Andouille Spices, Incorporated, has the following mutually exclusive projects available. The company has historically used a three-yearcutoff for projects. The required return is 10 percent.Year012345Project F- $ 215,000104,80092,30087,60078,00070,800Project G-$ 318,00074,60096,500125,600168,800189, 200a. Calculate the payback period for both projects.Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.b. Calculate the NPV for both projects.a. Project FProject Gb. Project FProject Gc. Project acceptanceNote: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.c. Which project should the company accept?yearsyears

To choose the best option or proposal, capital budgeting entails long-term planning, monitoring…

Answered: Andouille Spices, Incorporated, has the…

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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Andouille Spices, Incorporated, has the following mutually exclusive projects available. The company has historically used a three-year cutoff for projects. The required return is 10 percent. Year 0 1 2 3 4 5 a. Project F Project G b. Project F Project G C. Project F -$ 130,000 62,500 47,500 57,500 52,500 47,500 Project G -$ 200,000 42,500 57,500 87,500 a. Calculate the payback period for both projects. Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b. Calculate the NPV for both projects. Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. c. Which project, if any, should the company accept? 117,500 132,500 years years
A research laboratory which requires P5M for original construction; P100T at the end of every year for the first 6 years and then P120T each year thereafter for operating expenses, and P500T every 5 years for replacement of equipment with interest at 12% per annum. What is the cost of perpetual operation? a. P917,740 b. P977,140 c. P719,740 d. P717,940
One factory identified three mutually exclusive investment proposals. The life of the three is estimated at 5 years with a negligible residual value, and with a MARR equal to 9% per year. proposals Investment ($ million) Annual Net Income($ million) MARR (%) A1 5 1,3 9,43 A2 7 1,9 11,13 A3 8,5 2,3 11,0 Which investment should be selected according to the following methods: a) IRR-internal rate of return. b) Net Present Value.
A new project has an initial cost of $250,000. The equipment will be depreciated on a straight-line basis to a zero book value over the five-year life of the project. The projected net income each year is $13,250, $18,000, $20,240, $15,150, and $11,900, respectively. What is the average accounting return? Multiple Choice 11.52% 8.95% 13.46% 12.57% 5.33%
2) Your Team wish to evaluate four independent projects that all have a 10-year life at MARR = 15% per year. Preliminary estimates for first cost, annual net income, and Salvage Value have been made. First cost, $ Annual net income, $/year Salvage value, $ A B C D -1,200 -2,000 -5,000 -7,000 200 400 1100 1300 5 ___6 8 7 (a) Accept or reject each project using a present worth analysis. On your spreadsheet, include the logical IF function to make the accept/ reject decision. (b) The preliminary estimates have changed for projects A and B as shown below. Use the same spreadsheet to reevaluate them. First cost, $ Annual net income, $/year Salvage value, $ A - 1,000 300 8 B -2,200 440 0
A firm is considering three mutually exclusive alternatives as part of a production improvement program. The alternatives are as follows: A B C Installed cost $8,000 $12,000 $16,000 Uniform annual benefit 1,600 1,750 2,050 Useful life, in years 10 20 20 For each alternative, the salvage value at the end of useful life is zero. At the end of 10 years, Alt. A could be replaced by another A with identical cost and benefits. (a)Construct a choice table for interest rates from 0% to 100%. (b)The MARR is 12%. If the analysis period is 20 years, which alternative should be selected?
Required information [The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project that would require a $2,955,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 18%. The project would provide net operating. income in each of five years as follows: Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs $ 750,000 591,000 $ 2,865,000 1,015,000 1,850,000 Depreciation. Total fixed expenses Net operating income Click here to view Exhibit 128-1 and Exhibit 128-2. to determine the appropriate discount factor(s) using table. years 1,341,000 $ 509,000 7. What is the project's payback period? (Round your answer to 2 decimal places.) Project's payback period
Required information [The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project that would require a $2,975,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 14%. The project would provide net operating income in each of five years as follows: Sales $ 2,735,000 1,000,000 1,735,000 Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out- of-pocket costs Depreciation Total fixed expenses $ 735,000 595,000 1,330,000 Net operating income $ 405,000 Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table. 2. What are the project's annual net cash inflows? Annual net cash inflow
SHCJ Research Laboratory requires P3,500,000 for original construction, P500,000at the end of every year for the first 6 years and then P600,000 each year thereafterfor operating and maintenance expenses, and P2,000,000 every 10 years forreplacement of equipment with interest at 12% per annum. Determine thecapitalized cost of the said research laboratory.
A Mountain Frost is considering a new project with an initial cost of $270,000. The equipment will be depreciated on a straight-line basis to a zero book value over the four-year life of the project. The projected net income for each year is $21,300, $22,200, $24,600, and $18.200, respectively, What is the average accounting return? Multiple Choice O O O C 14.65% 15.00% 11.99% 1712%
A company is considering two alternatives with regards to equipment which it needs. The alternatives are as follows: Alternative A:PurchaseCost of Equipment 700,581Salvage Value 105,896Daily operating cost 534Economic life, years 10 Alternative B: Rental at 1,539 per day. At 18% interest, how many days per year must the equipment be in use if Alternative A is to be chosen.
[The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project that would require a $2,955,000 investment in equipment with a useful life of five years and no salvage value. The company’s discount rate is 18%. The project would provide net operating income in each of five years as follows: Sales $ 2,865,000 Variable expenses 1,015,000 Contribution margin 1,850,000 Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs $ 750,000 Depreciation 591,000 Total fixed expenses 1,341,000 Net operating income $ 509,000 Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table. rev: 05_11_2019_QC_CS-168512 5. What is the project profitability index for this project?

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