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- Problem 2 ABM Enterprise would like to evaluate/analyze an investment proposal.Given the following:Investment amount - 450,000 (2022)Dividends / Revenue stream - 100,000 for the first year and an interval of 5,000 for thesucceeding yearsDiscount rate - 14% a. NPV for the perio 2023 through 2029;b. Total NPV using manual computation;c. Total NPV using the Excel function; andd. IRR rate.Ch 5. ABC Company has the following mutually exclusive projects. Year Project A Project B 0 -$19,520 -$16,800 1 11,500 9,500 2 8,750 7,100 3 2,500 3,500 If the company’s payback period is 2 years, which of these projects should be chosen? Group of answer choices Project A Neither Projects Both Projects Project BQuestion 12 research laboratory which requires P5,000, 000 for original Determine the capitalized cost of construction; P100, 000 at the end of every year for the first 5 years and then P120, 000 each year thereafter f or operating expenses, and P500,000 every 6 years for replacement of equipment with interest at 12% per annum? OA6,441,350 O B.6,067,015 OC 6,632,445 8,573,650ס E, None of the above Question 12 of 50 A Moving to another question will save this response. acer PrtSc Pause Del Home Pg U F7 F8 F9 F10 F11 F12 F3 F4 F5 F6 SysRq Scr Lk Break Ins DIO Backspace 7 8.
- Part D: Investment Decisions Now consider that Luxio has identified the following two mutually exclusive projects: Year 0 1 2 3 4 Cash Flow (A) -$34,000 $16,500 $14,000 $10,000 $6,000 Cash Flow (B) -$34,000 $5,000 $10,000 $18,000 $19,000. 1. What is the IRR for each of these projects? Based on IRR decision rule, which project should the company accept? 2. If the required return is 11%, what is the NPV for each of these projects? Based on the NPV decision rule, which project should the company accept? 3. Over what range of discount rates would the company choose project A? At what discount rate would the company be indifferent between these two projects? Explain.Question 1 Grey Ltd has provided the following figures for two investment projects, only one of which may be chosen. Project X Project Y £ _ Initial outlay 200,000 180,000 Profit for year 1 65,000 35,000 2 65,000 35,000 3 75,000 65,000 4 35,000 85,000 Estimated resale value at end of year 4 60,000 40,000 Profit is calculated after deducting straight line depreciation. The business has a cost of capital of 10%. Required a) Calculate for each project i. Payback Average Return on Capital Employed Net present value (NPV) ii. iii. b) Critically discuss the merits and limitations of payback and NPV (Your answer is to be presented in an essay format NOT Bullet Points)Question 2 Sunshine Corporation is reviewing an investment proposal. The initial cost of the investment isR52 500. The estimated cash flows and net profit for each year are presented in the schedulebelow. All cash flows are assumed to take place at the end of the year. year Net cash flows Net profit R20 000 R2 500 R17 500 R3 500 R15 000 R4 500 R12 500 R5 500 R10 000 R6 500 The cost of capital is 12%. Required:Calculate the following:1. Payback Period 2. Net Present value 3. Accounting rate of return
- You are given the following data for a project that is to be evaluated using the APV method. Year EBIT CAPEX 0 O $201.765 O $193,822 O $185,617 O $222,872 O $213,918 1 $127.000 $60,000 2 Depreciation Increase in NWC Year-end net debt $80,000 Cost of net debt = 8% Unlevered cost of capital = 11.8% Corporate tax rate = 30% Calculate the total value of the project at t = 0. using the APV method. $72,000 $50,000 $100,000 $133,000 $40,000 $80,000 $60,000 $140,000 3 $138.500 $10,000 $84,000 $30,000 $140,000Question 2 Auckland Co had £3,000,000 of capitalised development expenditure at cost brought forward at 1st October 2020 in respect of products currently in production and a new project began on the same date. The research stage of the new project lasted until 31st December 2020 and incurred £500,000 of costs. From that date the project incurred development costs of £200,000 per month. On 1st June 2021 the directors of Auckland Co become confident that the project would be successful and yield a profit well in excess of costs. The project will still be in development at 30th September 2021. Capitalised development expenditure is amortised at 10% per annum using the diminishing balance method. What amount will be charged to profit or loss for the year ended 30th September 2021 in respect of research and development costs? £1,800,000 £1,900,000 £1,500,000 O £1,300,000Question 2 The directors of Paulter Ltd are currently considering two mutually exclusive investment projects. Both projects are concerned with the purchase of new equipment. The following information is available for each project: Cost (immediate outlay) Expected annual operating profit (loss) Year 1 2 3 4 5 Estimated residual value of the plant after 5 years Project 1 £ 120,000 29,000 (8,000) 12,000 22,000 18,000 7,000 Project 2 £ 80,000 18,000 (2,000) 9,000 12,000 14,000 6,000 The business uses the straight-line method of depreciation for all of its non-current (fixed) assets when calculating operating profit. Because of capital rationing only one project can be accepted. The business has an estimated cost of capital of 8%. Required: a) Calculate the annual depreciation of each project b) Calculate for each project: i. the net present value; ii. the accounting rate of return; iii. the payback period c) State with reasons which, if any, of the two investment projects the directors of…
- Ch 5. ABC Company has the following mutually exclusive projects. Year Project A Project B 0 -$19,520 -$16,800 1 11,500 9,500 2 8,750 7,100 3 2,500 3,500 If the company uses the Profitability Index to rank these two projects, which project should be chosen if the appropriate discount rate is 15 percent? Group of answer choices Project B Both projects Project A Neither projectsSECTION B (12 points) ABTS Co Ltd is considering the purchase of a new machine. Two alternative machines (A and B) have been suggested each having an initial cost of R400 000 and requiring R20 000 as additional working capital at the end of the 1st year Earnings after taxation are expected to be as follows. All cash flows are expected at the end of each period. Year1 Year 2 Year 3 Year 4 Year 5 Machine A R40 000 R120 000 R160 000 R240 000 R160 000 Machine B R120 000 R160 000 R200 000 R120 000 R80 000 The company has target return on capital of 10% and on this basis, you are required to compare the profitability of the machines and state which alternatives you consider financially preferable using the i) Payback, ii) Net Present Value and iii) Internal Rate of Return methods 2A4 9a We find the following information on NPNG (No-Pain-No-Gain) Inc.: A4 9a EBIT = $2,000,000Depreciation = $250,000Change in net working capital = $100,000Net capital spending = $300,000 These numbers are projected to increase at the following supernormal rates for the next three years, and 5% after the third year for the foreseeable future: EBIT: 20%Depreciation: 10%Change in net working capital: 15%Net capital spending: 10% The firm’s tax rate is 35%, and it has 1,000,000 outstanding shares and $8,000,000 in debt. We have estimated the WACC to be 15%. a. Calculate the EBIT, Depreciation, Changes in NWC, and net capital spending for the next four years.