6.6:05TB MC Qu. 14-55 (Algo) The management of Penfold Corporation...The management of Penfold Corporation is considering the purchase of a machine that would cost $310,000, would last for 6 years, and wouldhave no salvage value. The machine would reduce labor and other costs by $60,000 per year. The company requires a minimum pretax return of12% on all investment projects.© Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided.The net present value of the proposed project is closest to (Ignore income taxes.): (Round your intermediate calculations and final answer to thenearest whole dollar amount.)Multiple ChoiceО$(63,340)$(8.349)BO$(91,225)< Prev16 of 20Next>MacBook ProG Search or type URL

Step 1:Computation of NPV - Penfold CorporationParticularsPeriodAmountPV factor at 12%Present…

Answered: 6. 6:05 TB MC Qu. 14-55 (Algo) The…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Perit Industries has $155,000 to invest in one of the following two projects: Cost of equipment required Working capital investment required Annual cash inflows Salvage value of equipment in six years Life of the project Project A $ 155,000 $ 25,000 $ 8,600 6 1. Net present value project A 2. Net present value project B 3. Which investment alternative (if either) would you recommend that the company accept? X Answer is complete but not entirely correct. Project B $0 $ 155,000 $ 40,000 years The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries' discount rate is 14%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net present value of Project A. Note: Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount. 2. Compute the net present value of Project B. $(53,971) 70,527 X Project B $0…
Question 1. The management of Fine Electronics Company is considering to purchase an equipment to be attached with the main manufacturing machine. The equipment will cost Gh¢6,000 and will increase annual cash inflow by Gh¢2,200. The useful life of the equipment is 6 years. After 6 years it will have no salvage value. The management wants a 20% return on all investments. a. Compute net present value (NPV) of this investment project. b. Should the equipment be purchased according to NPV analysis?
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%
7. Problem 12.08 (New Project Analysis) A-Z dofice еВook You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price is $80,000, and it would cost another $12,000 to modify the equipment for special use by the firm. The equipment falls into the MACRS 3-year class and would be sold after 3 years for $28,000. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The equipment would require an $9,000 increase in net operating working capital (spare parts inventory). The project would have no effect on revenues, but it should save the firm $52,000 per year in before-tax labor costs. The firm's marginal federal-plus-state tax rate is 35%. a. What is the initial investment outlay for the spectrometer, that is, what is the Year 0 project cash flow? Enter your answer as a positive value. Round your answer to the nearest cent. 2$ b. What are the project's annual cash flows in Years 1, 2, and 3? Do not round intermediate calculations. Round your…
X company is considering investing P1,800,000 in a new machine that could give the company an annual net operating income of P120,000 for the next 6 years. At the end of its life, the machine has no salvage value. The company's required rate of return is 12%. Compute the following: 1. Accounting rate of return. 2. The payback period 3. The net present value of the project.
ces We are evaluating a project that costs $2,160,000, has a 8-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 90,900 units per year. Price per unit is $38.91, variable cost per unit is $24.00, and fixed costs are $863,000 per year. The tax rate is 21 percent and we require a return of 11 percent on this project. Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within ±10 percent. Calculate the best-case and worst-case NPV figures. Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. Best-case NPV Worst-case NPV
(Appendix 13A) The following data pertain to an investment; Cost of the Investment Life of the Project Annual Cost Savings Estimated Salvage Value Discount Rate $20,000 5 years $10,000 $1,000 15% What is the net present value of the proposed investment? (Ignore income taxes in this problem.) (Do not round your intermediate calculations and round the final answer to the nearest whole dollar.) Multiple Choice ($3,430) $14,019
13. A mining company using a 17% MARR is evaluating a new site for nickel mining. The site acquisition and equipment expenses are expected to cost P485M. Net annual receipts are estimated at P95M for the next 12 years after which the mine will be depleted. Clean up and biodiversity restoration is anticipated to cost P18M per year for the succeeding three years. Assess this venture using the ERR method. (Ans. Venture is not recommended, 16.72%)
:6: }; Cardinal Company is considering a five-year project that would require a $3,025,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 16%. The project would provide net operating income in each of five years as follows: F1 Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other out- of-pocket costs Depreciation Total fixed expenses Net operating income 10. If the equipment had a salvage value of $300,000 at the end of five years, would you expect the project's net present value to be higher, lower, or the same? 2 @ (Hint: Use Microsoft Excel to calculate the discount factor(s).) O Higher O Lower O Same W S F2 X 3 E 80 F3 D $ 4 C a F4 R $610,000 605,000 F olo 50 % V < Prev 9 $2,737,000 1,001,000 1,736,000 F5 1,215,000 $ 521,000 T G ^ 6 S 10 C F6 of 10 Y B & 7 H F7 Next + U N 8 DII J F8 - DD ( 9 F9 K M 0 A F10 L 4 F - P
Question: The management of Fine Electronics Company is considering to purchase an equipment to be attached with the main manufacturing machine. The equipment will cost $6,000 and will increase annual cash inflow by $2,200. The useful life of the equipment is 6 years. After 6 years it will have no salvage value. The management wants a 20% return on all investments. Required: Compute net present value (NPV) of this investment project. Should the equipment be purchased according to NPV analysis? DONOT SOLVE ON EXCEL
Year 01234 Proj Y Proj Z ($420,000) ($420,000) 400,000 182,000 185,000 156,000 146,000 175,000 The projects provide a necessary service, so whichever one is selected is expected to be repeated into the foreseeable future. Both projects have an 11% cost of capital. 6. What is each project's initial NPV without replication? 7. What is each project's equivalent annual annuity? 8. Now apply the replacement chain approach to determine the shorter projects' extended NPV. Which project should be chosen? 9. Now assume that the cost to replicate Project Y in 2 years will increase to $600,000 because of inflationary pressures. How should the analysis be handled now, and which project should be chosen?
Your Company is interest in buying a new project that will last for 8 years. The projects internal rate of return is 5%. The project will generate annual operating cash inflows of $20,000. What is the most the company should pay for the equipment needed for this project? It will have no salvage value. Group of answer choices $128,000 $129,260 $13,540 $135,723 $122,797

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