28:26Mattice Corporation is considering investing $750,000 in a project. The life of the project would be 11 years. The project would requireadditional working capital of $25,000, which would be released for use elsewhere at the end of the project. The annual net cashinflows would be $160,000. The salvage value of the assets used in the project would be $35,000. The company uses a discount rateof 18%. (Ignore income taxes.)Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided.Required:Compute the net present value of the project. (Negative amount should be indicated by a minus sign. Round your intermediatecalculations and final answer to the nearest whole dollar amount.)Net present value

Calculation of Net present value YearCash (Outflows) InflowsPV factor at 18%Present value of Cash…

Answered: 28:26 Mattice Corporation is…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 22E

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Redbird Company is considering a project with an initial investment of $265,000 in new equipment that will yield annual net cash flows of $45,800 each year over its seven-year life. The companys minimum required rate of return is 8%. What is the internal rate of return? Should Redbird accept the project based on IRR?
Wansley Lumber is considering the purchase of a paper company, which would require an initial investment of $300 million. Wansley estimates that the paper company would provide net cash flows of $40 million at the end of each of the next 20 years. The cost of capital for the paper company is 13%. Should Wansley purchase the paper company? Wansley realizes that the cash flows in Years 1 to 20 might be $30 million per year or $50 million per year, with a 50% probability of each outcome. Because of the nature of the purchase contract, Wansley can sell the company 2 years after purchase (at Year 2 in this case) for $280 million if it no longer wants to own it. Given this additional information, does decision-tree analysis indicate that it makes sense to purchase the paper company? Again, assume that all cash flows are discounted at 13%. Wansley can wait for 1 year and find out whether the cash flows will be $30 million per year or $50 million per year before deciding to purchase the company. Because of the nature of the purchase contract, if it waits to purchase, Wansley can no longer sell the company 2 years after purchase. Given this additional information, does decision-tree analysis indicate that it makes sense to purchase the paper company? If so, when? Again, assume that all cash flows are discounted at 13%.
Jasmine Manufacturing is considering a project that will require an initial investment of $52,000 and is expected to generate future cash flows of $10,000 for years 1 through 3, $8,000 for years 4 and 5, and $2,000 for years 6 through 10. What is the payback period for this project?
Markoff Products is considering two competing projects, but only one will be selected. Project A requires an initial investment of $42,000 and is expected to generate future cash flows of $6,000 for each of the next 50 years. Project B requires an initial investment of $210,000 and will generate $30,000 for each of the next 10 years. If Markoff requires a payback of 8 years or less, which project should it select based on payback periods?
12 Coyne Corporation is evaluating a capital investment opportunity. This project would require an initial investment of $31,000 to purchase equipment. The equipment will have a residual value at the end of its life of $1,000 The useful life of the equipment is 4 years. The new project is expected to generate additional net cash inflows of $22,000 per year for each of the four years. Coyne's required rate of return is 12% The net present value of this project is closest to (Cack the icon to view the present value of $1 table) (Click the icon to view the present value of annuity of $1 table) OA. 518,656 OB. $35.814 OC. $36,450 OD. $47.734 Data table Present Value of $1 Periods 3 4 5 6 Data table 10% 0.751 0.683 0.621 0.564 Present Value of Annuity of $1 Periods 3 4 5 6 10% 2.487 3.170 3.791 4.355 D D Print 12% 0712 0.636 0.567 0.507 Print 12% 2.402 3.037 3.605 4.111 Done Done 14% 0.675 0592 0.519 0.456 14% 2.322 2.914 3,433 3.889 111 16% 0.641 0.552 0.476 0.410 16% 2.246 2.798 3274…
24. You are evaluating a project that will cost $534,000, but is expected to produce cash flows of $128,000 per year for 10 years, with the first cash flow in one year. Your cost of capital is 11% and your company's preferred payback period is three years or less. a. What is the payback period of this project? b. Should you take the project if you want to increase the value of the company? a. What is the payback period of this project? The payback period is ____years. b. If you want to increase the value of the company you (will/will not) take the project since the NPV is (negative/positive) **round to two decimal places**
15 UPS is considering the purchase of a electric truck that would cost $150,000 and would last for 5 years. At the end of 5 years, the truck would have a salvage value of $20,000. By reducing labor and other operating costs, the machine would provide annual cost savings of $45,000. The company requires a minimum return of 19% on all investment projects. The net present value of the proposed project is closest to (Ignore income taxes.): PV factor of $1 annuity for 5 years at 19% is 3.058 and PV of $1 over 5 years is 0.419 A. $85,000 B. -$12,390 C. -$4,010 D. $145,990
312 Barker Company calculated the NPV of a project and found it to be $63,900. The project's life was estimated to be 8 years. The required rate of return used for the NPV calculation was 10%. The project was expected to produce annual after-tax cash flows of $135,000. Question 1 - What was the required investment for Barker Company's project? Round to the nearest dollar. If required, round all present value calculations to the nearest dollar. Evee Cardenas is interested in investing in a women's specialty shop. The cost of the investment is $180,000. She estimates that the return from owning her own shop will be $55,000 per year. She estimates that the shop will have a useful life of 6 years. Question 2 - What if the estimated return was $135,000 per year? Calculate the new NPV for Evee Cardenas' investment. Would this affect the decision? What does this tell you about your analysis? Round to the nearest dollar. $fill in the blank 5
20. Horn Corporation is considering investing in a four-year project. Cash inflows from the project are expected to be as follows: Year 1, $2,000; Year 2, $2,200; Year 3, $2,400; Year 4, $2,600. If using a discount rate of 8%, the project has a positive net present value of $500, what was the amount of the original investment? * A. $1,411. B. $2,411. C. $7,054. D.$8,054.
1. Alpha Moose Transporters is considering investing in a one-year project that requires an initial investment of $500,000. To do so, it will have to issue new common stock and will incur a flotation cost of 2.00%. At the end of the year, the project is expected to produce a cash inflow of $595,000. The rate of return that Alpha Moose expects to earn on its project (net of its flotation costs) is ________ (rounded to two decimal places). 2. Sunny Day Manufacturing Company has a current stock price of $22.35 per share, and is expected to pay a per-share dividend of $1.36 at the end of the year. The company’s earnings’ and dividends’ growth rate are expected to grow at the constant rate of 9.40% into the foreseeable future. If Sunny Day expects to incur flotation costs of 5.00% of the value of its newly-raised equity funds, then the flotation-adjusted (net) cost of its new common stock (rounded to two decimal places) should be _______ . 3. Alpha Moose Transporters Co.’s…
1. Primus Corp. is planning to convert an existing warehouse into a new plant that will increase its production capacity by 45 percent. The cost of this project will be $7,125,000. It will result in additional cash flows of $1,875,000 for the next eight years. The company uses a discount rate of 12 percent.  What is the payback period? What is the NPV for the project? What is the IRR for the project?
26. A project has a contribution margin of $6. projected fixed costs of $10,000, a projected variable cost per unit of $12, and a projected present value break-even point of 6,000 units. What is the operating cash flow at this level of output? $2.000 $15.000 $20. 000 $26.000

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