Suppose a simple economy produces only two goods, pillows and rugs. In the first year, 50 pillows are produced, and sold at $5 each; 11 rugs are produced, and sold at $50 each. In the second year, 54 pillows are produced, and sold for $6 each; 12 rugs are produced, and sold at $52 each. In the third year, 60 pillows are produced and sell for $7.00 dollars each; 14 rugs are produced and sold for 64 dollars each. Calculate real GDP for each year and the growth rate of real GDP from year 1 to year 2 and from year 2 to year 3. Next, construct a constant weight price index for the three years. Use the first year as the base year for both calculations.

Epsilon company is considering investing in Project X or Project Y. Project X generates the following cash flows: year “zero” = 307 dollars (outflow); year 1 = 252 dollars (inflow); year 2 = 265 dollars (inflow); year 3 = 343 dollars (inflow); year 4 = 182 dollars (inflow). Project Y generates the following cash flows: year “zero” = 230 dollars (outflow); year 1 = 120 dollars (inflow); year 2 = 100 dollars (inflow); year 3 = 200 dollars (inflow); year 4 = 120 dollars (inflow). The MARR is 10%. Compute the External Rate of Return (ERR) of the BEST project

PLEASE INCLUDE FORMULAS AND DETAILED STEPS. NO EXCEL CALCULATIONS PLEASE

Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.32 million. The fixed asset qualifies for 100 percent bonus depreciation in the first year. The project is estimated to generate $1.735 million in annual sales, with costs of $650,000. The project requires an initial investment in net working capital of $250,000, and the fixed asset will have a market value of $180,000 at the end of the project. The tax rate is 21 percent.

a. What is the project’s Year 0 net cash flow? Year 1? Year 2? Year 3?

b. If the required return is 12 percent, what is the project's NPV?

A construction company needs enough money to purchase a new tractor-trailer in 6 years at a cost of $450,000.

If the company sets aside $175,000 in year 2, $125,000 in year 3, and $75,000 in year 4, how much will the company have to set aside in year 5 to have the money needed in year 6?

Assume investments earn 8% per year compounded semi-annually.

What is the value of the individual cash flow at year = 1?

What semi-annual interest rate do you use to solve for the unknown cash flow in year 5?

What is the numerical value for the amount of funding the company have to set aside in year 5 to have the money needed in year 6?

6a- Your firm is evaluating a capital budgeting project. The estimated cash flows appear below. The board of directors wants to know the expected impact on shareholder wealth. Knowing that the estimated impact on shareholder wealth equates to net present value (NPV), you use your handy calculator to compute the value. What is the project's NPV? Assume that the cash flows occur at the end of each year. The discount rate (i.e., required rate of return, hurdle rate) is 15.2%. (Round to nearest penny)

Answer:

6b-  Your firm has limited capital to invest and is therefore interested in comparing projects based on the profitability index (PI), as well as other measures. What is the PI of the project with the estimated cash flows below? The required rate of return is 15.0%. Round to 3 decimals.

Year 0 cash flow = -710,000
Year 1 cash flow = -110,000
Year 2 cash flow = 410,000
Year 3 cash flow = 440,000
Year 4 cash flow = 430,000
Year 5 cash flow = 470,000

Answer:

6c- What is the discount rate at which the following cash flows have a NPV of $0? Answer in %, rounding to 2 decimals.

Year 0 cash flow = -160,000
Year 1 cash flow = 45,000
Year 2 cash flow = 31,000
Year 3 cash flow = 34,000
Year 4 cash flow = 30,000
Year 5 cash flow = 33,000
Year 6 cash flow = 38,000

Answer:

The following data (in millions) were adapted from recent financial statements of CVS Health Corporation (CVS)

1. Compute the accounts receivable turnover for Years 1 and 2. Round to one decimal place.

2. Compute the number of days' sales in receivables for Years 1 and 2. Assume there are 365 days in the year, and round to the nearest day.

3. Compute the inventory turnover for Years 1 and 2. Round to one decimal place.

4. Compute the number of days' sales in inventory for Years 1 and 2. Assume there are 365 days in the year, and round to the nearest day.

5. Compute the return on sales for Years 1 and 2. Round to one decimal place.

6. All of the following are true regarding the accounts receivable and inventory analyses for CVS except:

The management of receivables and inventories remained approximately the same in Years 1 and 2.

The days' sales in inventory has decreased from year 1 to year 2, which is an unfavorable change.

The days' sales in receivables increased from year 1 to year 2, which is an unfavorable change.

The inventory turnover increased from year 1 to year 2 which caused the days' sales in inventory to decrease.

Choose the correct answer:

Calculate the ATCF of the following investment (no ROR or NPV calculation is needed), considering a capital lease with following conditions:

Annual lease payments of $250,000 from year 1 to year 4

Effective annual interest rate of 6% for the borrowed money

Asset would yield the annual revenue of $350,000 for four years (from year 1 to year 4)

Asset would have operating cost of $50,000 for year 1 to 4

The asset can be depreciated based on MACRS 3-year life depreciation with the half year convention (table below) over four years (from year 1 to year 4)

Salvage value of $400,000 at the end of the 4th year

Income tax 40%

Please calculate and include the lease principleand interest calculations.

2) A firm is undertaking a project with the following details provided.

• The project costs $2 million and has a five-year service life.
• It generates revenues of $600,000 annually.
• The project is classified under a 7-year property under the MACRS rule.
• At the end of the fifth year, any assets held for the project will be sold. The expected salvage value will be 15% of the initial $2M project cost.
• The firm will finance 30% of the project money from an outside source with an annual interest rate of 12%. The firm is required to repay the loan with five equal annual payments.
• The firm’s tax rate is 21%
• MARR is 17%.
• Given the information,
  • Determine the end of year cash flows for years 0 through 5
  • Compute the Net Present Worth for this 5-year project

Year 0_________________

Year 1_________________

Year 2_________________

Year 3_________________

Year 4_________________

Year 5_________________

NPW____________________

The table shows the investment projected net cash inflows of the two projects over the coming 5 years.

Initial investment of $500000 and discount rate at 18% per year under each project.

Discount factors for Year 1 to Year 5 as follows:

1. Find the payback period in years for each project. (please show step clearly)
2. Finish an evaluation for project A and project B using net present value at the above discount rate for year 1 to year 5.
3. Which one of projects is the best investment for the business? Explain your reason clearly.