Answer all part. I will rate from 2 account A Water Treatment Company is considering the installation of new magnetic flow meters in one of its pipelines. If the company goes ahead with the project, it will spend $55,000 each year for fiveyears, starting at year 3 from now at an interest (Compound) rate of 20%From the given information, draw a CASHFLOW on a piece of paper to HELP YOU answer the following questions:What is the Capital (Investment) Cost of the project at year 0 =How much will the comapany pay at year 1 =How much will the company pay at year 2 =How much will the company pay annually from year 3 till year 7 =If the Annual Value shifted to Present Value at year 2, what is Present value at year 2 =What is the Present Worth (Present Value at year 0) of the investment =

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Answered: A Water Treatment Company is…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 4P

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If a copy center is considering the purchase of a new copy machine with an initial investment cost of $150,000 and the center expects an annual net cash flow of $20,000 per year, what is the payback period?
The Ham and Egg Restaurant is considering an investment in a new oven that has a cost of $60,000, with annual net cash flows of $9,950 for 8 years. The required rate of return is 6%. Compute the net present value of this investment to determine whether or not you would recommend that Ham and Egg invest in this oven.
Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided manufacturing system. The annual net cash benefits and savings associated with the system are described as follows: The system will cost 9,000,000 and last 10 years. The companys cost of capital is 12 percent. Required: 1. Calculate the payback period for the system. Assume that the company has a policy of only accepting projects with a payback of five years or less. Would the system be acquired? 2. Calculate the NPV and IRR for the project. Should the system be purchasedeven if it does not meet the payback criterion? 3. The project manager reviewed the projected cash flows and pointed out that two items had been missed. First, the system would have a salvage value, net of any tax effects, of 1,000,000 at the end of 10 years. Second, the increased quality and delivery performance would allow the company to increase its market share by 20 percent. This would produce an additional annual net benefit of 300,000. Recalculate the payback period, NPV, and IRR given this new information. (For the IRR computation, initially ignore salvage value.) Does the decision change? Suppose that the salvage value is only half what is projected. Does this make a difference in the outcome? Does salvage value have any real bearing on the companys decision?
Your company is planning to purchase a new log splitter for is lawn and garden business. The new splitter has an initial investment of $180,000. It is expected to generate $25,000 of annual cash flows, provide incremental cash revenues of $150,000, and incur incremental cash expenses of $100,000 annually. What is the payback period and accounting rate of return (ARR)?
Bouvier Restaurant is considering an investment in a grill that costs $140,000, and will produce annual net cash flows of $21,950 for 8 years. The required rate of return is 6%. Compute the net present value of this investment to determine whether Bouvier should invest in the grill.
A restaurant is considering the purchase of new tables and chairs for their dining room with an initial investment cost of $515,000, and the restaurant expects an annual net cash flow of $103,000 per year. What is the payback period?
Below is information about a new textile factory investment project. Accordingly, the initial amount of the investment is 50,000,000 USD, the net cash flows it will provide each year is 15,000,000 USD, and the cost of capital (discount rate) is 15%. Is it possible to invest in this project? Make your investment decision using the net present value method. You can use annuity tables to discount cash flows or calculate them yourself. NOTE : Time period is 5 years please solve that in details
Jasmine Manufacturing is considering a project that will require an initial investment of $53,700 and is expected to generate future cash flows of $10,100 for years 1 through 3, $8,400 for years 4 and 5, and $2,200 for years 6 through 10. What is the payback period for this project? years
Salalah Methanol Co. has bought some new machinery at a cost of 1250000 OMR. The impact of the new machinery will be felt in the additional annual cash flows of 375000 OMR over the next five years. What is the payback period for this project? If their acceptance period is three years, will this project be accepted?
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Evelyn's Exotics and Aquatics Shoppe is considering investing $540,000 in a project. The project is expected to generate a cash inflow of $90,000 in the first year, $180,000 in the second year, $540,000 in the third year, $450,000 in the fourth year, and $0 in subsequent years. Calculate the project’s payback period in years. Round your answer to two decimal places in years. For example, if the payback period is 1 year and 6 months (1.5 years), enter “1.50”. If the payback period is 2 years and 3 months (2.25 years), enter “2.25”. If the payback period is 3 years and 4 months (3.3333 years), enter “3.33”.
Jan Booth is considering investing in either a storage facility or a car wash facility. Both projects have a five-year life and require an investment of $360,000. The cash flow patterns for each project are given below. Storage facility: Even cash flows of $120,000 per year Car wash: $112,500, $142,500, $60,000, $120,000, and $90,000 Required: Calculate the payback period for the storage facility (even cash flows).years Calculate the payback period for the car wash facility (uneven cash flows). Round your answer to three decimal places. years Which project should be accepted based on payback analysis? What if a third mutually exclusive project, a laundry facility, became available with the same investment and annual cash flows of $150,000? Now which project would be chosen?

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