For discount factors use Exhibit 12B-1 and Exhibit 12B-2. Techno Inc. intends to invest in one of two competing types of flexible manufacturing systems: FLEX-1K and FLEX-2z. Both systems have a project life of 10 years. The purchase price of the FLEX-1K system is $9,600,000, and it has a net annual after-tax cash inflow of $2,400,000. The FLEX-2Z is more expensive, selling for $11,200,000, but it will produce a net annual after-tax cash inflow of $2,800,000. The cost of capital for the company is 12%. Required: 1. Calculate the NPV for each project. Round present value calculations and your final answers to the nearest dollar. FLEX-1K: 24 FLEX-2Z: $

For discount factors use Exhibit 12B-1 and Exhibit 12B-2. Techno Inc. intends to invest in one of two competing types of flexible manufacturing systems: FLEX-1K and FLEX-2z. Both systems have a project life of 10 years. The purchase price of the FLEX-1K system is $9,600,000, and it has a net annual after-tax cash inflow of $2,400,000. The FLEX-2Z is more expensive, selling for $11,200,000, but it will produce a net annual after-tax cash inflow of $2,800,000. The cost of capital for the company is 12%. Required: 1. Calculate the NPV for each project. Round present value calculations and your final answers to the nearest dollar. FLEX-1K: 24 FLEX-2Z: $

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 17E: Postman Company is considering two independent projects. One project involves a new product line,...

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Postman Company is considering two independent projects. One project involves a new product line, and the other involves the acquisition of forklifts for the Materials Handling Department. The projected annual operating revenues and expenses are as follows: Required: Compute the after-tax cash flows of each project. The tax rate is 40 percent and includes federal and state assessments.
A company is considering two separate mutually exclusive projects A and B. Project A requires an initial investment of $100,000 and is expected to generate after-tax cash flows of $15,000 per year forever. Project B requires an initial investment of $150,000 and is expected to generate after-tax cash flows of $18,000 per year forever. Which of the following statement is correct? O a. Select Project B when the discount rate is 11% Ob. Select Project A when the discount rate is 16% Oc Select Project A when the discount rate is 5% O d. Select Project A when the discount rate is 13% O e. Select Project A when the discount rate is 4%
World Trans. is considering two mutually exclusive projects. Both require an initial investment of $9,200 at t = 0. Project X has an expected life of 2 years with after-tax cash inflows of $7,000 and $7,800 at the end of Years 1 and 2, respectively. In addition, Project X can be repeated at the end of Year 2 with no changes in its cash flows. Project Y has an expected life of 4 years with after-tax cash inflows of $5,000 at the end of each of the next 4 years. Each project has a WACC of 8%. Using the replacement chain approach, what is the NPV of the most profitable project? Do not round the intermediate calculations and round the final answer to the nearest whole number. Group of answer choices $5,971 $5,528 $6,855 $7,371 $7,592
eBook Project S costs $14,000 and its expected cash flows would be $6,500 per year for 5 years. Mutually exclusive Project L costs $30,000 and its expected cash flows would be $10,150 per year for 5 years. If both projects have a WACC of 16%, which project would you recommend? Select the correct answer. Oa. Project L, since the NPVL > NPVS. Ob. Both Projects S and L, since both projects have NPV's > 0. Oc. Project S, since the NPVS > NPVL. Od. Both Projects S and L, since both projects have IRR's > 0. Oe. Neither Project S nor L, since each project's NPV < 0.
Choosing between two projects with acceptable payback periods Shell Camping Gear, Ic., is considering two mutually exclusive projects. Each requires an initial investment of $100,000. John ShellI, president of the company, has set a maximum payback period of 4 years. The after-tax cash inflows associated with each project are shown in the following table: E. a. Determine the payback period of each project. b. Because they are mutually exclusive, Shell must choose one. Which should the company invest in? a. The payback period of project A is years. (Round to two decimal places.) The payback period of project B is years. (Round to two decimal places.) b. Because they are mutually exclusive, Shell must choose one. Using the payback period, which project should the company invest in? (Select the best answer below.) O Project B would be preferred over project A because the larger cash flows are in the early years of the project. Data Table O Project A would be preferred over project B…
Hunt Inc. intends to invest in one of two competing types of computer-aided manufacturing equipment. CAM X and CAM Y. Both CAM X and CAM Y models have a project life of 10 years. The purchase price of the CAM X model is P3,600,000 and it has a net annual after-tax cash inflow of P900,000. The CAM Y model is more expensive, selling for P4,200,000, but it will produce a net annual after-tax cash inflow of P1,050,000. The cost of capital for the company is 10%. Required: 1. Calculate the NPV for each project. Which model would you recommend? 2. Calculate the IRR for each project. Which model would you recommend?
Choosing between two projects with acceptable payback periods Shell Camping Gear, Inc., is considering two mutually exclusive projects. Each requires an initial investment of $100,000. John Shell, president of the company, has set a maximum payback period of 4 years. The after-tax cash inflows associated with each project are shown in the following table: LOADING... . a. Determine the payback period of each project. b. Because they are mutually exclusive, Shell must choose one. Which should the company invest in?
Aguilera Acoustics, Inc. (AAI), projects unit sales for a newseven-octave voice emulation implant as follows: Year Unit Sales 1 8300 2 9200 3 10400 4 9800 5 8400 Production of the implants will require GH¢ 150,000 in net working capital to start and additional net working capital investments each year equal to 15 percent of the projected sales for that year. In the final year of the project, net working capital will decline to zero as the project is wound down. In other words, the investment in working capital is to be completely recovered by the end of the project’s life. Total fixed costs are GH¢ 240,000 per year, variable production costs are GH¢ 190 per unit, and the units are priced at GH¢ 345 each. The equipment needed to begin production has an installed cost of GH¢ 2,300,000. Because the implants are intended for professional singers, this equipment depreciated using the straight-line basis. In five years,…
Choosing between two projects with acceptable payback periods Shell Camping Gear, Inc., is considering two mutually exclusive projects. Each requires an initial investment of $100,000. John Shell, president of the company, has set a maximum payback period of 4 years. The after-tax cash inflows associated with each project are shown in the following table: a. Determine the payback period of each project. b. Because they are mutually exclusive, Shell must choose one. Which should the company invest in? a. The payback period of project A is years. (Round to two decimal places.) The payback period of project B is years. (Round to two decimal places.) b. Because they are mutually exclusive, Shell must choose one. Using the payback period, which project should the company invest in? (Select the best answer below.) Project A would be preferred over project B because the larger cash flows are in the later years of the project. Project B would be preferred over project A because the larger cash…
The Salalah Golf Resorts is redoing its golf course at a cost of 2744320 ÖMR. It expects to generate cash flows of OMR 1223445, OMR 2007812, and OMR 3147890 over the next three years. If the appropriate discount rate for the firm is 13 percent, what is the NPV of this project? Select one: a. 3112459.67 OMR O b. 2092431.67 OMR c. None of these O d. 7581072.67 OMR O e. 4836752.67 OMR
Lakelord Company is considering two mutually exclusive projects, A and B. Project A costs $94072 and is expected to generate $56196 in year one and $67090 in year two. Project B costs $118377 and is expected to generate $52195 in year one, $60452 in year two, $62774 in year three, and $47559 in year four. The firm's required rate of return for these projects is 0.060. The net present value for Project A is Instruction: Type ONLY your numerical answer in the unit of dollars, NO $ sign, NO comma, and round to the nearest whole number. E.g.. if your answer is $7,001.56, should type ONLY the number 7002, NEITHER 7,001.6, $7001.6, $7.001.6, NOR 7001.56. Otherwise, Blackboard will treat it as a wrong answer.
Axis Corp. is studying two mutually exclusive projects. Project Kelvin involves an overhaul of the existing system; it will cost $70,000 and generate cash inflows of $30,000 per year for the next 3 years. Project Thompson replaces the existing system; it will cost $215,000 and generate cash inflows of $50,000 per year for 6 years. Using a(n) 10.39% cost of capital, calculate each project's NPV, and make a recommendation based on your findings.