Question
In: Statistics and Probability
Prime Financial Inc. is evaluating two capital investment proposals for a drive-up ATM kiosk, each requiring...
Prime Financial Inc. is evaluating two capital investment proposals for a drive-up ATM kiosk, each requiring an investment of $100,000 and each with an eight-year life and expected total net cash flows of $200,000. Location 1 is expected to provide equal annual net cash flows of $25,000, and Location 2 is expected to have the following unequal annual net cash flows:
| Year 1 | $45,000 | Year 5 | $24,000 | |
| Year 2 | 34,000 | Year 6 | 18,000 | |
| Year 3 | 21,000 | Year 7 | 14,000 | |
| Year 4 | 32,000 | Year 8 | 12,000 |
Determine the cash payback period for both location proposals.
| Location 1 1-8? | years |
| Location 2 1-8? | years |
Solutions
orchestra answered 1 year agoRelated Solutions
The following data are accumulated by Eco Labs, Inc. in evaluating two competing capital investment proposals:...
The following data are accumulated by Eco Labs, Inc. in
evaluating two competing capital investment proposals:
Testing Equipment
Vehicle
Amount of investment
$56,000
$40,000
Useful life
4 years
5 years
Estimated residual value
0
0
Estimated total income over the useful life
$8,400
$10,500
Determine the expected average rate of return for each proposal.
If required, round your answers to one decimal place.
Testing Equipment
%
Vehicle
%
Blaine Company is considering four investment proposals, each requiring the same amount of initial cash investment....
Blaine Company is considering four investment proposals, each
requiring the same amount of initial cash investment. The excess
present value index for each proposal is listed below. Using the
index as a selection criterion, identify the index of the most
attractive proposal.
a. 90
b. 100
c. 110
d. 115
The primary limitation of the cash payback method is that it
a. Uses before-tax cash flows.
b. Identifies the length of time it will take to recover the
investment outlay...
14.2 Better Health, Inc is a evaluating two investment projects, each of which requires an up-front...
14.2 Better Health, Inc is a evaluating two investment projects,
each of which requires an up-front expenditure of $1.5 million. The
projects are expected to produce the following net cash inflows:
Project A Project B Year $500,000 $2,000,00 1 1,000,000 1,000,000 2
2,000,000 600,000 3 ($1,500,000) a. What is each project's IRR? b.
What is each project's NPV if the cost of capital is 10 percent? 5
percent? 15 percent?
Better Health, Inc. is evaluating two investment projects, each of which requires an up-front expenditure of...
Better Health, Inc. is evaluating two investment projects, each
of which requires an up-front expenditure of $2.5 million. The
projects are expected to produce the following net cash
inflows:
Year
Project A
Project B
0
-$2,500,000
-$2,500,000
1
$500,000
$1,200,000
2
$1,100,000
$1,300,000
3
$1,400,000
$800,000
a. What is each project's IRR?
b. What is each project's NPV if the cost of capital is 10
percent?
c. Which one would you buy?
Please include the input used in a financial...
Better Health, Inc. is evaluating two investment projects, each of which requires an up-front expenditure of...
Better Health, Inc. is evaluating two investment projects, each
of which requires an up-front expenditure of $2.5 million. The
projects are expected to produce the following net cash inflows:
Year Project A Project B 1 750,000 2,000,000 2 1,250,000 1,250,000
3 2,000,000 750,000 a. What is each project's IRR? Project A =
IRR(C11: b. What is each project's NPV if the cost of capital is
10%?
Attention Chegg Tutor: There is a similar answer online
in Chegg, but the excel...
Better Health Inc. is evaluating two capital investments, each of which requires an up-front (year 0)...
Better Health Inc. is evaluating two capital investments, each
of which requires an up-front (year 0) expenditure of $1.5 million.
The projects are expected to produce the following net cash
inflows:
a. What is each project's IRR?
b. What is each project's NPV if the opportunity cost of capital
is 10 percent? 5 percent? and 15 percent?
Year
Project A
Project B
1
$500,000
$,2000,000
2
1,000,000
1,000,000
3
2,000,000
600,000
A hospitality firm has a choice between two mutually exclusive capital investment alternatives that each requiring...
A hospitality firm has a choice between two mutually exclusive
capital investment alternatives that each requiring an initial
outlay of $30,000. Project A promises cash flows of $4,000 for the
first year and second year; and $42,000 for the third year. Project
B offers cash flows of $31,000 for the first year; $18,000 for the
second year; and $4,000 for the third year. The minimum required
rate of return is 9.00%. Calculate the NPV and IRR of each
investment. Based...
Continental Railroad Company is evaluating three capital investment proposals by using the net present value method....
Continental Railroad Company is evaluating three capital
investment proposals by using the net present value method.
Relevant data related to the proposals are summarized as
follows:
Maintenance
Equipment
Ramp
Facilities
Computer
Network
Amount to be invested
$731,220
$435,949
$202,282
Annual net cash flows:
Year 1
300,000
207,000
123,000
Year 2
279,000
186,000
85,000
Year 3
255,000
166,000
62,000
Present Value of $1 at Compound
Interest
Year
6%
10%
12%
15%
20%
1
0.943
0.909
0.893
0.870
0.833
2
0.890
0.826...
Continental Railroad Company is evaluating three capital investment proposals by using the net present value method....
Continental Railroad Company is evaluating three capital
investment proposals by using the net present value method.
Relevant data related to the proposals are summarized as
follows:
Maintenance
Equipment
Ramp
Facilities
Computer
Network
Amount to be invested
$939,782
$621,264
$283,902
Annual net cash flows:
Year 1
428,000
308,000
180,000
Year 2
398,000
277,000
124,000
Year 3
364,000
246,000
90,000
Present Value of $1 at Compound
Interest
Year
6%
10%
12%
15%
20%
1
0.943
0.909
0.893
0.870
0.833
2
0.890
0.826...
Carr Company is considering two capital investment proposals. Estimates regarding each project are provided below: Project...
Carr Company is considering two capital investment proposals.
Estimates regarding each project are provided below:
Project Soup Project
Nuts
Initial
investment
$400,000
$600,000
Annual net income 30,000 46,000
Net annual cash
inflow
110,000
146,000
Estimated useful life 5
years
6 years
Salvage value -0- -0-
The company requires a 10% rate of return on all new
investments.
Present Value of an Annuity of 1
Periods
9% 10% 11% 12%
5
3.890
3.791
3.696 3.605
6
4.486
4.355
4.231 4.111
The...
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