

Problem 16-1 The stockholders’ equity section of Blossom Inc. at the beginning of the current year appears below. Common stock, $10 par value, authorized 911,000 shares, 309,000 shares issued and outstanding $3,090,000 Paid-in capital in excess of par—common stock 646,000 Retained earnings 604,000 During the current year, the following transactions occurred. 1. The company issued to the stockholders 102,000 rights. Ten rights are needed to buy one share of stock at $35. The rights were void after 30 days. The...

Question