Two alternative machines (A and B) have been suggested each costing 4,50,000. CashQuestion. 2. The XYZ Co. Ltd. is considering the purchase of a new machine.Flow After Tax (CFAT) are expected to be as follows :Cash Flow After TaxYearMachine A (7)Machine B (7)140,0001,20,0001,20,0001,60,0001,60,0002,00,00042,40,0001,20,0001,60,00080,000The company has a target of return on capital of 10 percent and on this basisyou are required to compare the profitability of the machines and state which alternativeyou consider financially perferable.23

The net рresent vаlue (NРV) is the differenсe between the рresent vаlue оf саsh inflоws…

Two alternative machines (A and B) have been suggested each costing 4,50,000. C. Flow After Tax (CFAT) are expected to be as follows : Cash Flow After Tax Year Machine A () Machine B () 1 40,000 1,20,000 1,20,000 1,60,000 3 1,60,000 2,00,000 100 0 0

Two alternative machines (A and B) have been suggested each costing 4,50,000. C. Flow After Tax (CFAT) are expected to be as follows : Cash Flow After Tax Year Machine A () Machine B () 1 40,000 1,20,000 1,20,000 1,60,000 3 1,60,000 2,00,000 100 0 0

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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The cash flow after taxes for two machineries A and B are given in the table below.Year wise Cash flow A B1 22000 70002 25000 50003 28000 45004 5000 280005 4500 250006 7000 22000The estimated useful life of the machines is 6 years and the discount rate is 11%. The cost of each machine is Rs60000 1. Discuss the steps of application of the concept of NPV to the given situation. Determine the NPV of Machine A . 2. Determine the NPV of the Machine B. Discuss, which machinery should be acquired and why?
3. Kiwanda limited is considering the purchase of a new machine. Two alternatives machines, A and B, which will cost shs 6m and 7m respectively, are available in the market at a cost of 12%. The cash flows after taxation of each machine are as follows;Year Cash flowMachine A Machine Bshs shs1. 600,000 1,800,0002. 1,800,000 2,400,0003. 2,000,000 3,000,0004. 3,000,000 1,800,0005. 2,400,000 1,600,000 Required:a. Compute the net present value of each machine. b. Assume that each machine represent a project. Compute the Internal rate of return the company expects to earn from each of the two projects. c. Comments on the use of the results obtained in (a) and (b) above in selecting between the two projects.
Doak Corporation is evaluating a project with the following cash flows: Year 0 1 2 Cash Flow -$ 53,000 16,700 21,900 27,300 20,400 -8,600 The company uses an interest rate of 10 percent on all of its projects. Calculate the MIRR of the project using all three methods. Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. Discounting approach Reinvestment approach. Combination approach Sover 17.00 % % %
Duo Corporation is evaluating a project with the following cash flows. Year Cash Flow -$ 16,900 8,000 9,200 8,800 7,600 -5,000 The company uses an interest rate of 8 percent on all of its projects. Calculate the MIRR of the project using all three methods. Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. Discounting approach Reinvestment approach Combination approach % % ྣ| R
Duo Corporation is evaluating a project with the following cash flows: Year Cash Flow 0 -$ 29,300 11,500 12345 14,200 16,100 13,200 -9,700 The company uses a discount rate of 11 percent and a reinvestment rate of 8 percent on all of its projects. a. Calculate the MIRR of the project using the discounting approach. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the MIRR of the project using the reinvestment approach. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. Calculate the MIRR of the project using the combination approach. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Discounting approach MIRR % b. Reinvestment approach MIRR 14.18 % c. Combination approach MIRR 13.68 %
3) Fast Machine, Inc. have a Project with the following cash flows. The company evaluates the Project by applying the IRR rule. If the apropriate discount rate is 9 percent, should the company accept the Project? Year 0 1 2 3 Cash Flows (S) -$16,100 7,800 9,100 5.300 I
Solo Corp. is evaluating a project with the following cash flows: Year Cash Flow -$29,100 11,300 14,000 15,900 13,000 9,500 1 3. The company uses an interest rate of 8 percent on all of its projects. a. Calculate the MIRR of the project using the discounting approach. (Do not round Intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the MIRR of the project using the reinvestment approach. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. Calculate the MIRR of the project using the combination approach. (Do not round Intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Duo Corporation is evaluating a project with the following cash flows: Year Cash Flow -$ 28,900 012345 11,100 13,800 15,700 12,800 -9,300 The company uses an interest rate of 9 percent on all of its projects. a. Calculate the MIRR of the project using the discounting approach. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the MIRR of the project using the reinvestment approach. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. Calculate the MIRR of the project using the combination approach. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Discounting approach MIRR b. Reinvestment approach MIRR c. Combination approach MIRR % % %
Doak Corp. is evaluating a project with the following cash flows: Year 012345 Cash Flow -$16,200 7,300 8,500 8,100 6,900 - 4,300 The company uses an interest rate of 12 percent on all of its projects. Calculate the MIRR of the project using all three methods. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Discounting approach Reinvestment approach Combination approach % % %
Solo Corp, is evaluating a project with the following cash flows: Cash Flow -$28,200 10,400 Year 0 12440 3 5 13,100 15,000 12,100 8,600 The company uses a discount rate of 11 percent and a reinvestment rate of 8 percent on all of its projects. MIRR Calculate the MIRR of the project using the discounting approach. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) %
Dogwood Company is considering a capital investment in machinery: (Click the icon to view the data.) 8. Calculate the payback. 9. Calculate the ARR. Round the percentage to two decimal places. 10. Based on your answers to the above questions, should Dogwood invest in the machinery? 8. Calculate the payback. Amount invested Expected annual net cash inflow Payback 1,500,000 24 500,000 3 years 9. Calculate the ARR. Round the percentage to two decimal places. Average annual operating income Average amount invested ARR Data Table Initial investment $ 1,500,000 Residual value 350,000 Expected annual net cash inflows 500,000 Expected useful life 4 years Required rate of return 15%
S Duo Corporation is evaluating a project with the following cash flows: Year 1 0 2345 Cash Flow -$ 29,500 11,700 14,400 16,300 13,400 -9,900 The company uses an interest rate of 9 percent on all of its projects. Calculate the MIRR of the project using the discounting approach. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) MIRR % Calculate the MIRR of the project using the reinvestment approach. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) MIRR % D Calculate the MIRR of the project using the combination approach. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) MIRR %

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