Answered: Nick is considering a capital…

Nick is considering a capital investment that costs $525,000 and will provide the following net cash inflows: Year Net Cash Inflow 1 $298,000 2 $202.000

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 7PA: There are two projects under consideration by the Rainbow factory. Each of the projects will require...

See similar textbooks

Related questions

Q: As assistant to the CFO of Boulder Inc., you must estimate the Year 1 cash flow for a project with…

A: cashflow formula: cashflow = sales- depreciation- operating cost×1-tax+depreciation

Q: Jill's Sandwiches Ltd. is considering a project that has the following cash flow data. What is this…

A: Internal ROR(IRR) is rate at which NPV(Net Present Value) of a project is zero. At IRR, discounted…

Q: An investment with an initial cost of $6,000 produces cash flows of 3,000, −$500, -$2,800, −$100,…

A: Solution- (1)- IRRr of the project given by=-6000+3000/1+r-500/1+r2+2800/1+r3-100/1+r4+6000/1+r5=0

Q: FOlTowing is Informaion on two aiternative Investments belng considered by Jolee Company. The…

A: Project A Total inflows=49000+65000+89295+99400+74000=$376,695

Q: Required: 1. Determine the payback period of the investment. 2. Would the payback period be…

Q: M/s Sons & Sons is considering two projects, A & B, with cash flows as shown below:…

A: Year Cash Flows Present Value Factors @13% Present Value of cash flows ($) PVF @12% Present Value…

Q: YOUR UNDERSFANDING Directions: Evaluate the following projects. Which is the best among them using…

A: Hi! Thank you for the question, As per the honor code, we are allowed to answer three sub-parts at a…

Q: below

A: Calculation of PBP, NPV,IRR of project A Calculation of persent value of project/NPV of project A:…

Q: I'm having issues figuring out the cashflows for a project using the following info so that I can…

A: The internal rate of return is the rate at which the present value of cash inflows is equals to the…

Q: Imagine you are investing $100,000 into a project A. MARR is 15% This investment will bring you the…

A: Investment in Project $100000 Annual Positive Cashflwos = $ 31000 from year 1 to year MARR = 15%

Q: M/s Sons & Sons is considering two projects, A & B, with cash flows as shown below: period Cash…

A: NPV is the net current worth of cash flows that are expected to occur in the future. It is…

Q: The management of Unter Corporation, an architectural design firm, is considering an investment with…

A: 1.Determine the payback period for investment:

Q: Campbell Modems, Inc. (CMI) has several capital investment opportunities. The term, expected annual…

A: In table 1, we will find 'Times present value factor' , 'Present value of cash flow' and 'Net…

Q: CSY Bhd is considering a project that has the following cash flow data. What is the project's…

A: PB Period refers to the time in which the company could cover the amount invested in the project.

Q: Nashville's Kitchen Corp. is considering a proposed project with the following cash flows. If both…

A: MIRR = Future value of cash inflowPresent value of cash outflow1/n-1 Note: Alternatively we can…

Q: Use the information in the table below for the following 5 questions. A capital investment project…

A: NPV is the sum of future cashflows less initial investment

Q: Below is the cash flow of project Alpha. (EOY: end of year) EOY Cash Flow 0 -$200,000 1 $25,000 2…

A: The net worth of the project after the deduction of the current worth of the cash outflows from the…

Q: Imagine you are investing $100,000 into a project A. MARR is 15% This investment will bring you the…

A: Incremental analysis is used to make financial decisions by determining each project or investment…

Q: You are a financial analyst for the Waffle Company. The director of capital budgeting has asked you…

A: The project with positive NPV is selected if projects are independent. NPV is the net present value…

Q: FB Company is considering investing in two construction projects, and he developed the following…

A: Required return = 10%

Q: Use the NPV method to determine whether Smith Products should invest in the following projects:…

A: Net Present Value(NPV) is excess of PV of inflows over PV of outflows related to proposal and…

Q: A company is considering three alternative investment projects with different net cash flows. The…

A: >Present value of net cash flows are the discounted future net cash flows that were converted to…

Q: Tropical Candy Inc are considering two mutually-exclusive projects, A and B. Their cash flows are…

Q: The management of Unter Corporation, an architectural design firm, is considering an investment with…

A: The payback period is the period that investment requires to recoup the initial investment. It means…

Q: RQP Corporation intends to invest RM600,000 in Project Knight. The corporation is considering the…

A: The discounted cash payback period is the time required to recover the initial investment. It is…

Q: Gomez is considering a $195,000 investment with the following net cash flows. Gomez requires a 9%…

A: (a) Year Cash Inflow (a) Present Value of 1 at 9% (b) Present Value of Net Cash Flows (a x b) 1…

Q: If the cost of capital is 18 percent and an investment costs $51,000, should you make this…

A: Cost of capital is 18% Initial cost is $51,000 Cash flow years 1-3 is $8,000 Cash flow Year 4-6 is…

Q: You are a financial analyst for the Waffle Company. The director of capital budgeting has asked you…

A: The MIRR is similar to IRR but assumes that the cash flows are reinvested at the cost of capital.…

Q: Gomez is considering a $200,000 investment with the following net cash flows. Gomez requires a 15%…

A: Calculation of Net Present Value of the Project Year Net Cash Flows Present value of $ 1 at 15%…

Q: Consider the following cash flows for two mutually exclusive capital investment projects. The…

A: PROJECT B Year Cash flows 0 -20000 1 6000 2 6000 3 6000 4 5400 5 5400 6 5400

Q: Here are the details for Kat Co’s proposed project. Calculate its NPV. Assume that the cost of…

A: Cost of capital = 15% Initial cost = $ 5,000,000

Q: The management of Unter Corporation, an architectural design firm, is considering an investment with…

A: Year Investment Cash Inflow Net cash flow Cumulative cash flows 1 61,000 3,000 -58,000 -58000 2…

Q: Beta Corporation is considering investing in one of twomachines – Machine A or Machine B. The…

A: "Since you have posted a question with multiple sub-parts, we will solve first three sub parts for…

Q: You are a financial analyst for the Hittle Company. The director of capital budgeting has asked you…

A: Hello. Since your question has multiple sub-parts, we will solve first three sub-parts for you. If…

Q: Imagine you are investing $100,000 into a project A. MARR is 15% This investment will bring you the…

A: Future worth of investment is the equivalent future value of net present value of project,…

Q: Evaluate and rank each alternative based on: discounted payback period (use a 10% for cost of…

A: Net Present Value: It is the present worth of the future cash flows and the initial cost of the…

Q: FB Company is considering investing in two construction projects, and he developed the following…

A: Formula for Profitability Index = (Net Present value + Initial investment) / Initial investment.…

Q: Use the NPV method to determine whether Root Products should invest in the following projects: •…

A: NPV = Present value of future cash flows -Initial investment Profitability Index = Present Value of…

Q: Suppose that you are working as a capital budgeting analyst in a finance department of a firm and…

A: The IRR is a techniques that helps in measuring the expected future RoR (rate of return) of an…

Q: Tuttle Enterprises is considering a project that has the following cash flow and WACC data. The…

A: The net present value of a project is the present value of all the cash flows of that project…

Q: M/s Sons & Sons is considering two projects, A & B, with cash flows as shown below: period Cash…

Q: Garage, Inc., has identified the following two mutually exclusive projects: Year Cash Flow…

A: Note:We shall answer the first question since the exact one wasn’t specified. Please submit a new…

Q: 21

A: Profitability index is the ratio between the initial investment made and the present value of future…

Q: Alba Company has an investment opportunity to invest their money around BD 50,000 with two choice of…

A: "Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: Dixon Sisters has a project with the after-tax cash flows shown below. The required return (cost of…

A: The budgeting methods like payback period, discounted payback period, NPV, profitability index, IRR,…

Q: Vital Silence, Inc., has a project with the following cash flows: Year Cash Flow 0 –$ 27,800…

A: IRR is the rate at which the Net Present value is ZERO. Net Present Value is the Present Value of…

Q: Financial Manager of Timmy Company is considering two projects (project A and project H), which have…

A: Computation: Payback period: It is the time taken to get back the initial invested amount and the…

Q: An investor has invested $1,000,000 in a real estate project that will give him an IRR (Internal…

A: While evaluating various capital budgeting proposals, the top-level management or the owners of the…

Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Nick is considering a capital investment that costs $525,000 and will provide the following net cash inflows:

Year	Net Cash Inflow
1	$298,000
2	$202.000
3	$104,000

1) Using hurdle rate of 10%, find the NPV of the investment

2) Find IRR of the capital investment.

Definition Definition Transfer of funds into a company by any third party, which may happen due to any operational, investing, and financing activities. The cash inflow includes payments made by customers or investments made by the investors into the company by purchasing its equity.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Step by step

Solved in 3 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Buena Vision Clinic is considering an investment that requires an outlay of 600,000 and promises a net cash inflow one year from now of 810,000. Assume the cost of capital is 10 percent. Required: 1. Break the 810,000 future cash inflow into three components: a. The return of the original investment b. The cost of capital c. The profit earned on the investment 2. Now, compute the present value of the profit earned on the investment. 3. Compute the NPV of the investment. Compare this with the present value of the profit computed in Requirement 2. What does this tell you about the meaning of NPV?
There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $35,000 and is expected to generate the following cash flows: Use the information from the previous exercise to calculate the internal rate of return on both projects and make a recommendation on which one to accept. For further instructions on internal rate of return in Excel, see Appendix C.
There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment or $28.000 and is expected to generate the following cash flows: If the discount rate is 5% compute the NPV of each project and make a recommendation of the project to be chosen.
Consider the cash flows for the following investment projects. Assume that MARR=12%/year. A B C 0 - PhP 1,000 – PhP 1,000 - PhP2,000 1 900 600 900 2 500 500 900 100 500 900 4 50 100 900 Which project should be selected using incremental analysis (AW method)? ANSWERS: AWA = PhP Blank 1 AWB = PhP Blank 2 AWC = PhP Blank 3 AW (B-A) = PhP Blank 4 AW (C-B) = PhP Blank 5 Investment Blank 6 (use capital letter) is better.
You identify an investment project with the following cash flows. If the discount rate is 10%, what is the present value of these cash flows? Y1- $500 Y2- $550 Y3- $800 Y4- $450. Please type answer no write by hend.
Consider an investment project with the cash flows given in the table below. Compute the IRR for this investment. Is the project acceptable at MARR = 10%? The IRR for this project is %. (Round to one decimal place.) n 0 1 2 3 Cash Flow -$35,000 15,000 14,520 13,990
A firm is evaluating a project with the following cash flows. At a required return of 11 percent, what is the project's NPV? What if the required return is 24 percent? Input area: Required Return Required Return Year 0 Year 1 Year 2 Year 3 Output area: es es es es NPV at 11% NPV at 24% Մ $ $ 11% 24% (Use cells A6 to B11 from the given information to complete this question. You must use the built Excel function to answer this question.) (41,000) 20,000 23,000 14,000
You've estimated the following cash flows (in $) for a project: A B 1 Year Cash flow 2 0 -3,000 3 1 900 4 2 1,300 5 3 1,606 The required return is 8.5%. 1. What is the IRR for the project? 2. What is the NPV of the project? 3. What should you do? Check all that apply: Accept the project based on its IRR Accept the project based on its NPV Reject the project based on its IRR Reject the project based on its NPV
Consider the cash flows for the following investment projects. Assume that MARR=12%/year. A B 0 -PhP 1,000 -PhP 1,000 - PhP2,000 1 900 600 900 2 500 500 900 3 100 500 900 4 50 100 900 Which project should be selected using incremental analysis (AW method)? ANSWERS: AWA = PhP Blank 1 AWB = PhP Blank 2 AWc = PhP Blank 3 %3D AW (B-A) = PhP BIlank 4 AW (C-B) = PhP Blank 5 Investment Blank 6 (use capital letter) is better.
Consider the cash flows for the following investment projects: (a) For Project A. find the value of X that makes the equivalent annual receiptsequal the equivalent annual disbursement at i = 13%.(b) Would you accept Project Bat i = 15% based on the AE criterion?
Based on the following, obtain the Incremental Cash Flow and determine the NPV (12% discount) for the project: \begin{tabular}{|l|r|r|r|r|r|r|} \hline & \multicolumn{6}{|c|}{ Year } \\ \hline & & 1 & 2 & 3 & 4 & 5 \\ \hline Investment i Show Transcribed Text $403.93 $280.28 $356.63 $179.41
The cash flows associated with an investment project are as follows: Project Y (200 000) Year 1 100 000 2 100 000 3 120 000 4 110 000 The discount rate is 8 percent. What's the discount payback period of the projects? (compile a spreadsheet) Calculate NPV, PI of a projects Calculate IRR of a projects Should the firm accept the project? a) b) c) d)