Homework Answers
a) The internal rate of return is the rate at which investment cost is equal to present value of cash inflows.
Investment cost = Annual cash inflows*PVAF(i%, 6 yrs) (where i = internal rate of return)
$17,944 = $4,000*PVAF(i%, 6 yrs)
PVAF(i%, 6 yrs) = 17,944/4,000 = 4.486
Now, in the given present value table the value of 4.486 for 6 years is at 9%. (See the table).
Therefore the internal rate of return is 9%.
As the internal rate of return is less than cost of capital , the investment should not be made.
b) Present value of cash inflows = Annual cash inflows*PVAF(10%, 6 yrs)
= $4,000*4.355 = $17,420
Net Present Value = PV of Cash Inflows - Investment cost
= $17,420 - $17,944 = -$524
As the net present value of the investment is negative, the investment should not be made.
c) The net present value and the internal rate of return suggest the same courses of action.
Add Answer to:
a: should/should not
b: should/should not
c: the same/different
An investment costs $17,944 and will generate...
a: should/should not b: should/shouod not appendix d An investment costs $23,958 and will generate cash...
a: should/should not
b: should/shouod not
appendix d
An investment costs $23,958 and will generate cash flow of $6,000 annually for five years. The firm's cost of capital is 10 percent. Use Appendix D to answer the questions a. What is the investment's Internal rate of return? Round your answer to the nearest whole number Based on the internal rate of return, should the firm make the investment? The investment Select B made b. What is the investment's net present...
2. An investment costs $23,958 and will generate cash flow of $6,000 annually for five years....
2. An investment costs $23,958 and will generate cash flow of $6,000 annually for five years. The firm’s cost of capital is 6 percent. a. What is the investment’s internal rate of return? Based on the internal rate of return, should the firm make the investment? b. What is the investment’s net present value? Based on the net present value, should the firm make the investment? c. Compare the answers to Problems 1 and 2. Do the net present values...
1. An investment costs $23,958 and will generate cash flow of $6,000 annually for five years....
1. An investment costs $23,958 and will generate cash flow of $6,000 annually for five years. The firm’s cost of capital is 10 percent. a. What is the investment’s internal rate of return? Based on the internal rate of return, should the firm make the investment? b. What is the investment’s net present value? Based on the net present value, should the firm make the investment?
OptiLux is considering investing in an automated manufacturing system. The system requires an initial investment of...
OptiLux is considering investing in an automated manufacturing system. The system requires an initial investment of $3.8 million, has a 20-year life, and will have zero salvage value. If the system is implemented, the company will save $540,000 per year in direct labor costs. The company requires a 12% return from its investments. 1. Compute the proposed investment's net present value. 2. Using your answer from part 1, is the investment's internal rate of return higher or lower than 12%?...
5.) An investment costing S50,000 promises an after tax cash flow of $18,000 per year for...
5.) An investment costing S50,000 promises an after tax cash flow of $18,000 per year for 6 years. a. Find the investment's accounting rate of return and its payback period. b. Find the investment's net present value at a 15 percent discount rate C. Find the investment's internal rate of return. d. Assuming the required rate of return on the investment is 15 percent, which of the above figures of merit indicate the investment is attractive? Which indicate it is...
will like for correct answer! OA frm has two pessible investments with the following cash inflows. Each Investment costs $540, and the cost of capital is seven percent. Use Appendix 8 and Appendi...
will like for correct answer!
OA frm has two pessible investments with the following cash inflows. Each Investment costs $540, and the cost of capital is seven percent. Use Appendix 8 and Appendix D to questions. Assume that the investments are not mutually exclusive and there are no budget restrictions. answer the Cash Inflows Year A 350 160 120 $210 210 210 a. Based on each investment's net present value, which Investment(s) should the firm make? Use a minus sign...
Luong Machines Company is evaluating an investment of $1,360,000 which will yield net cash inflows of...
Luong Machines Company is evaluating an investment of $1,360,000 which will yield net cash inflows of $208,749 per year for 9 years with no residual value. What is the internal rate of return? Present value of ordinary annuity of $1: 5% 6% 7% 0.952 0.943 0.935 1.859 1.833 1.808 2.723 2.673 2.624 3.546 3.465 3.387 4.329 4.212 4.100 5.076 4.917 4.767 5.786 5.582 5.389 6.463 6.21 5.971 8% 0.926 1.783 2.577 3.312 3.993 4.623 5.206 5.747 > voo A WN-...
In order to find the net present value of an investment, one should Compound the costs...
In order to find the net present value of an investment, one should Compound the costs and discount the returns Discount the costs and compound the returns Discount the net returns Use the rate of internal returns
A machine that costs $6,750 is expected to operate for 9 years. The estimated salvage value...
A machine that costs $6,750 is expected to operate for 9 years.
The estimated salvage value at the end of 9 years is $0. The
machine is expected to save the company $1,669 per year before
taxes and depreciation. The company depreciates its assets on a
straight-line basis and has a marginal tax rate of 40 percent. What
is the exact internal rate of return on this investment? Use the
calculator and Table IV to answer the question. Round your...
requirement 2 The management of Revco Products is exploring four different investment opportunities. Information on the...
requirement 2
The management of Revco Products is exploring four different investment opportunities. Information on the four projects under study follows: Project Number 1 2 3 Investment $ (540,000) $ ( 390,000) $ (340 ,000) (450,000) required Present value of cash inflows at a 8% discount 715,947 $ 175,947 549,775 416,102 399,353 rate 99,775 26,102 59,353 Net present value $ Life of the 12 years б уеars 3 years б уеars project Internal rate of 15% 148 10% 178 return...
a: should/should not
b: should/shouod not
appendix d
An investment costs $23,958 and will generate cash flow of $6,000 annually for five years. The firm's cost of capital is 10 percent. Use Appendix D to answer the questions a. What is the investment's Internal rate of return? Round your answer to the nearest whole number Based on the internal rate of return, should the firm make the investment? The investment Select B made b. What is the investment's net present...
OptiLux is considering investing in an automated manufacturing system. The system requires an initial investment of $3.8 million, has a 20-year life, and will have zero salvage value. If the system is implemented, the company will save $540,000 per year in direct labor costs. The company requires a 12% return from its investments. 1. Compute the proposed investment's net present value. 2. Using your answer from part 1, is the investment's internal rate of return higher or lower than 12%?...
5.) An investment costing S50,000 promises an after tax cash flow of $18,000 per year for 6 years. a. Find the investment's accounting rate of return and its payback period. b. Find the investment's net present value at a 15 percent discount rate C. Find the investment's internal rate of return. d. Assuming the required rate of return on the investment is 15 percent, which of the above figures of merit indicate the investment is attractive? Which indicate it is...
will like for correct answer!
OA frm has two pessible investments with the following cash inflows. Each Investment costs $540, and the cost of capital is seven percent. Use Appendix 8 and Appendix D to questions. Assume that the investments are not mutually exclusive and there are no budget restrictions. answer the Cash Inflows Year A 350 160 120 $210 210 210 a. Based on each investment's net present value, which Investment(s) should the firm make? Use a minus sign...
Luong Machines Company is evaluating an investment of $1,360,000 which will yield net cash inflows of $208,749 per year for 9 years with no residual value. What is the internal rate of return? Present value of ordinary annuity of $1: 5% 6% 7% 0.952 0.943 0.935 1.859 1.833 1.808 2.723 2.673 2.624 3.546 3.465 3.387 4.329 4.212 4.100 5.076 4.917 4.767 5.786 5.582 5.389 6.463 6.21 5.971 8% 0.926 1.783 2.577 3.312 3.993 4.623 5.206 5.747 > voo A WN-...
A machine that costs $6,750 is expected to operate for 9 years.
The estimated salvage value at the end of 9 years is $0. The
machine is expected to save the company $1,669 per year before
taxes and depreciation. The company depreciates its assets on a
straight-line basis and has a marginal tax rate of 40 percent. What
is the exact internal rate of return on this investment? Use the
calculator and Table IV to answer the question. Round your...
requirement 2
The management of Revco Products is exploring four different investment opportunities. Information on the four projects under study follows: Project Number 1 2 3 Investment $ (540,000) $ ( 390,000) $ (340 ,000) (450,000) required Present value of cash inflows at a 8% discount 715,947 $ 175,947 549,775 416,102 399,353 rate 99,775 26,102 59,353 Net present value $ Life of the 12 years б уеars 3 years б уеars project Internal rate of 15% 148 10% 178 return...
Most questions answered within 3 hours.
-
Where is the error in this code sequence?
String s1 = "Hello";
String s2 = "ello";...
asked 10 months ago -
Financial data for Joel de Paris, Inc., for last year
follow:
Joel de Paris, Inc.
Balance...
asked 10 months ago -
Consider this reaction:
Al2(SO4)3 (aq)+ BaCl3
(aq) Al2Cl6 (aq)- +
3BaSO4(s) . What is the...
asked 10 months ago -
Suppose that Savneet is considering increasing her
recent random sample from 20 car rentals to 40...
asked 10 months ago -
Trucks arrive at an unloading terminal at an average rate of 120
per hour.
Trucks arrive...
asked 10 months ago -
Why are methanol and ethanol completely soluble in water while
octanol is not very little soluble....
asked 10 months ago -
A facilities manager at a university reads in a research report
that the mean amount of...
asked 10 months ago -
When the CuSO4 is rehydrated by adding water to the anhydrous
compound, is this an endothermic...
asked 10 months ago -
A ray of sunlight is passing from diamond into crown glass; the
angle of incidence is...
asked 10 months ago -
A block of mass 0.249 kg is placed on top of a light, vertical
spring of...
asked 10 months ago -
how do the kidneys compensate in the presences of acidosis
a) trigger hyperventilate
b) reserve acid...
asked 10 months ago -
Question 501 pts
The rental rate of capital to the firm increases. Which of the
following...
asked 10 months ago