Question
In: Accounting
Using a discount rate of 14 percent, calculate the net present value (NPV) of the proposed investment.
Beacon Company is considering automating its production facility. The initial investment in automation would be $9.40 million, and the equipment has a useful life of 8 years with a residual value of $1,000,000. The company will use straight-line depreciation. Beacon could expect a production increase of 38,000 units per year and a reduction of 20 percent in the labor cost per unit.
| Current (no automation) | Proposed (automation) | ||||||||
| 77,000 units | 115,000 units | ||||||||
| Production and sales volume | Per Unit | Total | Per Unit | Total | |||||
| Sales revenue | $ | 96 | $ ? | $ | 96 | $ ? | |||
| Variable costs | |||||||||
| Direct materials | $ | 18 | $ | 18 | |||||
| Direct labor | 15 | ? | |||||||
| Variable manufacturing overhead | 12 | 12 | |||||||
| Total variable manufacturing costs | 45 | ? | |||||||
| Contribution margin | $ | 51 | ? | $ | 54 | ? | |||
| Fixed manufacturing costs | $ 1,160,000 | $ 2,180,000 | |||||||
| Net operating income | ? | ? | |||||||
Using a discount rate of 14 percent, calculate the net present value (NPV) of the proposed investment. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Negative amount should be indicated by a minus sign. Enter the answer in whole dollars.)
Is there any way you can look the present value annuity chart up? It won't let me send it.
Solutions
ekkarill92 answered 2 years agoRelated Solutions
Considering discount rate of 14%, calculate NPV, Benefit Cost Ratio, and Present Value Ratio for the...
Considering discount rate of 14%, calculate NPV, Benefit Cost
Ratio, and Present Value Ratio for the following investment and
explain if it is a good investment.
C=10,000
C=8,000
C=6,000
I=7,500
I=7,500
...
I=7,500
L=10,000
0
1
2
3
4
...
10
C: Cost, I:Income, L: Salvage value
Calculate the net present value (NPV) for both projects usingthe crossover rate as your discount...
Use the following information to answer the next three questions. Consider the cash flows from two mutually exclusive projects: Cash FlowYearProject AProject B0-$420,000-$420,0001$140,000$400,0002$230,000$110,0003$331,000$140,000The appropriate discount rate is 8.5%.Calculate the net present value (NPV) for both projects using
the crossover rate as your discount rate. Round both NPVs to the
nearest dollar.
Net present value. Independent projects Using a 14% cost of capital, calculate the net present value...
Net present value. Independent projects Using a 14% cost of
capital, calculate the net present value for each of the
independent projects shown in the following table, and indicate
whether each is acceptable.
Project A
Project B
Project C
Project D
Project E
Initial investment
$26,000
$500,000
$170,000
$950,000
$80,000
Year
Cash inflows
1
$4,000
$100,000
$20,000
$230,000
$ 0
2
4,000
120,000
19,000
230,000
0
3
4,000
140,000
18,000
230,000
0
4
4,000
160,000
17,000
230,000
20,000
5
4,000...
Net present value. Independent projects Using a 14% cost of capital, calculate the net present value...
Net present value. Independent projects Using a 14% cost of
capital, calculate the net present value for each of the
independent projects shown in the following table, and indicate
whether each is acceptable.
Project A
Project B
Project C
Project D
Project E
Initial investment
$26,000
$500,000
$170,000
$950,000
$80,000
Year
Cash inflows
1
$4,000
$100,000
$20,000
$230,000
$ 0
2
4,000
120,000
19,000
230,000
0
3
4,000
140,000
18,000
230,000
0
4
4,000
160,000
17,000
230,000
20,000
5
4,000...
Calculate the net present value (NPV) of the investment using your answers from Q2-Q4 and Q6....
Calculate the net present value (NPV) of the investment
using your answers from Q2-Q4 and Q6.
I need to also have the formula in my excel answer so I
will need to be walked through the formula to use with which
numbers to plug in.
Purchase Price
-$449,900.00
Initial Cost
-$11,468.00
Investment in NWC
-$3,220.00
After-Tax SV
Initial Outlay
-$464,588.00
Project Life
10
Tax Rate
Rate for Single Earning $207,350 a year
Initial Outlay from Q2
-$464,588.00
35.00%
Annual Operating...
The relationship between a Net Present Value (NPV) and a discount rate could best be described...
The relationship between a Net Present Value (NPV) and a
discount rate could best be described as?
Direct
Random
Stochastic
Indirect
Indeterminant
(a) Calculate the net present value (NPV) of a project which requires an initial investment of...
(a) Calculate the net present value (NPV) of a project which
requires an initial investment of $243,000 and it is expected to
generate a cash inflow of $58,000 each month for 12 months. Assume
that the salvage value of the project is zero. The target rate of
return is 12 % per annum.
(b) An initial investment of $8,720 thousand (i.e. × 1,000) on
plant and machinery is expected to generate cash inflows of $3,411
thousand, $4,070 thousand, $5,824 thousand...
Calculate the net present value (NPV) for a 1515-year project with an initial investment of $45...
Calculate the net present value
(NPV)
for a
1515-year
project with an initial investment of
$45 comma 00045,000
and a cash inflow of
$7 comma 0007,000
per year. Assume that the firm has an opportunity cost of
1515%.
Comment on the acceptability of the project.
The project's net present value is
$nothing.
(Round to the nearest cent.)
The net present value (NPV) and internal rate of return (IRR) methods of investment analysis are...
The net present value (NPV) and internal rate of return (IRR)
methods of investment analysis are interrelated and are sometimes
used together to make capital budgeting decisions.
Consider the case of Cold Goose Metal Works Inc.:
Last Tuesday, Cold Goose Metal Works Inc. lost a portion of its
planning and financial data when both its main and its backup
servers crashed. The company’s CFO remembers that the internal rate
of return (IRR) of Project Omicron is 13.2%, but he can’t...
The net present value (NPV) and internal rate of return (IRR) methods of investment analysis are...
The net present value (NPV) and internal rate of return (IRR)
methods of investment analysis are interrelated and are sometimes
used together to make capital budgeting decisions.
Consider the case of Blue Hamster Manufacturing Inc.:
Last Tuesday, Blue Hamster Manufacturing Inc. lost a portion of
its planning and financial data when both its main and its backup
servers crashed. The company’s CFO remembers that the internal rate
of return (IRR) of Project Lambda is 11.3%, but he can’t recall how...
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