Masters Golf Products, Inc., spent 3 years and $1,000,000 to develop its new line of club heads to replace a line that is becoming obsolete. To begin manufacturing them, the company will have to invest $1,800,000 in new equipment. The new clubs are expected to generate an increase in operating cash inflows of $750,000 per year for the next 10 years. The
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- Garnette Corp is considering the purchase of a new machine that will cost $342,000 and provide the following cash flows over the next five years: $99,000, $88,000, $92,000. $87,000, and $72,000. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return in Excel. see Appendix C.Consolidated Aluminum is considering the purchase of a new machine that will cost $308,000 and provide the following cash flows over the next five years: $88,000, 92,000, $91,000, $72,000, and $71,000. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return in Excel, see Appendix C.Manzer Enterprises is considering two independent investments: A new automated materials handling system that costs 900,000 and will produce net cash inflows of 300,000 at the end of each year for the next four years. A computer-aided manufacturing system that costs 775,000 and will produce labor savings of 400,000 and 500,000 at the end of the first year and second year, respectively. Manzer has a cost of capital of 8 percent. Required: 1. Calculate the IRR for the first investment and determine if it is acceptable or not. 2. Calculate the IRR of the second investment and comment on its acceptability. Use 12 percent as the first guess. 3. What if the cash flows for the first investment are 250,000 instead of 300,000?
- Gallant Sports s considering the purchase of a new rock-climbing facility. The company estimates that the construction will require an initial outlay of $350,000. Other cash flows are estimated as follows: Assuming the company limits its analysis to four years due to economic uncertainties, determine the net present value of the rock-climbing facility. Should the company develop the facility if the required rate of return is 6%?BAS Companies would like to construct and operate a new gaming facility. In addition to the capital expenditures on the facility, management estimates that the project will require an investment today of $175,000 in net working capital. The firm will recover the investment in net working capital fifteen years from today, when management anticipates closing the facility. The discount rate for this type of cash flow is 8% per year. Calculate the present value of the cost of working capital for the ice skating rink.Masters Golf Products, Inc., spent 3 years and $1,010,000 to develop its new line of club heads to replace a line that is becoming obsolete. To begin manufacturing them, the company will have to invest $1,760,000 in new equipment. The new clubs are expected to generate an increase in operating cash inflows of $760,000 per year for the next 15 years. The company has determined that the existing line could be sold to a competitor for $243,000. a. How should the $1,010,000 in development costs be classified? b. How should the $243,000 sale price for the existing line be classified? c. What are all the relevant cash flows for years 0 thru 15? (Note: Assume that all of these numbers are net of taxes.)
- Prescott Corporation is considering an investment in new equipment costing $912,000. The equipment will be depreciated on a straight-line basis over a ten-year life and is expected to have a residual value of $92,000. The equipment is expected to generate net cash inflows of $140,000 for each of the first five years and $100,000 for each of the last five years. What is the accounting rate of return associated with the equipment investment? (Round your answer to two decimal places.) OA. 8.59% OB. 8.66% OC. 8.99% OD. 7.57% CBob Jensen Inc. purchased a $580,000 machine to manufacture specialty taps for electrical equipment. Jensen expects to sell all it can manufacture in the next 10 years. The machine is expected to have a 10-year useful life with no salvage value. Jensen uses straight-line depreciation. Jensen uses a 10% discount rate in evaluating capital investments, the investment is subject to taxes, and the projected pretax operating cash inflows are as follows: Year Pretax Cash Inflow 1 $ 58,000 2 71,000 3 107,000 4 178,000 5 214,000 6 268,000 7 241,000 8 214,000 9 107,000 10 71,000 Jensen has been paying 25% for combined federal, state, and local income taxes, a rate that is not expected to change during the period of this investment. The firm uses straight-line depreciation. Assume, for simplicity, that MACRS depreciation rules do not apply. Required: Using Excel, compute the following for…Bob Jensen Inc. purchased a $580,000 machine to manufacture specialty taps for electrical equipment. Jensen expects to sell all it can manufacture in the next 10 years. The machine is expected to have a 10-year useful life with no salvage value. Jensen uses straight-line depreciation. Jensen uses a 10% discount rate in evaluating capital investments, the investment is subject to taxes, and the projected pretax operating cash inflows are as follows: Year Pretax Cash Inflow 1 $ 58,000 2 71,000 3 107,000 4 178,000 5 214,000 6 268,000 7 241,000 8 214,000 9 107,000 10 71,000 Jensen has been paying 25% for combined federal, state, and local income taxes, a rate that is not expected to change during the period of this investment. The firm uses straight-line depreciation. Assume, for simplicity, that MACRS depreciation rules do not apply. Required: Using Excel, compute the following…
- Bob Jensen Inc. purchased a $580,000 machine to manufacture specialty taps for electrical equipment. Jensen expects to sell all it can manufacture in the next 10 years. The machine is expected to have a 10-year useful life with no salvage value. Jensen uses straight-line depreciation. Jensen uses a 10% discount rate in evaluating capital investments, the investment is subject to taxes, and the projected pretax operating cash inflows are as follows: Year Pretax Cash Inflow 1 $ 58,000 2 71,000 3 107,000 4 178,000 5 214,000 6 268,000 7 241,000 8 214,000 9 107,000 10 71,000 Jensen has been paying 25% for combined federal, state, and local income taxes, a rate that is not expected to change during the period of this investment. The firm uses straight-line depreciation. Assume, for simplicity, that MACRS depreciation rules do not apply. Required: Using Excel, compute the following for the proposed…Torbet Fish Packing Company wants to accumulate enough money over the next 10 years to pay for the expected replacement of its digitalized, automated scaling machine. The new machine is expected to cost $200,000 in 10 years. Torbet currently has $10,000 that it plans to invest over the next 10 years to help pay for the new machine. Torbet wants to put away an equal, end-of-year amount into a sinking fund investment account at the end of each of the next 10 years. Earnings on all of the investments are expected to be in 7 percent for the first five years and 9 percent thereafter. What equal, end-of-the amount must Torbet save each year over the next 10 years to meet these needs?Gallant Sports is considering the purchase of a new rock-climbing facility. The company estimates that the construction will require an initial outlay of $352,000. Other cash flows are estimated as follows: Year 1 $(60,000) Year 2 $141,000 Year 3 $210,000 Year 4 $130,000 (Click here to see present value and future value tables) A. Assuming the company limits its analysis to four years due to economic uncertainties, determine the net present value of the rock-climbing facility if the required rate of return is 8%. $ 24,412. x B. Should the company develop the facility if the required rate of return is 8%? The rock-climbing facility should not v be developed. Feedback ▼ Check My Work Discount the cash flows using the appropriate table. Add together the cash flows after the factor has been applied. What does the final result indicate?