Question
In: Finance
Tempura, Inc., is considering two projects. Project A requires an investment of $52,000. Estimated annual receipts...
Tempura, Inc., is considering two projects. Project A requires an investment of $52,000. Estimated annual receipts for 20 years are $22,000; estimated annual costs are $12,500. An alternative project, B, requires an investment of $71,000, has annual receipts for 20 years of $31,000, and has annual costs of $18,000. Assume both projects have a zero salvage value and that MARR is 10.0 %/year.
A) What is the present worth of each project?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Elite Apparel Inc. is considering two investment projects. The estimated net cash flows from each project...
Elite Apparel Inc. is considering two investment projects. The
estimated net cash flows from each project are as follows:
Year
Plant Expansion
Retail Store Expansion
1
$142,000
$119,000
2
117,000
140,000
3
101,000
96,000
4
91,000
67,000
5
28,000
57,000
Total
$479,000
$479,000
Each project requires an investment of $259,000. A rate of 20%
has been selected for the net present value analysis.
Present Value of $1 at Compound
Interest
Year
6%
10%
12%
15%
20%
1
0.943
0.909
0.893...
Elite Apparel Inc. is considering two investment projects. The estimated net cash flows from each project...
Elite Apparel Inc. is considering two investment projects. The
estimated net cash flows from each project are as follows:
Year
Plant Expansion
Retail Store Expansion
1
$105,000
$88,000
2
86,000
103,000
3
74,000
71,000
4
67,000
49,000
5
21,000
42,000
Total
$353,000
$353,000
Each project requires an investment of $191,000. A rate of 6%
has been selected for the net present value analysis.
Present Value of $1 at Compound
Interest
Year
6%
10%
12%
15%
20%
1
0.943
0.909
0.893...
Elite Apparel Inc. is considering two investment projects. The estimated net cash flows from each project...
Elite Apparel Inc. is
considering two investment projects. The estimated net cash flows
from each project are as follows:
Year
Plant Expansion
Retail Store Expansion
1
$129,000
$108,000
2
106,000
127,000
3
91,000
87,000
4
83,000
61,000
5
26,000
52,000
Total
$435,000
$435,000
Each project requires
an investment of $235,000. A rate of 10% has been selected for the
net present value analysis.
Present Value of $1 at Compound
Interest
Year
6%
10%
12%
15%
20%
1
0.943
0.909
0.893...
Elite Apparel Inc. is considering two investment projects. The estimated net cash flows from each project...
Elite Apparel Inc. is considering two investment projects. The
estimated net cash flows from each project are as follows:
Year
Plant Expansion
Retail Store Expansion
1
$102,000
$85,000
2
83,000
100,000
3
72,000
68,000
4
65,000
48,000
5
20,000
41,000
Total
$342,000
$342,000
Each project requires an investment of $185,000. A rate of 10%
has been selected for the net present value analysis.
Present Value of $1 at Compound
Interest
Year
6%
10%
12%
15%
20%
1
0.943
0.909
0.893...
The management of Quest Media Inc. is considering two capital investment projects. The estimated net cash...
The management of Quest Media Inc. is considering two capital
investment projects. The estimated net cash flows from each project
are as follows:
Year
Radio Station
TV Station
1
$170,000
$310,000
2
170,000
310,000
3
170,000
310,000
4
170,000
310,000
Present Value of an Annuity of $1 at
Compound Interest
Year
6%
10%
12%
15%
20%
1
0.943
0.909
0.893
0.870
0.833
2
1.833
1.736
1.690
1.626
1.528
3
2.673
2.487
2.402
2.283
2.106
4
3.465
3.170
3.037
2.855
2.589...
The management of Quest Media Inc. is considering two capital investment projects. The estimated net cash...
The management of Quest Media Inc. is considering two capital
investment projects. The estimated net cash flows from each project
are as follows:
Year
Radio Station
TV Station
1
$220,000
$460,000
2
220,000
460,000
3
220,000
460,000
4
220,000
460,000
Present Value of an Annuity of $1 at
Compound Interest
Year
6%
10%
12%
15%
20%
1
0.943
0.909
0.893
0.870
0.833
2
1.833
1.736
1.690
1.626
1.528
3
2.673
2.487
2.402
2.283
2.106
4
3.465
3.170
3.037
2.855
2.589...
Dunning, Inc. is trying to decide between two investment projects using NPV. Project A requires an...
Dunning, Inc. is trying to decide between two investment
projects using NPV. Project A requires an initial investment of
$600,000 and has annual cash inflows of $196,000 for the next 5
years. Project B has an initial investment of $400,000 and offers
annual cash inflows of $88,000 over the next 7 years. Dunning, Inc.
uses a 6% discount rate to evaluate investment projects.
a) Calculate the NPV for both projects and determine which
investment Dunning should choose.
Your company is currently considering two investment projects. Each project requires an upfront expenditure of $25...
Your company is currently considering two investment projects.
Each project requires an upfront expenditure of $25 million. You
estimate that the cost of capital is 10% and the investments will
produce the following after tax cash flows:
Year
Project A
Project B
1
$5,000,000
$20,000,000
2
$10,000,000
$10,000,000
3
$15,000,000
$8,000,000
4
$20,000,000
$6,000,000
a) Calculate the payback period for
both projects, then compare to identify which project the firm
should undertake. [Note: you are supposed to show every step...
Stephens, Inc. is considering investing in one of two mutually exclusive 4-year projects. Project A requires...
Stephens, Inc. is considering investing in one of two mutually
exclusive 4-year projects. Project A requires equipment with a cost
of $140,000 and increases net income by $5,000, $10,000, $20,000
and $30,000 in years 1-4, respectively. Project B requires
equipment with a cost of $200,000 and increases cash flow by
$70,000 per year in years 1-4. Both projects have a 4-year life and
the equipment will be depreciated using straight-line
depreciation.
What is the NPV of project A at a...
1. There are two mutually exclusive projects. Project A requires a $600,000 initial investment and is...
1. There are two mutually exclusive projects. Project A requires
a $600,000 initial investment and is expected to provide $120,000
annual net cash inflows for 6 years. Project B requires a $740,000
initial investment and is expected to provide $200,000 annual net
cash inflows for 4 years.
Which project should you accept according to IRR method when
your cost of capital is 10%?
A. Project A
B. Project B
C. Both
D. Neither of these
2. Leveraged IRR:
A. estimates...
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