A company is planning to undertake an investment project. The following data have been calculated for two alternatives, A and B:A BInitial Investment outlay ($) 200,000 275,000 Freight charges 20,000 30,000 Set up charges 5,000 7,000 Economic Life (years) 10 10 Liquidation Value at end of economic life($) 12,000 17,000 Other fixed costs ($/yr) 4,000 20,000 Production and sales volume (units/year) 9,000 12,000 Sales Price ($/unit) 15 15 Variable costs ($/unit) 2.45 2.00 Rate of Interest (%/year) 6% 6% 1. Evaluate the projects using the Net Present Value.
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A company is planning to undertake an investment project. The following data have been calculated for
two alternatives, A and B:
A B
Initial Investment outlay ($)
200,000
275,000
Freight charges
20,000
30,000
Set up charges
5,000
7,000
Economic Life (years)
10
10
Liquidation Value at end of economic life($)
12,000
17,000
Other fixed costs ($/yr)
4,000
20,000
Production and sales volume (units/year)
9,000
12,000
Sales Price ($/unit)
15
15
Variable costs ($/unit)
2.45
2.00
Rate of Interest (%/year) 6% 6%
1. Evaluate the projects using the
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- A company is planning to undertake an investment project. The following data have been calculated for two alternatives, A and B:A BInitial Investment outlay ($) 200,000 275,000 Freight charges 20,000 30,000 Set up charges 5,000 7,000 Economic Life (years) 10 10 Liquidation Value at end of economic life($) 12,000 17,000 Other fixed costs ($/yr) 4,000 20,000 Production and sales volume (units/year) 9,000 12,000 Sales Price ($/unit) 15 15 Variable costs ($/unit) 2.45 2.00 Rate of Interest (%/year) 6% 6%1. Ascertain the preferred project using:a. The profit comparison method. b. The average rate of return method. c. The static payback method 2. Re-evaluate the projects using the Net Present Value. Are the results of the Project selection process the same? If different, what reasons can you offer?A company is planning to undertake an investment project. The following data have been calculated for two alternatives, A and B: A B Initial Investment outlay ($) 200,000 275,000 Freight charges 20,000 30,000 Set up charges 5,000 7,000 Economic Life (years) 10 10 Liquidation Value at end of economic life($) 12,000 17,000 Other fixed costs ($/yr) 4,000 20,000 Production and sales volume (units/year) 9,000 12,000 Sales Price ($/unit) 15 15 Variable costs ($/unit) 2.45 2.00 Rate of Interest (%/year) 6% 6% 1. Ascertain the preferred project using: a. The profit comparison method. b. The average rate of return method. C. The static payback methodA company is planning to undertake an investment project. The following data have been calculated for two alternatives, A and B: A В Initial Investment outlay ($) 200,000 275,000 Freight charges 20,000 30,000 Set up charges 5,000 7,000 Economic Life (years) 10 10 Liquidation Value at end of economic life($) 12,000 17,000 Other fixed costs ($/yr) 4,000 20,000 Production and sales volume (units/year) 9,000 12,000 Sales Price ($/unit) 15 15 Variable costs ($/unit) 2.45 2.00 Rate of Interest (%/year) 6% 6% 1. Ascertain the preferred project using: a. The profit comparison method. . b. The average rate of return method. The static payback method C. Are the results of the Project selection process 2. Re-evaluate the projects using the Net Present Value. the same? If different, what reasons can you offer?
- A firm has projected the following financials for a possible project: YEAR Sales Cost of Goods S&A Depreciation Investment in NWC Investment in Gross PPE 0 1,130.00 105,468.00 1 132,716.00 Submit 549.00 2 62,780.00 62,780.00 30,000.00 30,000.00 30,000.00 21,093.60 21,093.60 21,093.60 Answer format: Currency: Round to: 2 decimal places. 3 132,716.00 132,716.00 132,716.00 549.00 What is the NPV of the project? (Hint: Be careful about rounding the WACC here!) 4 62,780,00 62,780.00 62,780.00 30,000.00 549.00 21,093.60 549.00 5 132,716.00 The firm has a capital structure of 37.00% debt and 63.00% equity. The cost of debt is 9.00%, while the cost of equity is estimated at 15.00%. The tax rate facing the firm is 38.00%. (Assume that you can't recover the final NWC position in year 5. i.e. only consider the change in NWC for each year) 30,000.00 21,093.60 549.00A firm has projected the following financials for a possible project: YEAR Sales Cost of Goods S&A Depreciation Investment in NWC Investment in Gross PPE 0 1,163.00 104,285.00 1 125,285.00 2 62,893.00 62,893.00 20,857.00 125,285.00 30,000.00 30,000.00 526.00 526.00 3 125,285.00 4 125,285.00 30,000.00 30,000.00 20,857.00 20,857.00 20,857.00 What is the NPV of the project? (Hint: Be careful about rounding the WACC here!) 62,893.00 62,893.00 62,893.00 526.00 5 526.00 125,285.00 30,000.00 20,857.00 526.00 The firm has a capital structure of 46.00% debt and 54.00% equity. The cost of debt is 10.00%, while the cost of equity is estimated at 13.00%. The tax rate facing the firm is 38.00%. (Assume that you can't recover the final NWC position in year 5. i.e. only consider the change in NWC for each year)Bluestone Ltd has provided the following figures for two investment projects, only one of which may be chosen. Project A Project B £ £ Initial outlay 190,000 170,000 Profit for year 1 55,000 15,000 2 40,000 25,000 3 25,000 45,000 4 10,000 65,000 Estimated resale value at end of year 4 50,000 20,000 Profit is calculated after deducting straight line depreciation. The business has a cost of capital of 10%. a) Calculate the payback period, net present value and accounting rate of return for each project, and provide brief recommendations as to what project needs to be chosen based on the following: The Payback Period. The Accounting Rate of Return/Return on Capital Employed. The Net Present Value.
- The data below are estimated for the project for the project study of a certain businessinvestment. IF money is worth 15% which of the project is more desirable, using PresentWorth Method and determine the difference in profit from each project study.For A, the initial investment is P5,000, with annual revenue of P2000. Annualdisbursement amounts to P650 with no salvage value at the end of its life which is 4years.For B, the initial investment is P8,000, with annual revenue of P3000. Annualdisbursement is P1500 with no salvage value at the end of its life which is 8 years.A company is thinking of investing in one of two potential new products for sale. The projections are as follows: Year Revenue/cost £ (Product A) Revenue/cost £ (Product B)0 (150,000) outlay (150,000) outlay 1 24,000 12,0002 24,000 25,3333 44,000 52,0004 84,000 63,333 Calculate the IRR for Product B only using 3% and 15% to 2 d.p.Okta company provides the following information pertaining to its proposed projects. Project Investment Required Net Present Value Life of the project (years) Internal Rate of Return A $850,000 $269,640 7 19% В $745,000 $277,100 12 17% For the purpose of calculating NPV, the discount rate is 10%. Determine profitability Index for Project A and Project B. a. Profitability Index for project A is $0.40 and Project B is 0.37 b. Profitability Index for project A is $0.32 and Project B is 0.19 c. Profitability Index for project A is $0.32 and Project B is 0.37 d. Profitability Index for project A is $0.37 and Project B is 0.32
- Harvard Manufacturing Company is considering the following investment proposal: Initial investment: Depreciable assets (straight-line) $48,000 Working capital 4,000 Operations (per year for 4 years): Cash receipts $30,000 Cash expenditures 17,000 Disinvestment: Salvage value of equipment $2,000 Recovery of working capital 4,000 The investment's accounting rate of return (rounded to two decimal points) on the original investment is: Select one: A. 3.85 percent B. 5.88 percent C. 10.71 percent D. 8.33 percentA company is considering a 3-year project with a projected net income of sh. 4M, 6M,5M in year 1, year 2 and year 3 respectively. The initial investment is sh. 40M and the salvage value is sh.2M.The company applies the straight line method for depreciating its assets, what is the Accounting Rate of Return? Assume a tax rate of 30% Select one: A. 26.3% B. 23.8% C.25% D. None of the aboveA project proposal submitted to you for evaluation follow: Investment, including depreciable assets of P495,000 with economic life of six years) - Php 865,000 Annual sales revenue - PhP 750,00 Variable cost of sales - 43.5% Annual cash operating costs - 295,000 Income tax rate - 25% Required: a. Annual cash return, payback period and internal rate of return. b. If the corporate cost of capital is 8%, should the project be implemented ?