his own enterprise
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A man is considering putting up his own enterprise, where an investment of 800,000Php will be required and will take 15 years to recoup . He estimates his annual sales at 800,000Php along with the following operating costs.
Materials ............................. 160,000Php/ year
Labor ............................. 280,000Php/ year
Overhead ............................. (40,000 + 10% of sales) Php/ year
Selling Expense............................. 60,000Php/ year
The man will give up his regular job paying 216,000 Php per year and devote all his time to the operation of his business, this will result in decreasing his labor cost by 40,000Php per year, material cost by 28,000Php per year and overhead cost by 32,000 Php per year. If the man expects to earn at least 20% of his capital, should he invest?
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- A man is considering putting up his own enterprise, where an investment of 800,000Php will be required and will take 15 years to recoup . He estimates his annual sales at 800,000Php along with the following operating costs. Materials ............................. 160,000Php/ yearLabor ............................. 280,000Php/ yearOverhead ............................. (40,000 + 10% of sales) Php/ yearSelling Expense............................. 60,000Php/ yearThe man will give up his regular job paying 216,000 Php per year and devote all his time to the operation of his business, this will result in decreasing his labor cost by 40,000Php per year, material cost by 28,000Php per year and overhead cost by 32,000 Php per year. If the man expects to earn at least 20% of his capital, should he invest? solve in the annual cost methodCaduceus Company is considering the purchase of a new piece of factory equipment that will cost $565,000 and will generate $135,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return In Excel, see Appendix C.Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated revenue producing life of 4 years. Falkland has a cost of capital of 8%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?
- Mason, Inc., is considering the purchase of a patent that has a cost of $85000 and an estimated revenue producing lite of 4 years. Mason has a required rate of return that is 12% and a cost of capital of 11%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?Camellia Engineering Ltd is a manufacturer of high pressure steam valves andsteam traps. Its initial investment on equipment was $50,000 and its annualoperating costs were $20,000. The revenues generated from these products were$45,000 per year. The used equipment was salvaged for $ 4,000 at the end of 5years. The minimum attractive rate of return of the company is 15% per year. a.Calculate the internal rate of return (IRR) that the company earned on theproducts. Justify your answer.b. Compute the discounted payback period for the above investment at MARRof 15% per year.A company is considering an investment in a machine. The machine will cost $250,000 and will have a seven year useful economic life. It has a salvage value of $50,000. The expected annual operating costs for the machine would be $30,000 (for each year of the seven years). Assume that the company's desired return on its investment (MARR) is 11%, find the annual equivalent cost (AEC)?
- Nick’s Novelties, Inc., is considering the purchase of electronic pinball machines to place in amusementhouses. The machines would cost a total of $300,000, have an eight-year useful life, and have a totalsalvage value of $20,000. The company estimates that annual revenues and expenses associated with themachines would be as follows:Revenues .................................................... $200,000Less operating expenses:Commissions to amusement houses ....... $100,000Insurance ................................................. 7,000Depreciation ............................................. 35,000Maintenance ............................................ 18,000 160,000Net operating income .................................. $ 40,000Required:(Ignore income taxes.)1. Assume that Nick’s Novelties, Inc., will not purchase new equipment unless it provides a paybackperiod of five years or less. Would the company purchase the pinball machines?2. Compute the simple rate of return promised by…Assume that a company is considering purchasing a machine for $70,000 that will have a seven-year useful life and no salvage value. The machine will lower operating costs by $18,000 per year and increase sales volume by 1,000 units per year. The company earns a contribution margin of $3.00 per unit. The company's required rate of return is 17%. The internal rate of return for this investment is closest to: Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. Multiple Choice O 23%. 25%. 21%. 19%.Axel Industries is considering investing in a new machine. It will generate revenues of $100,000 each year and the cost of goods sold will be 60% of sales. The net working capital requirements of the project is 72 days of the sale revenue from year 1 to year 3. What are the NWC needs in Year 0? Select one: a. $0 b. $20 000 c. $400 000 d. $40 000
- Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product are $4.97 million. The product is expected to generate profits of $1.08 million per year for ten years. The company will have to provide product support expected to cost $99,000 per year in perpetuity. Assume all profits and expenses occur at the end of the year. a. What is the NPV of this investment if the cost of capital is 6.2%? Should the firm undertake the project? Repeat the analysis for discount rates of 1.6% and 14.2%, respectively. b. What is the IRR of this investment opportunity? c. What does the IRR rule indicate about this investment?.company can buy a machine that is expected to increase the company's net income by $25, 000 each year for the 10-year life of the machine. The company also estimates that for the next 10 years, the money they invest from that continuous stream will earn 6 % compounded continuously. Round all answers to the nearest cent. a. Find the total amount of money produced by the machine over its 10-year life. b. Find the future value of the income stream. c. Find the present value of the income stream. %24Elearning Company would like to develop its technology process by purchasing a production equipment for 11.2 million HUF. The equipment is expected to have a useful life of 5 years, and will be sold at the end of 5 years for 2.5 million HUF. The annual operating costs are predicted to be 1.5 million HUF. The estimated revenues are in yearly sequence ( HUF) 5.2 million; 5.5 million; 6.1million; 7 million; 7.5 million. The company's required rate of return is 12 percent. You can see the way of the economic efficiency calculation in the table. Some of the data are missing. Enter the missing data in the table. Perform further calculations and explain the results obtained. Data Year O Year 1 Year 2 Year 3 Year 4 Year 5 Pt (M HUF) 5.2 5.5 6.1 7 kt (M HUF) 1.5 1.5 1.5 1.5 1.5 Et (M HUF) 11.2 CFt (M HUF) -11.2 3.7 4 4.6 5.5 8.5 Dt 1 0.89286 0.79719 0.63552 0.56743 CFt*Dt (M HUF) -11.20 3.30 3.19 3.27 4.82 ECF**Dt (M HUF) -11.20 -7.90 -4.71 -1.43 2.06 The NPV of the project is million HUF.