An engineer who works for Zpac is pitching a project for a new machine to his management. Zpac’s MARR is 12%. To finance this project, Zpac would have to invest $34,000 immediately and then $5000 each year for the next five years starting one year from now. The project is expected to generate revenue of $10000 one year from now, and then the revenue would increase by $2000 each year through year 4. The revenue in year 5 would be $24,000. a. Determine the rate of return for this project by hand NOT EXCEL please
In: Finance
Serenity by Jan is considering expanding its operations. The expansion will require new equipment costing $750,000 that would be depreciation straightlin to zero over a 4 year life. The estimated after-tax proceeds on the sale this equipment is $124,000. The project requires an investment in net working capital of $40,000. The projected annaul operating cash flow is $230,000. Serenity by Jan's tax rate is 34%.
What are the annual cash flows for this project?
Year 0:
Year 1:
Year 2:
Year 3:
Year 4:
In: Finance
| Q) A firm has a WACC of 10.58% and is deciding between two mutually exclusive projects. Project A has an initial investment of $60.79. The additional cash flows for project A are: year 1 = $15.60, year 2 = $36.71, year 3 = $41.74. Project B has an initial investment of $73.28. The cash flows for project B are: year 1 = $59.23, year 2 = $49.61, year 3 = $23.70. Calculate the Following: |
| -Payback Period for Project A: |
| -Payback Period for Project B: |
| -NPV for Project A: |
| -NPV for Project B: |
In: Finance
Given the discount rate and the future cash flow of each project listed in the following table, use the PI to determine which projects the company should accept.
|
Cash Flow |
Project A |
Project B |
|||
|
Year 0 |
−$2,000,000 |
-$2,600,000 |
|||
|
Year 1 |
$200,000 |
$1,300,000 |
|||
|
Year 2 |
$400,000 |
$1,100,000 |
|||
|
Year 3 |
$600,000 |
$900,000 |
|||
|
Year 4 |
$800,000 |
$700,000 |
|||
|
Year 5 |
$1,000,000 |
$500,000 |
|||
|
Discount rate |
8% |
15% |
|||
a) What is the PI of project A?
b) What is the PI of project B?
In: Finance
Profitability index. Given the discount rate and the future cash flow of each project listed in the following table, use the PI to determine which projects the company should accept. Cash Flow Project U Project V Year 0 -$1,800, 000 -$2, 400,000 Year 1 $450,000 $1, 200,000 Year 2 $450,000 $1,000,000 Year 3 $450,000 $800, 000 Year 4 $450, 000 $600,000 Year 5 $450,000 $400,000 Discount rate 7% 12%
In: Finance
Given the discount rate and the future cash flow of each project listed in the following table,
use the PI to determine which projects the company should accept.
What is the PI of project A?
Enter your answer in the answer box and then click Check Answer.
|
Cash Flow |
Project A |
Project B |
||
|
Year 0 |
−$2,000,000 |
−$2,600,000 |
||
|
Year 1 |
$400,000 |
$1,300,000 |
||
|
Year 2 |
$550,000 |
$1,150,000 |
||
|
Year 3 |
$700,000 |
$1,000,000 |
||
|
Year 4 |
$850,000 |
$850,000 |
||
|
Year 5 |
$1,000,000 |
$700,000 |
||
|
Discount rate |
6% |
15% |
||
In: Finance
Given the discount rate and the future cash flow of each project listed in the following table, use the PI to determine which projects the company should accept.
| Cash Flow | Project U | Project V | |
| Year 0 | -$2,000,000 | -$2,300,000 | |
| Year 1 | $500,000 | $1,150,000 | |
| Year 2 | $500,000 | $950,000 | |
| Year 3 | $500,000 | $750,000 | |
| Year 4 | $500,000 | $550,000 | |
| Year 5 | $500,000 | $350,000 | |
| Discount rate | 5% | 15% |
What is the PI of project U?
(Round to two decimal places.)
In: Finance
Consider the following historical information for Sonny’s Body Shop over the past five years.
|
Year 2014 |
Year 2015 |
Year 2016 |
Year 2017 |
Year 2018 |
|
|
Stock price($) |
100 |
120 |
147 |
192 |
180 |
|
EPS |
10 |
12 |
14 |
16 |
20 |
Earnings are expected to grow at 10% for the next four years. Using the company’s historical average PE ratio as a bench mark, (a) what is the target stock price next year? (b) What about four years from now?
In: Finance
The Purple Lion Beverage Company expects the following cash flows from its manufacuring plant in Palau over the next 6 years:
Year 1= $100,000
Year 2= $20000
Year 3= $330,000
Year 4= $450,000
Year 5= $750,000
Year 6= $375,000
The CFO of the company believes that an appropriate annual interest rate on this investment is 4%. What is the present value of this uneven cash flow stream, rounded to the nearest whole dollar?
a) $450,000
b) $2025000
c) $1705489
d) $ 1675000
In: Finance
Russell Corporation sold a parcel of land valued at $517,500. Its basis in the land was $382,950. For the land, Russell received $72,750 in cash in year 0 and a note providing that Russell will receive $265,000 in year 1 and $179,750 in year 2 from the buyer (plus reasonable interest on the note). (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)
What is Russell’s realized gain on the transaction?
What is Russell’s recognized gain in year 0, year 1, and year 2?
In: Accounting