Fun Land is considering adding a miniature golfcourse to its facility. The course would cost$75000, would be depreciated on a straight linebasis over its 4-year life, and would have a zerosalvage value. The estimated income from thegolfing fees would be $40000 a year with $12000of that amount being variable cost. The fixed costwould be $6000. In addition, the firm anticipatesan additional $15000 in revenue from its existingfacilities if the course is added. The project willrequire $7000 of net working capital, which isrecoverable at the end of the project. What is thenet present value of this project at a discount rateof 12 percent and a tax rate of 35 percent?$19,812.09$20,360.22$15,429.48$13,199.40$24,738.41

Net present value(NPV) is the difference between present value of all cash inflows and initial…

Answered: Fun Land is considering adding a…

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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You are considering a proposal to produce and market a new sluffing machine. The most likely outcomes for the project are as follows: Expected sales: 115,000 units per year Unit price: $220 Variable cost: $132 Fixed cost: $4,890,000 The project will last for 10 years and requires an initial investment of $16.70 million, which will be depreciated straight-line over the project life to a final value of zero. The firm's tax rate is 30%, and the required rate of return is 12%. However, you recognize that some of these estimates are subject to error. In one scenario a sharp rise in the dollar could cause sales to fall 30% below expectations for the life of the project and, if that happens, the unit price would probably be only $210. The good news is that fixed costs could be as low as $3,260,000, and variable costs would decline in proportion to sales. a. What is project NPV if all variables are as expected? Note: Do not round intermediate calculations. Enter your answer in thousands not in…
Outdoor Sports is considering adding a putt putt golf course to its facility. The course would cost $169000, would be depreciated on a straight-line basis over its 4-year life, and would have a $62500 saivage value. The sales would be $93,500 a year, with costs of $28,350. The project will require $3,550 of net working capital, which is recoverable at the end of the project. Estimate the free cash flows for the project for years 0, 1, 2, 3, and 4 if the tax rate is 17%.
The plant manager of IHK is considering the purchase of a new robotic assemble plant. The new robotic line will cost $750,000. The manager believes that the new investment will result in direct labor savings of $187,500 per year for ten years. Requirements: What is the payback period for this project What is the net present value or PV assuming a 10% rate of return? Should the plant manager accept or reject the project? What else should the manager consider in the analysis?
The management of Penfold Corporation is considering the purchase of a machine that would cost $310,000, would last for 6 years, and would have no salvage value. The machine would reduce labor and other costs by $60,000 per year. The company requires a minimum pretax return of 12% on all investment projects. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided. The net present value of the proposed project is closest to (Ignore income taxes.): (Round your intermediate calculations and final answer to the nearest whole dollar amount.)
You are considering a proposal to produce and market a new sluffing machine. The most likely outcomes for the project are as follows: Expected sales: 125,000 units per year Unit price: $240 Variable cost: $144 Fixed cost: $5,430,000 The project will last for 10 years and requires an initial Investment of $21.78 million, which will be depreciated straight-line over the project life to a final value of zero. The firm's tax rate is 30%, and the required rate of return is 12% However, you recognize that some of these estimates are subject to error. In one scenario a sharp rise in the dollar could cause sales to fall 30% below expectations for the life of the project and, if that happens, the unit price would probably be only $230. The good news is that fixed costs could be as low as $3,620,000, and variable costs would decline in proportion to sales. a. What is project NPV If all variables are as expected? Note: Do not round Intermediate calculations. Enter your answer in thousands not in…
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 O C. -$4,010 O D.$145,990
Wayne Company is considering a long-term investment project called ZIP. ZIP will require an investment of $125,600. It will have a useful life of 4 years and no salvage value. Annual cash inflows would increase by $80,500, and annual cash outflows would increase by $42,000. The company’s required rate of return is 8%. Click here to view PV table.Calculate the net present value on this project. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round present value answer to 0 decimal places, e.g. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present value ________? Whether this project should be accepted? The project should be ACCEPTED OR DECLINED???? .
Brown Company is considering purchasing a machine that would cost $320,000 and would last for 6 years. At the end of 6 years, the machine would have a salvage value of $50,000. The machine would provide annual cost savings of $75,000. The company requires a rate of return of 11% on all investment projects. What is the net present value of the proposed project? (Select the answer that is closest to your calculations.) Present value tables are provided below. Present Value of $1 Table (Exhibit 11B-1) (Partial table) Periods 4% 5% 6% 7% 8% 9% 10% 11 12% 13% 14% 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0.877 0.925 0.907 0.890 0.873 0.857 0.842 0.826 0.812 0.797 0.783 0.769 0.889 0.864 0.840 0.816 0.794 0.772 0.751 0.731 0.712 0.693 0.675 0.855 0.823 0.792 0.763 0.735 0.708 0.683 0.659 0.636 0.613 0.592 0.822 0.784 0.747 0.713 0.681 0.650 0.621 0.593 0.567 0.543 0.519 1 2. 4 5. 6 0.790 0.746 0.705 0.666 0.630 0.596 0.564 0.535 0.507 0.480 0.456 0.760 0.711 0.665 0.623…
You are evaluating a project for The Farpour golf club, guaranteed to correctthat nasty slice. You estimate the sales price of The Tiff-any to be $400 per unitand sales volume to be 1000 units in year 1; 1500 units in year 2; and 1325units in year 3. The project has a three-year life. Variable costs amount to $225per unit and fixed costs are $100,000 per year. The project requires an initialinvestment of $165,000 in assets which will be depreciated straight-line to zeroover the three-year project life. The actual market value of these assets at theend of year 3 is expected to be $35,000. NWC requirements at the beginning ofeach year will be approximately 20 percent of the projected sales during thecoming year. The tax rate is 34 percent and the required return on the project is10 percent. What change in NWC occurs at the end of year 1?
Vaughn Company is considering a long-term investment project called ZIP. ZIP will require an investment of $122,200. It will have a useful life of 4 years and no salvage value. Annual cash inflows would increase by $79,700, and annual cash outflows would increase by $39,000. The company's required rate of return is 12%. Click here to view PV table. Calculate the net present value on this project. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round present value answer to 0 decimal places, e.g. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present value Whether this project should be accepted? The project should be
management of Penfold Corporation is considering the purchase ofa machine that would cost $380,000, would last for 5 years, and would have no salvage value. The machine would reduce labor and other costs by $85,000 per year. The company requires a minimum pretax return of 13% on all investment projects. The Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided. The net present value of the proposed project is closest to (Ignore income taxes.): Multiple Cholce $(81,055) $(6,055) $(166,055) $(379.997) Prev 1 of 4 Next > 9:44 AM ype here to search 49°F Mostly sunny 20 10/19/2021 DELL F11 F12 PrtScr Insert Delete PgUp PgDn Home End F3 F4 F5 F6 F7 F8 F9 F10 %24 & Num Lock Backspace 大

The construction division of WTG Construction estimates that the annual maintenance cost of a highway pavement are P20,000. The placement of the new surface would reduce the annual maintenance costs to P5,000 per year for the first five years and to P10,000 per year for the next five years. The annual maintenance cost after 10 years would again be P20,000. if the maintenance costs are the only savings, what minimum investment that can be justified for the new surface if the interest rate is 4%? show your solution

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