Upper Division of Lower Company acquired an asset with a cost of $580,000 and a four-year life. The cash flows from the asset, considering the effects of inflation, were scheduled as follows:
| Year | Cash Flow | ||
| 1 | $ | 185,000 | |
| 2 | 265,000 | ||
| 3 | 285,000 | ||
| 4 | 305,000 | ||
The cost of the asset is expected to increase at a rate of 20 percent per year, compounded each year. Performance measures are based on beginning-of-year gross book values for the investment base. Ignore taxes. Required: a. What is the ROI for each year of the asset's life, using a historical cost approach? (Enter your answers as a percentage rounded to 1 decimal place (i.e., 32.1).)
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b. What is the ROI for each year of the asset's life if both the investment base and depreciation are determined by the current cost of the asset at the start of each year? (Enter your answers as a percentage rounded to 1 decimal place (i.e., 32.1).)
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In: Accounting
Temple Corp. is considering a new project whose data are shown below. The equipment that would be used has a 4-year tax life, would be depreciated by the straight-line method over its 4-year life, and would have a zero salvage value. At the end of the project, the equipment would be sold for $8,000 cash. No new working capital would be required. Revenues and other operating costs are expected to be constant over the project’s 4-year life. What is the project’s NPV?
Discount rate 10.0%
investment cost $65,000
Sales revenues, each year $65,500
Operating costs (excl. deprec.), each year $25,000
Tax rate 30.0%
Ans:
Cash flow in Capital investment at Year 0 = $
Cash flow in Capital investment at Year 4 = $
OCF for Year 1 = $
OCF for Year 2 = $
OCF for Year 3 = $
OCF for Year 4 = $
Total CF for Year 0 = $
Total CF for Year 1 = $
Total CF for Year 2 = $
Total CF for Year 3 = $
Total CF for Year 4 = $
NPV for the project = $
In: Finance
Temple Corp. is considering a new project whose data are shown below. The equipment that would be used has a 4-year tax life, would be depreciated by the straight-line method over its 4-year life, and would have a zero salvage value. At the end of the project, the equipment would be sold for $8,000 cash. No new working capital would be required. Revenues and other operating costs are expected to be constant over the project’s 4-year life. What is the project’s NPV?
Discount rate 10.0%
investment cost $65,000
Sales revenues, each year $65,500
Operating costs (excl. deprec.), each year $25,000
Tax rate 30.0%
Ans:
Cash flow in Capital investment at Year 0 = $
Cash flow in Capital investment at Year 4 = $
OCF for Year 1 = $
OCF for Year 2 = $
OCF for Year 3 = $
OCF for Year 4 = $
Total CF for Year 0 = $
Total CF for Year 1 = $
Total CF for Year 2 = $
Total CF for Year 3 = $
Total CF for Year 4 = $
NPV for the project = $
In: Finance
Case Study:
A manufacturing company is evaluating two options for new equipment to introduce a new product to its suite of goods. The details for each option are provided below:
Option 1
Revenues are estimated to be:
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Year 6 | Year 7 |
|---|---|---|---|---|---|---|
| - | 75,000 | 100,000 | 125,000 | 150,000 | 150,000 | 150,000 |
Option 2
Revenues are estimated to be:
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Year 6 | Year 7 |
|---|---|---|---|---|---|---|
| - | 80,000 | 95,000 | 130,000 | 140,000 | 150,000 | 160,000 |
The company’s required rate of return is 8%.
Management has turned to its finance and accounting department to perform analyses and make a recommendation on which option to choose. They have requested that the four main capital budgeting calculations be done: NPV, IRR, Payback Period, and ARR for each option.
For this assignment, compute all required amounts and explain how the computations were performed. Evaluate the results for each option and explain what the results mean. Based on your analysis, recommend which option the company should pursue.
In: Accounting
Write a Python code that will ask a user to input a year and return "Leap Year" if the year is a leap year, or "No Leap Year" if it is not a leap year. The program then asks for another year and performs the same task in the form of a loop, until the user inputs the then integer "-1." At that point, the program will exit the loop.
In: Computer Science
C++ problem 11-2
In this chapter, the class dateType was designed to implement the date in a program, but the member function setDate and the constructor do not check whether the date is valid before storing the date in the member variables. Rewrite the definitions of the function setDate and the constructor so that the values for the month, day, and year are checked before storing the date into the member variables. Add a member function, isLeapYear, to check whether a year is a leap year. Moreover, write a test program to test your class.
Input should be format month day year with each separated by a space.
for dateType.h
//dateType.h
#ifndef date_H
#define date_H
class dateType
{
public:
void setDate(int month, int day, int year);
int getDay() const;
int getMonth() const;
int getYear() const;
void printDate() const;
bool isLeapYear();
dateType(int month = 1, int day = 1, int year = 1900);
private:
int dMonth;
int dDay;
int dYear;
};
#endif
---------------------------------------
For dateTypeImp.cpp
#include"dateType.h"
class dateType{
private:
int month;
int day;
int year;
public:
dateType(){
}
dateType(int month,int day,int year){
int maxNumberOfDays[]={31,28,31,30,31,30,31,31,30,31,30,31};
if(month < 1 || month > 12){
cout<<"Date :"<<month<<"-"<<day<<"-"<<year;
cout<<" Month is not valid"<<endl;
}
if(day >= 1 && day <= maxNumberOfDays[month]){
}
else if(month == 2 && day == 29){
if(isLeapYear() == 1){
}
else{
cout<<"Date :"<<month<<"-"<<day<<"-"<<year;
cout<<" Day is not valid for this month"<<endl;
}
}
else{
cout<<"Date :"<<month<<"-"<<day<<"-"<<year;
cout<<" Day is not valid for this month"<<endl;
}
if(year < 0){
cout<<"Date :"<<month<<"-"<<day<<"-"<<year;
cout<<" year is not valid"<<endl;
}
this->month = month;
this->day = day;
this->year = year;
}
int isLeapYear(){
int year = this->year;
if((year % 400) == 0){
return 1;
}
else if((year % 100) == 0){
return 0;
}
else if((year%4) == 0)
return 1;
// else
return 0;
}
void setDate(int month,int day,int year){
int maxNumberOfDays[]={31,28,31,30,31,30,31,31,30,31,30,31};
if(month < 1 || month > 12){
cout<<"Date :"<<month<<"-"<<day<<"-"<<year;
cout<<" Month is not valid"<<endl;
}
if(day >= 1 && day <= maxNumberOfDays[month]){
}
else if(month == 2 && day == 29){
if(isLeapYear() == 1){
}
else{
cout<<"Date :"<<month<<"-"<<day<<"-"<<year;
cout<<" Day is not valid for this month"<<endl;
}
}
else{
cout<<"Date :"<<month<<"-"<<day<<"-"<<year;
cout<<" Day is not valid for month="<<month<<endl;
}
if(year < 0){
cout<<"Date :"<<month<<"-"<<day<<"-"<<year;
cout<<" year is not valid"<<endl;
}
this->month = month;
this->day = day;
this->year = year;
}
string getDate(){
return (to_string(this->month)+"-"+to_string(this->day)+"-"+to_string(this->year));
}
};
--------------------------------------------------------
for main.cpp
#include"dateTypeImp.cpp"
int main(){
int month;
int day;
int year;
cin>>month>>day>>year;
dateType Date1(month,day,year);
cout<<"Date 1:"<<Date1.getDate();
int isLeap = Date1.isLeapYear();
if(isLeap == 1){
cout<<" this is a Leap Year"<<endl;
}
else{
cout<<" this is not a Leap Year"<<endl;
}
cin>>month>>day>>year;
dateType Date2;
Date2.setDate(month,day,year);
cout<<"Date 2:"<<Date2.getDate();
isLeap = Date2.isLeapYear();
if(isLeap == 1){
cout<<" this is a Leap Year"<<endl;
}
else{
cout<<" this is not a Leap Year"<<endl;
}
cin>>month>>day>>year;
dateType Date3(month,day,year);
cin>>month>>day>>year;
dateType Date4;
Date4.setDate(month,day,year);
cin>>month>>day>>year;
dateType Date5(month,day,year);
return 0;
}
In: Computer Science
A firm is considering an investment project with the following cash flows: Year 0 = -$110,000 (initial costs); Year 1= $40,000; Year 2 =$90,000; and Year 3 = $30,000; and Year 4 = $60,000. The company has a 10% cost of capital. What is the project’s discounted payback?
|
1.67 years |
||
|
1.86 years |
||
|
1.99 years |
||
|
2.08 years |
A firm is considering an investment project with the following cash flows: Year 0 = -$110,000 (initial costs); Year 1= $40,000; Year 2 =$90,000; and Year 3 = $30,000; and Year 4 = $60,000. The company has a 10% cost of capital, calculate the NPV for the project.
|
$58,569 |
||
|
$64,264 |
||
|
$74,264 |
||
|
$77,333 |
A firm is considering an investment project with the following cash flows: Year 0 = -$110,000 (initial costs); Year 1= $40,000; Year 2 =$90,000; and Year 3 = $30,000; and Year 4 = $60,000. The company has a 10% cost of capital, calculate the IRR for the project.
25.9%
29.8%
34.6%
40.7%
In: Finance
In: Finance
You intended to buy new equipment for $2,000,000, you will depreciate it in value using MACRS depreciation for a 5-year property. The equipment will then be leased to a friend for $500,000 per year for 4 years. After 4 years, it will be sold to your friend for $700,000.
5-year MACRS schedule:
year 1 = 20%
year 2 = 32%
year 3 = 19.2%
year 4 = 11.52%
year 5 = 11.52%
year 6 = 5.76%
a) what is the book value of the equipment in year 3
b) what, if any, is the recaptured depreciation in year 4
c) is the tax rate is 40% what are the taxes paid in year 4 for the purchase and lease of the equipment
d) will you buy the equipment if it has a MARR of 12%
In: Economics
You are trying to value an option on DMH (Ducati). The stock price is currently $70. Next year the stock price will either increase or decrease by $10. The following year the stock price will either increase or decrease (from the year 1 value) by $5. One-year U.S. treasuries currently have an annual return of 4%. Assume that at a one-year U.S. treasury bought in year 1 (maturing in year 2) will have a one-year return of 5%. a. What is the value on a two-year European put option with a strike price of $78? b. What is the value of a two-year American put option with a strike price of $78 (assume you can only exercise at year 1 or year 2, not today)?
In: Finance