Use a financial calculator or an Excel spreadsheet to estimate the IRR for each of the following investments:
The Yield for Investment A:
The Yield for Investment B:
| A | B | |
| Initial Investment | 6,400 | 9,535 |
| Year 1 | $1,822.65 | $2,200 |
| Year 2 | $1,822.65 | $2,500 |
| Year 3 | $1,822.65 | $3,100 |
| Year 4 | $1,822.65 | $3,600 |
| Year 5 | $1,822.65 | $4,100 |
In: Finance
A project is projected to cost $2,000,000 to undertake. It will generate positive cash inflows as follows: Year 1 - $400,000; Year 2 – 500,000; Year 3 - $650,000; Year 4 – 750,000; Year 5 – 800,000. What is the project’s Profitability Index?
Select one:
a. 1.22
b. 1.20
c. 1.16
d. 1.14
e. 1.12
In: Accounting
Which one would you rather have:
a) The future value of $5,000 per year for 10 years to be given to you in year 10 (that is 10 years from now) when the interest rate is 6%?
b) The present value of $12,500 per year from year 11 to year 35 when the interest rate is 6%?
In: Finance
Listed below are several transactions that took place during the
second and third years of operations for RPG Company.
| Year 2 | Year 3 | |||||
| Amounts billed to customers for services rendered | $ | 290,000 | $ | 390,000 | ||
| Cash collected from credit customers | 200,000 | 340,000 | ||||
| Cash disbursements: | ||||||
| Payment of rent | 74,000 | 0 | ||||
| Salaries paid to employees for services rendered during the year | 134,000 | 154,000 | ||||
| Travel and entertainment | 24,000 | 34,000 | ||||
| Advertising | 12,000 | 29,000 | ||||
In addition, you learn that the company incurred advertising costs
of $19,000 in year 2, owed the advertising agency $4,400 at the end
of year 1, and there were no liabilities at the end of year 3.
Also, there were no anticipated bad debts on receivables, and the
rent payment was for a two-year period, year 2 and year 3.
Required:
1. Calculate accrual net income for both
years.
2. Determine the amount due the advertising agency
that would be shown as a liability on RPG’s balance sheet at the
end of year 2.
In: Accounting
SBS Company purchased a new machine on January 1, at a cost of $420,000. The machine has an expected useful life of four years and an expected salvage value of $40,000. The company expects to use the machine for 1,300 hours in the first year, 1,900 hours in the second year, and 900 hours in the third and fourth year, respectively.
(a) Calculate Depreciation Expenses for each year using Straight-Line Method
|
Year |
Depreciation Expenses |
|
1 |
$ |
|
2 |
$ |
|
3 |
$ |
|
4 |
$ |
(b) Calculate Depreciation Expenses for each year using Double-Declining-Balance Method
A working table is provided on the next page.
|
Year |
Depreciation Expenses |
|
1 |
$ |
|
2 |
$ |
|
3 |
$ |
|
4 |
$ |
(c) Calculate Depreciation Expenses for each year using Units of Production Method
|
Year |
Depreciation Expenses |
|
1 |
$ |
|
2 |
$ |
|
3 |
$ |
|
4 |
$ |
Working Table for Double-Declining-Balance Method
|
Year |
Beginning NBV |
Rate |
Depreciation Expenses |
Accumulated Depreciation |
Ending NBV |
|
1 |
|||||
|
2 |
|||||
|
3 |
|||||
|
4 |
In: Accounting
Upper Division of Lower Company acquired an asset with a cost of $550,000 and a four-year life. The cash flows from the asset, considering the effects of inflation, were scheduled as follows:
The cost of the asset is expected to increase at a rate of 10 percent per year, compounded each year. Performance measures are based on beginning-of-year gross book values for the investment base. Ignore taxes.
Year Cash Flow
1 $200,000
2 $245,000
3 $280,000
4 $305,000
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).)
ROI
Year
1 _____ %
2 _____ %
3 _____ %
4 _____ %
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).)
ROI
Year
1 _____ %
2 _____ %
3 _____ %
4 _____ %
In: Accounting
Listed below are several transactions that took place during the
second and third years of operations for the RPG Company.
| Year 2 | Year 3 | |||||
| Amounts billed to customers for services rendered | $ | 270,000 | $ | 370,000 | ||
| Cash collected from credit customers | 180,000 | 320,000 | ||||
| Cash disbursements: | ||||||
| Payment of rent | 72,000 | 0 | ||||
| Salaries paid to employees for services rendered during the year | 132,000 | 152,000 | ||||
| Utilities | 22,000 | 32,000 | ||||
| Advertising | 11,000 | 27,000 | ||||
In addition, you learn that the company incurred advertising costs
of $17,000 in year 2, owed the advertising agency $4,200 at the end
of year 1, and there were no liabilities at the end of year 3.
Also, there were no anticipated bad debts on receivables, and the
rent payment was for a two-year period, year 2 and year 3.
Required:
1. Calculate accrual net income for both
years.
2. Determine the amount due the advertising agency
that would be shown as a liability on RPG’s balance sheet at the
end of year 2.
In: Accounting
|
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.67 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life. The project is estimated to generate $2,070,000 in annual sales, with costs of $765,000. The project requires an initial investment in net working capital of $290,000, and the fixed asset will have a market value of $265,000 at the end of the project. If the tax rate is 34 percent, what is the project’s Year 0 net cash flow? Year 1? Year 2? Year 3? (Do not round intermediate calculations. Enter your answers in dollars, not millions of dollars, e.g. 1,234,567. Negative amounts should be indicated by a minus sign.) |
| Years | Cash Flow |
| Year 0 | $ |
| Year 1 | $ |
| Year 2 | $ |
| Year 3 | $ |
|
If the required return is 13 percent, what is the project's NPV? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.) |
| NPV |
$ |
In: Finance
BBB Manufacturing Company has considered investing in two independent projects, which both will result in a cost of $1,200,000. Each project is expected to last 5 years. Project A ‘s annual cash flows are listed as follows: Year 1: $325,000; Year 2: $440,000; Year 3: $270,000 Year 4: $550,000; and Year 5: $265,000. Project B annual cash flows are listed as follows: Year 1: $880,000; Year 2: $500,000; Year 3: $300,000; Year 4: $200,000; and Year 5: $1,000. BBB’s cost of capital is 9%. In excel:
**Please please show formulas/explain how you got the answers in the cells. I'm very confused on this and appreciate the help. Thank you!
In: Finance
|
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.79 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $2,110,000 in annual sales, with costs of $805,000. The project requires an initial investment in net working capital of $330,000, and the fixed asset will have a market value of $225,000 at the end of the project. If the tax rate is 35 percent, what is the project’s Year 0 net cash flow? Year 1? Year 2? Year 3? (Do not round intermediate calculations. Enter your answers in dollars, not millions of dollars, e.g. 1,234,567. Negative amounts should be indicated by a minus sign.) |
| Years | Cash Flow |
| Year 0 | $ |
| Year 1 | $ |
| Year 2 | $ |
| Year 3 | $ |
|
If the required return is 12 percent, what is the project's NPV? (steps for how to calc NPV pls?) |
In: Finance