Flint Company is considering investing in a new dock that will cost $760,000. The company expects to use the dock for 5 years, afterwhich it will be sold for $500,000. Flint anticipates annual cash flows of $310,000 resulting from the new dock. The company'sborrowing rate is 8%, while its cost of capital is 11%.Click here to view PV tables.Calculate the net present value of the dock. (Use the above table.) (Round factor values to 5 decimal places, e.g. 1.25124 and final answerto O decimal places, e.g. 5,275.)Net present value $Indicate whether Flint should make the investment.Flintshould accept682484the project.

Net Present Value (NPV) is a measure of evaluating the project. NPV is the difference between the…

Calculate the net present value of the dock. (Use the above table.) (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to O decimal places, e.g. 5,275.) Net present value $ Indicate whether Flint should make the investment. Flint should accept 682484 the project.

Calculate the net present value of the dock. (Use the above table.) (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to O decimal places, e.g. 5,275.) Net present value $ Indicate whether Flint should make the investment. Flint should accept 682484 the project.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter11: Capital Budgeting And Risk

Section: Chapter Questions

Problem 9P

See similar textbooks

Related questions

Q: Subject : Accounting The existence or occurrence assertion as related to cash is concerned with…

A: Assertion means a statement made by the Company's management regarding the completeness and accuracy…

Q: [The following information applies to the questions displayed below. Golden Corporation's current…

A: Statement of Cash Flow - Statement of Cash Flow is a financial statement that includes all the…

Q: 1. Prepare a vertical analysis of the balance sheet data for 2025 and 2024. Express each amount as a…

A: Financial statements can be interpreted by using vertical analysis in simple manner. Vertical…

Q: Please record the adjusting entries for the month of May 31, 20-. It is not necessary to write a…

A: Journal entries are used to record accounting transactions in chronological order under double entry…

Q: What is Rapid Shine’s net assets at the date of acquisition? And Should this acquisition be…

A: It is to be noted that acquisition of assets and liabilities are always recorded at fair value.…

Q: Budgeted sales are $200 in April, $240 in May, and $280 in June. You expect to collect 80% of a…

A: Cash inflow from sales during a particular period the amount of cash received by the entity from the…

Q: a. The following direct labor data pertain to the operations of Jacuzi Instrument Corporation. for…

A: Hi student Since there are multiple questions, we will answer only first question. Variance analysis…

Q: Retained earnings refers to Group of answer choices Cash and other assets The amount of net income…

A: Retained earnings are the portion of a company's net income that management retains for internal…

Q: Vulcan Company's contribution format income statement for June is as follows: Vulcan Company Income…

A: Contribution is the amount of earnings remaining after all direct costs have been subtracted from…

Q: Connar Company reports the following accounts and balances at the end of the first year of…

A: Current assets are the short-term assets that are reported by the entity in the balance sheet. These…

Q: Peace Co. purchased land as a factory site for P300,000. Peace paid P30,000 to tear down two…

A: Cost of Building include Architect's Fees, Liability Insurance Cost, Excavation Cost, Contractor's…

Q: SpinCycle Company has budgeted its January sales to be 10,000 units of its interactive belts.…

A: Budgeted sales revenue means the estimated amount of revenue to be earned during a particular…

Q: A local partnership was considering the possibility of liquidation. Capital account balances at that…

A: The partnership comes into existence when two or more persons agree to do the business and further…

Q: Pam Erickson Construction Company changed from the cost-recovery to the percentage-of-completion…

A: Net income is an important tool or way because it indicates how much money a company has generated…

Q: Levi and Peter's Athletic Emporium (LPAE) provided the following information. Fair value of the…

A: An impairment loss is the amount by which the carrying amount of an asset or a cash-generating unit…

Q: XYZ Bakery's general manager was puzzled by the results of the income statement for the month which…

A: Introduction:- The profitability of a business is a crucial aspect of its long-term success, and it…

Q: Which variances will the company Investigate? Item a. Direct materials price variance b. Direct…

A: Variance arises when the actual costs for the company is different from the standard costs which…

Q: Santana Rey expects second quarter 2022 net income of Business Solutions's line of computer…

A: In accounting, budgeting refers to the process of creating a financial plan for a specific period,…

Q: Exercise 9-13 (Algo) Retail inventory method; average cost [LO9-3] San Lorenzo General Store uses a…

A: The cost to retail ratio is measured as ratio of cost of goods available for sale at cost and…

Q: A manufacturer is considering eliminating a segment because it shows the following $6,200 loss. All…

A: Contribution margin = Sales - variable cost Unavoidable fixed cost = Total fixed cost - Avoidable…

Q: Starplus limited - Internal Rate of Return of Project B (expressed to two decimal places) using…

A: The internal rate of return is the interest rate (for the purpose of discounting) at which the net…

Q: template provided, and refer to the formulas of the article "Amortization Schedule" to calculate…

A: Amortization schedule refers to the statement showing the payment on a monthly basis, the balance at…

Q: Enterprises acquired three different pieces of furniture and equipment for its newly renovated…

A: The assets acquired for bulk price can be allocated cost on the basis of market value or retail…

Q: The following information about the payroll for the week ended December 30 was obtained from the…

A: State Unemployment Tax Act (SUTA): Employer has to pay the tax to the state government. The tax…

Q: Exercise 8-14 (Algo) Part 1 equired: Using calculations based on a perpetual inventory system,…

A: FIFO Cost of Goods Available for sale Cost of Goods Sold -Periodic Fifo Ending Inventory…

Q: Costs and Production Data Raw materials unit cost Raw materials units Direct labor payroll Direct…

A: Overhead controllable variance Overhead controllable variance refers to the difference between the…

Q: (b) Prepare the adjusting entry at December 31, 2022, to show the securities at fair value. Sunland…

A: If an investor company holds less than 20% stake in investee company then it is assumed that…

Q: Mercer Asbestos Removal Company removes potentially toxic asbestos insulation and related products…

A: Under Activity based costing method, the cost is allocated to each activity based on their…

Q: Toren Inc. employs one person to run its solar management company. The employee's gross income to…

A: Payroll: Payroll is the aggregate expenditure on wages and salaries incurred by a business in an…

Q: Mr. and Mrs. Poe earned $115,900 compensation income and $963 interest this year and recognized a…

A: Long-term capital gains are the profits earned from the sale of an asset that was held for more than…

Q: net present value, C

A: this question is based on engineering economics, capital budgeting. we are required to use the…

Q: 2) An asset is purchased for $20,000. It has a service life of 3 years and a salvage value of…

A: The MACRS depreciation rates for 3-year property are: Year 1: 33.33% Year 2: 44.45% Year 3: 14.81%…

Q: Journalize Payroll Tax The payroll register of Patel Heritage Co indicates $2,568 of social security…

A: Journal Entry is the primary step to record the transaction in the books of accounts. The increase…

Q: Gerald Company has the following account balances at the end of the first year of operations:…

A: Assets are the items that provides some future economic benefits to an organisation. Assets includes…

Q: Ayayai Company began operations late in 2024 and adopted the conventional retail inventory method.…

A: The retail inventory method is a method for calculating ending inventory based on the ratio of the…

Q: Pierce Self Storage purchased land, paying $190,000 cash as a down payment and signing a $185,000…

A: The capitalized cost is the cost of an asset that is recorded in the balance sheet. The revenue…

Q: 8. Bonds with a face value of $500,000 and a quoted price of 102% have a selling price of a.…

A: The selling price includes cost price and marginal profit. It is calculated on the basis of face…

Q: Business Solutions sells upscale modular desk units (60% of sales) and office chairs (40% of sales).…

A: “Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: uary 1, 2023, ACT Company issued 1,000 of its 10%, 5-year, P 5,000 face value convertible bonds at…

A: Convertible bonds are the instruments having the conversion feature which is separately valued and…

Q: Which statement/s about residual income is false? I. an evaluation havng a positive residual income…

A: Residual income is a financial performance metric that measures the excess income generated by a…

Q: NATIONAL INTERCABLE COMPANY Statement of Cash Flows Cash outflows For the year ended December 31,…

A: A cash flow statement discloses net increases or decreases in cash during an accounting period. it…

Q: table, what is the share price when the price to book (P/B) multiple of a comparable company is…

A: Ratio analysis used identify the business performance of the company. It is used to measure…

Q: Fairfield Foods plc is a catering establishment which also owns shops and cafes. Due to increased…

A: It is through the ratio analysis which shows the progress of the company and through which the…

Q: 12- Lower-of-cost-or-net realizable value a) b) e) 68 None the answer is correct must be applied to…

A: Lower-of-cost-or-net realizable value (LCNRV) is an accounting method used to value inventory. It…

Q: Date 12/31/23 12/31/24 12/31/25 12/31/26 12/31/27 12/31/28 Interest Cash Received Revenue Amortized…

A: Calculation of fair value adjustment of (e) (160890-160300) =590

Q: Issue Price The following terms relate to independent bond issues: a. 670 bonds; $1,000 face value;…

A: Selling price of the bond issue=PV of the face value of the bond issue+PV of the interest payments

Q: Suppose you just bought an annuity with 11 annual payments of $16,400 at a discount rate of 13.5…

A: Present value refers to a concept of time, value, and money that is issued for estimating the…

Q: Coronado Company's standard materials cost per unit of output is $8.80 (2.00 pounds x $4.40). During…

A: Lets understand the basics. Material price variance is a variance betweent the rate at which…

Q: A year-end review of Accounts Receivable and estimated uncollectible percentages revealed the…

A: Bad debts expense: Bad debts expense is recognized in the books of the company when a debtor is…

Q: Exercise 14-3 (Algo) Internal Rate of Return [LO14-3] Wendell's Donut Shoppe is investigating the…

A: The question is based on the concept of Cost Accounting. Annual cash flows can be calculated by…

Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Flint Company is considering investing in a new dock that will cost $760,000. The company expects to use the dock for 5 years, after
which it will be sold for $500,000. Flint anticipates annual cash flows of $310,000 resulting from the new dock. The company's
borrowing rate is 8%, while its cost of capital is 11%.
Click here to view PV tables.
Calculate the net present value of the dock. (Use the above table.) (Round factor values to 5 decimal places, e.g. 1.25124 and final answer
to O decimal places, e.g. 5,275.)
Net present value $
Indicate whether Flint should make the investment.
Flint
should accept
682484
the project.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: Introduction

VIEW

Step 2: Computation of Net Present Value

VIEW

Step 3: Discussion on Discount Rate

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Bouvier Restaurant is considering an investment in a grill that costs $140,000, and will produce annual net cash flows of $21,950 for 8 years. The required rate of return is 6%. Compute the net present value of this investment to determine whether Bouvier should invest in the grill.
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?
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?
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%.
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?
Garnette Corp is considering the purchase of a new machine that will cost $342,000 and provide the following cash flows over the next five years: $99,000, $88,000, $92,000. $87,000, and $72,000. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return in Excel. see Appendix C.
Blossom Corporation is considering investing in a new facility. The estimated cost of the facility is $1,791,500. It will be used for 12 years, then sold for $715,000. The facility will generate annual cash inflows of $350,000 and will need new annual cash outflows of $150,000. The company has a required rate of return of 7%. Click here to view PV table. Calculate the internal rate of return on this project. (Round answer to 0 decimal place, e.g. 13%.) Internal rate of return is Whether the project should be accepted. The project ✰ be accepted. %
Viera Corporation is considering investing in a new facility. The estimated cost of the facility is $1,911,898. It will be used for 12 years, then sold for $718,600. The facility will generate annual cash inflows of $399,500 and will need new annual cash outflows of $152,600. The company has a required rate of return of 7%. Click here to view PV table.Calculate the internal rate of return on this project. (Round answer to 0 decimal place, e.g. 13%.) Internal rate of return is _________? % Whether the project should be accepted. The project SHOULD OR SHOULD NOT??? - be accepted.
Your company is considering a capital project that will require a net initial investment of $264,978. The project is expected to have a 7-year life and will generate an annual net cash inflow of $46,260. Using the present value tables, what is the internal rate of return? (Round answers to 0 decimal places, e.g. 25.) Click here to view the factor table. Internal Rate of Return eTextbook and Media
CircleCo is considering the purchase of new construction crane, which would cost approximately $400,000 initially. produce cash flows of $4,500 per month for the next 8 years and has a resale value of $50,000 in assets at the end of 8 years. i With an interest rate of 4.5% what is this project's net present value? li) What is this project's Internal Rate of Return? ili) How do you use the IRR to determine if a project should be accepted?
GTO Incorporated is considering an investment costing $214,720 that results in net cash flows of $32,000 annually for 10 years. (PV of $1. FV of $1. PVA of $1, and EVA of $1) (Use appropriate factor(s) from the tables provided.) (a) What is the internal rate of return of this investment? (b) The hurdle rate is 8.5%. Should the company invest in this project on the basis of internal rate of return? a. Internal rate of return b. Should the company invest in this project on the basis of internal rate of return? %