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- Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided manufacturing system. The annual net cash benefits and savings associated with the system are described as follows: The system will cost 9,000,000 and last 10 years. The companys cost of capital is 12 percent. Required: 1. Calculate the payback period for the system. Assume that the company has a policy of only accepting projects with a payback of five years or less. Would the system be acquired? 2. Calculate the NPV and IRR for the project. Should the system be purchasedeven if it does not meet the payback criterion? 3. The project manager reviewed the projected cash flows and pointed out that two items had been missed. First, the system would have a salvage value, net of any tax effects, of 1,000,000 at the end of 10 years. Second, the increased quality and delivery performance would allow the company to increase its market share by 20 percent. This would produce an additional annual net benefit of 300,000. Recalculate the payback period, NPV, and IRR given this new information. (For the IRR computation, initially ignore salvage value.) Does the decision change? Suppose that the salvage value is only half what is projected. Does this make a difference in the outcome? Does salvage value have any real bearing on the companys decision?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?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?
- (Related to Checkpoint 11.1) (Net present value calculation) Dowling Sportswear is considering building a new factory to produce aluminum baseball bats. This project would require an initial cash outlay of $6,000,000 and would generate annual net cash inflows of $1,200,000 per year for 7 years. Calculate the project's NPV using a discount rate of 5 percent. If the discount rate is 5 percent, then the project's NPV is $ (Round to the nearest dollar.)(Net present value calculation) Big Steve's, makers of swizzle sticks, is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $95,000 and will generate net cash inflows of $19,000 per year for 8 years. a. What is the project's NPV using a discount rate of 8 percent? Should the project be accepted? Why or why not? b. What is the project's NPV using a discount rate of 14 percent? Should the project be accepted? Why or why not? c. What is this project's internal rate of return? Should the project be accepted? Why or why not? a. If the discount rate is 8 percent, then the project's NPV is $. (Round to the nearest dollar.)(Net present value calculation) Big Steve's, makers of swizzle sticks, is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $90,000 and will generate net cash inflows of $19,000 per year for 8 years. a. What is the project's NPV using a discount rate of 9 percent? Should the project be accepted? Why or why not? b. What is the project's NPV using a discount rate of 17 percent? Should the project be accepted? Why or why not? c. What is this project's internal rate of return? Should the project be accepted? Why or why not? a. If the discount rate is 9 percent, then the project's NPV is $nothing. (Round to the nearest dollar.)
- (Net present value calculation) Big Steve's, makers of swizzle sticks, is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $105,000 and will generate net cash inflows of $16,000 per year for 9 years. a. What is the project's NPV using a discount rate of 11 percent? Should the project be accepted? Why or why not? b. What is the project's NPV using a discount rate of 17 percent? Should the project be accepted? Why or why not? ed c. What is this project's internal rate of return? Should the project be accepted? Why or why not? a. If the discount rate is 11 percent, then the project's NPV is $ (Round to the nearest dollar.) tion stion stion rse (Busin Use Priv Enter your answer in the answer box and then click Check Answer. Check Answer 6 parts remaining Clear All 99+(Related to Checkpoint 11.1) (Net present value calculation) Dowling Sportswear is considering building a new factory to produce aluminum baseball bats. This project would require an initial cash outlay of $4,000,000 and would generate annual net cash inflows of $900,000 per year for 7 years. Calculate the project's NPV using a discount rate of 7 percent. If the discount rate is 7 percent, then the project's NPV is $nothing. (Round to the nearest dollar.)(Net present value calculation) Big Steve's, makers of swizzle sticks, is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $95,000 and will generate net cash inflows of $19,000 per year for 9 years a. What is the project's NPV using a discount rate of11 percent? Should the project be accepted? Why or why not? b. What is the project's NPV using a discount rate of16 percent? Should the project be accepted? Why or why not? c. What is this project's internal rate of return? Should the project be accepted? Why or why not? a If the discount rate is 11 percent, then the project's NPV is $ ? (Round to the nearest dollar.)
- (Net present value calculation) Dowling Sportswear is considering building a new factory to produce aluminum baseball bats. This project would require an initial cash outlay of $6,000,000 and would generate annual net cash inflows of $1,100,000 per year for 9 years. Calculate the project's NPV using a discount rate of 5 percent. If the discount rate is 5 percent, then the project's NPV is $___________________(Round to the nearest dollar.)(Net present value calculation) Dowling Sportswear is considering building a new factory to produce aluminum baseball bats. This project would require an initial cash outlay of $4,000,000 and would generate annual net cash inflows of $900,000 per year for 9 years. Calculate the project's NPV using a discount rate of 8 percent. If the discount rate is 8 percent, then the project's NPV is $ ?(Net present value calculation) Dowling Sportswear is considering building a new factory to produce aluminum baseball bats. This project would require an initial cash outlay of $5,500,000 and would generate annual net cash inflows of $1,100,000 per year for 6 years. Calculate the project's NPV using a discount rate of 8 percent. If the discount rate is 8 percent, then the project's NPV is $. (Round to the nearest dollar.)