Assume that a company is considering a capital investment project with a four-year time horizon and...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Assume that a company is considering a capital investment project with a four-year time horizon and the following cash flows: Cost of new equipment $210,000 Working capital required $ 50,000 Annual net cash inflows $ 100,000 Maintenance and repairs in third year $ 40,000 Salvage value of equipment in fourth year $30,000 Click here to view Exhibit 148-1 and Exhibit 148-2, to determine the appropriate discount factor(s) using the tables provided. Assuming the company's required rate of return is 20%, the profitability index of the project is closest to: 1.19. 1.15. O 1.05. O 1.31. Assume that you are thinking about starting your own small business. You have made the following estimates regarding this opportunity: • You can rent a location for your business at a cost of $36,000 per year. • The equipment costs incurred to start the business would total $250,000. The equipment would have a 5-year useful life and a salvage value of $25,000. • Your company's estimated sales per year would equal $350,000 and its variable cost of goods sold would be 30% of sales. Other operating costs would include $60,000 per year in salaries, $4,000 per year for insurance, $25,000 per year for utilities, and a 3% sales commission. The simple rate of return for this investment opportunity is closest to: 25.8%. 18.4%. 14.9%. 21.2%. Assume that a company is considering a capital investment project with a four-year time horizon and the following cash flows: Cost of new equipment $210,000 Working capital required $ 50,000 Annual net cash inflows $ 100,000 Maintenance and repairs in third year $ 40,000 Salvage value of equipment in fourth year $30,000 Click here to view Exhibit 148-1 and Exhibit 148-2, to determine the appropriate discount factor(s) using the tables provided. Assuming the company's required rate of return is 20%, the profitability index of the project is closest to: 1.19. 1.15. O 1.05. O 1.31. Assume that you are thinking about starting your own small business. You have made the following estimates regarding this opportunity: • You can rent a location for your business at a cost of $36,000 per year. • The equipment costs incurred to start the business would total $250,000. The equipment would have a 5-year useful life and a salvage value of $25,000. • Your company's estimated sales per year would equal $350,000 and its variable cost of goods sold would be 30% of sales. Other operating costs would include $60,000 per year in salaries, $4,000 per year for insurance, $25,000 per year for utilities, and a 3% sales commission. The simple rate of return for this investment opportunity is closest to: 25.8%. 18.4%. 14.9%. 21.2%.
Expert Answer:
Related Book For
Foundations of Financial Management
ISBN: 978-1259194078
15th edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen
Posted Date:
Students also viewed these accounting questions
-
Assume a $40,000 investment and the following cash flows for two alternatives. Which of the alternatives would you select under the paybackmethod? Year Investment X Investment Y S6,000 8.000 9,000...
-
Assume a $90,000 investment and the following cash flows for two alternatives. a. Calculate the payback for investment A and B. b. If the inflow in the fifth year for Investment A was $25,000,000...
-
Assume a $250,000 investment and the following cash flows for two products: Which alternatives would you select under the payback method? Why? Year Product x Product y $90,000 $50,000 90,000 80,000...
-
Assume that global lightning on the Earth constitutes a constant current of 1.00 kA between the ground and an atmospheric layer at potential 260 kV. (a) Find the power of terrestrial lightning. (b)...
-
Troy has a credit card that charges 18% on outstanding balances and on cash advances. The closing date on the credit card is the first of each month. Last month Troy left a balance on his credit card...
-
Using the Maxwell distribution function, calculate the mean velocity projection (vx) and the mean value of the modulus of this projection (| vx |) if the mass of each molecule is equal to m and the...
-
At \(t=0\), electron 1 is shot out of an accelerator at a speed of \(2.0 \times 10^{3} \mathrm{~m} / \mathrm{s}\). At \(t=1.0 \mu \mathrm{s}\), electron 2 is shot out of the accelerator and travels...
-
Forte Inc. produces and sells theater set designs and costumes. The company began operations on January 1, 2016. The following transactions relate to securities acquired by Forte Inc., which has a...
-
11. If a,b,x,ye R,@ #1, is a cube root of unity and (a+b)=x+yo, then (b+aw)' equals: (a) y+x@ 6 (c) -y-xw 12. The value of S = sin- -icos- (c) y+yw (d) -x-ya 2k is: 7 (c)-i (d) i , then value of...
-
Daniel B. Butler and Freida C. Butler, husband and wife, file a joint return. The Butlers live at 625 Oak Street in Corbin, KY 40701. Dan's Social Security number is 111-11-1112, and Freida's is...
-
Baker's Son Sdn. bakes 150 units cupcakes at a cost of RM2.25 per cupcake. Generally an average of 4% of the cupcakes remain unsold at the end of the day and are donated. Required: If a markup of 55%...
-
You are considering purchasing an insurance policy that requires an annual premium payment of $ 8 0 0 for four years. The insurance company requires payments to be made at the beginning of each year,...
-
What are the emerging technologies and methodologies for detecting and characterizing mutations at high resolution, and how are they advancing our understanding of mutational processes?
-
Write a program that will read an integer input representing the 12 months in the calendar. Display the number of days in that month. Note that the only valid input is from 1 to 12. Display an...
-
Callable bond. Corso Books has just sold a callable bond. It is a thirty-year monthly bond with an annual coupon rate of 10% and $1,000 par value. The issuer, however, can call the bond starting at...
-
Beautify Limited, an established and well - known brand, selling make up and facial products, acquired Roland Limited, another popular brand well known in the industry. Roland Limited was acquired...
-
What do tool angles specification systems help in defining? a ) Chip thickness ratio b ) Cutting tool wear c ) The orientation and geometry of cutting edges d ) Workpiece hardness
-
In Problems 1522, find the principal needed now to get each amount; that is, find the present value. To get $750 after 2 years at 2.5% compounded quarterly.
-
Suggest two areas where the use of futures contracts is most common. What percent of the value of the underlying security is typical as a down payment in a futures contract?
-
Your aunt offers you a choice of $20,100 in 20 years or $870 today. If money is discounted at 17 percent, which should you choose?
-
Harper Engine Company needs $631,000 to take a cash discount of 2.5/20, net 75. A banker will loan the money for 55 days at an interest cost of $13,300. a. What is the effective rate on the bank...
-
You are to enter up the necessary accounts for the month of October from the following information relating to a small printing firm. Then balance-off the accounts and extract a trial balance as at...
-
What would have been the balance on the account of C. De Freitas in MC17 on 19 May 2017? (A) A debit balance of 265 (B) A credit balance of 95 (C) A credit balance of 445 (D) A credit balance of 265
-
Enter the following transactions of an antiques shop in the accounts and extract a trial balance as at 31 March 2017. 2017 March 1 Started in business with 8,000 in the bank. 2 Bought goods on time...
Study smarter with the SolutionInn App