Answered: what is the present value of the cash…

Business

Finance

what is the present value of the cash flow stream

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 22P

See similar textbooks

Related questions

Q: Your firm has the opportunity to repurpose one of its facilities and use it to invest in a new…

A: The incremental profits/contribution can be computed with the help of the following formula:…

Q: Your company is planning to purchase a new log splitter for its lawn and garden business. The new…

A: working notes: Payback period = $204,000 / 30,000 = 6.8 Years 125,080-70,000 =55,080 Accounting rate…

Q: UNITAR International University has the opportunity to invest RM400,000 in a new project. However,…

A: Payback period determines how long it will take to get the initial investment back. For this we…

Q: Galvanized Products is considering purchasing a new computer system for its enterprise data…

A: Net Present Value(NPV) is excess of present value of cash inflows over initial outlay of proposed…

Q: RKE & Associates is considering the purchase of a building it currently leases for $30,000 per year…

A: NAL (Net advantage to Lease) is benefits that an entity might geberate by leasing an equipment…

Q: proposed to a young, start-up company. The Delta project will cost $150,000 to develop and is…

A: Solution:- Calculation of the payback period for each project as follows:- The following formula…

Q: orbet Fish Packing Company wants to accumulate enough money over the next 10 years to pay for the…

A: Sinking fund relates to creating a fund in which an equal amount is deposited at end of each period…

Q: A firm is considering the installation of an automatic data processing unit to handlesome of its…

A: Given in the question: Interest rate which is worth of the money = 15% Purchase price of the machine…

Q: Blues Bros. Inc. is considering an investment in a computer that is capable of producing various…

A: Annual Depreciation (straight line method) = (Cost of the assets - Residual value) / Expected life…

Q: Galvanized Products is considering the purchase of a new computer system for their enterprise data…

A: Before the investing money in new assets, profitability and return from that asset is computed. This…

Q: The controller has asked you to consider three separate options that your firm has for getting a new…

A: Annual Lease payment for 5 years as follows: Years ALP ALP (Net of Tax) PVF @ 10% PVF ($) 1 15…

Q: A large electronic retailer is considering the purchase of software that will minimize…

A: Net present value (NPV) is a method for assessment of financial profitability of a project. NPV is…

Q: You have just completed a $20,000 feasibility study for a new coffee shop in some retail space you…

A: Free cash flow is referred to the cash the company, which used to generate after considering the…

Q: A new computer system will require an initial outlay of $14,150, but it will increase the firm's…

A: As related to 3rd question you have asked, the Discussion given in the below steps is based on the…

Q: Your company will generate GH¢ 55,000 in annual revenue each year for the next eight years from a…

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

Q: he Yurdone Corporation wants to set up a private cemetery business. According to the CFO, Barry M.…

A: A. The present value can be calculated as follows : Results obtained :

Q: You recently went to work for Allied Components Company, a supplier of auto repair parts used in the…

A: Here, Discount rate = 10% To Find: IRR of each project =? Payback Period =?

Q: A firm considering the installation of an automatic data processing unit to handle some of its…

A: given, purchase price = P20,000 lease: year 1 = P8000 decrease every year = P1000 n= 4 r=15%

Q: Your company is planning to purchase a new log splitter for its lawn and garden business. The new…

A: = Initial InvestmentAnnual cash flows=$312,000$40,000 = 7.8 Years

Q: You have just completed a $25,000 feasibility study for a new coffee shop in some retail space you…

A: Relevant cash flows: The cash flows are considered relevant while making capital budgeting decisions…

Q: Your boss, the chief financial officer (CFO) for Southern Textiles, has just handed you the…

A: The main disadvantages of payback period are: The main disadvantages of the payback period are:The…

Q: A Firm Considering The Installation Of An Automatic Data Processing Unit To Handle Some Of Its…

A: A lease agreement laying out the terms under which one gathering consents to lease property…

Q: You have just completed a $20,000 feasibility study for a new coffee shop in some retail space you…

A: The relevent cashflows are basically the cashflows which are expected to be received or sold in…

Q: You recently went to work for Allied Components Company, a supplier of auto repair parts used in the…

A: Since multiple questions are asked , we will solve 1st question for you as per prescribed…

Q: Shelton Tax Services is considering investing in new software for their corporate tax business. The…

A: Net present value is a method for determining whether to invest in a capital asset. It is used…

Q: Accusoft Systems is offering small business owners a software package that keeps track of many…

A: PAYBACK PERIOD IS THE PEROD DURING WHICH THE FIRM RECOVERS INITIAL INVESTMENT OF THE PROJECT. given,…

Q: Galvanized Products is considering purchasing a new computer system for their enterprise data…

A: 1. Computation of loan amount. Amount of loan = 100000 × 25% = 25000 Loan including interest = 25000…

Q: Your firm has the option of making an investment in new software that will cost $278,367 today and…

A: We need to calculate Net present value(NPV) of software. NPV is the difference between present value…

Q: A project, that consists of just readjusting some parts to adapt them to assemble to electric cars,…

A: Annual savings =200000 which is expected to grow at 1% per year Year Revneue A B=Revenue of PY…

Q: Last year, company Z invested £10m to develop a new software. However, all of its customers have now…

A: The project should be accepted when its present value of future cash flows greater than its…

Q: Two new software projects are proposed to a young, start-up company. The Alpha project will cost…

A: The payback period is one of the capital budgeting techniques. It is defined as the number of years…

Q: A professor in the Computer Science department at United States Institute of Technology has just…

A: Note: It is assumed that the profits will grow at the expected growth rate between years 1 and 5.…

Q: Anta networks want to modernize their networking system. Proposals have been received from two major…

A: Formulas:

Q: Skyline Industries will need $2.2 million in 4.5 years from now to replace some equipment.…

A: The discounted value of future value used to assess money's purchasing power is called the present…

Q: You must now determine whether one or both of the projects should be accepted. Questions: (2)…

A: Answer 1. Computation of the project's present worth and IRR: IRR: It is the rate that makes the…

Q: Rogers Inc.is considering investing $320,000 in hardware and software to develop a…

A: Accounting Rate of Return (ARR) seems to be the yearly % of the average net earnings created by an…

Q: what is the present value of the cash flow stream that the company is offering you?

A: Present value of annuity is the current value of the future sum of cash flows. The present value…

Q: Cryptocurrency Finder is buying the first computer for their new server farm. Suppose the company…

A: Expenditure refers to the form of payment either in cash or credit to purchase regarding the…

Q: You wrote a piece of software that does a better job of allowing computers to network than any other…

A: The current value of the cash flow or stream of cash flow after discounting is termed as the present…

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

You wrote a piece of software that does a better job of allowing computers to network than any other program designed for this purpose. A large networking company wants to incorporate your software into its systems and is offering to pay you $549,000 today, plus $549,000 at the end of each of the following six years, for permission to do this. If the appropriate interest rate is 6 percent, what is the present value of the cash flow stream that the company is offering you? (Round factor values to 4 decimal places, e.g. 1.5215 and final answer to 2 decimal places, e.g. 15.25.)

Present value

Expert Solution

This question has been solved!

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

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 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, finance and related others by exploring similar questions and additional content below.

Similar questions

You wrote a piece of software that does a better job of allowing computers to network than any other program designed for this purpose. A large networking company wants to incorporate your software into its systems and is offering to pay you $453,000 today, plus $453,000 at the end of each of the following six years, for permission to do this. If the appropriate interest rate is 8 percent, what is the present value of the cash flow stream that the company is offering you? (Round factor values to 4 decimal places, e.g. 1.5215 and final answer to 2 decimal places, e.g. 15.25.)
Cryptocurrency Finder is buying the first computer for their new server farm. Suppose the company paid $5,000for this computer, which it expects to last for three years. Describe how the company would account for the $5,000 expenditure under (a) the cash basis and (b) the accrual basis. State in your own words why the accrual basis is more realistic for this situation.
Your company will generate $40,000 in cash flow each yearfor the next nine years from a new information database. The computer system needed to set up the database costs $253,000. If you can borrow the money to buy the computer system at 8% annual interest, what is the PV of the cash flows, and can you afford the new system. Please provide steps to us on a T184 plus calculator
If a copy center is considering the purchase of a new copy machine with an initial investment cost of $150,000 and the center expects an annual net cash flow of $20,000 per year, what is the payback period?
Each of the following scenarios is independent. All cash flows are after-tax cash flows. Required: 1. Patz Corporation is considering the purchase of a computer-aided manufacturing system. The cash benefits will be 800,000 per year. The system costs 4,000,000 and will last eight years. Compute the NPV assuming a discount rate of 10 percent. Should the company buy the new system? 2. Sterling Wetzel has just invested 270,000 in a restaurant specializing in German food. He expects to receive 43,470 per year for the next eight years. His cost of capital is 5.5 percent. Compute the internal rate of return. Did Sterling make a good decision?
Your company is planning to purchase a new log splitter for is lawn and garden business. The new splitter has an initial investment of $180,000. It is expected to generate $25,000 of annual cash flows, provide incremental cash revenues of $150,000, and incur incremental cash expenses of $100,000 annually. What is the payback period and accounting rate of return (ARR)?
A firm considering the installation of an automatic data processing unit to handle some of its accounting operations. Machines for that purpose may be purchased for P20,000, or maybe leased for P8,000 for the first year and P1,000 less every year now and then until the end of the 4th year. If money is worth 15%, is it advisable to rent or buy the machine?
A fin-tech firm is considering devising a new payment system. The initial cost for developing this system will be $20 million today. Once the system development is completed, in one year, the system will be sold to a major bank for $25 million. Assume that both the development of the system and the sale of the project for $25 million are certain. The firm can pay $20 million of investment entirely using its own cash. Or the firm can also raise funds to finance part of the investment by issuing a security that will pay investors $11 million in one year. Suppose the risk-free rate of interest is 10%. What is the NPV of this project if the fin-tech firm invests its own money and does not issue the new security? What is the NPV if the firm issues the new security? Briefly explain your answer by comparing the NPVs
A company is considering investing in a new machine that requires a cash payment of $47,947 today. The machine will generate annual cash flows of $21,000 for the next three years. What is the internal rate of return if the company buys this machine?
Suppose you work for a software company that has developed a new product. The patent on this product will last for seventeen years. You expect that the product will produce cash-flows of $10,000,000 in its 1st year and that this amount will grow at a rate of 4 percent per year for the next seventeen years. Once the patent expires, your competitors will be able to produce equivalents copies of your software and drive any future profits to zero. If the interest rate is 11 percent per year, then what is the present value of producing this software?
Mitchell Investments has offered you the following investment opportunity: $7,000 at the end of each year for the first 7 years, plus $6,000 at the end of each year from years 8 through 14, plus $3,000 at the end of each year from years 15 through 21. Use Table II and Table IV or a financial calculator to answer the questions. Round your answers to the nearest dollar. How much would you be willing to pay for this investment if you required a 8 percent rate of return?$ If the payments were received at the beginning of each year, what would you be willing to pay for this investment?$
You recently bought a mini-supercomputer for $10,000 to allow for tracking and analysis of real-time changes in stock and bond prices. Assume you plan on spending half your time tending to the stock market with this computer and the other half as personal use. Also assume you can depreciate your computer by 20% per year over 5 years (straight line rate). How much tax savings will you have in each of those 5 years, if any? Use a tax rate of 28%. Contributed by D. P. Loucks, Cornell University