Assume the followling Information for a capital budgeting proposal with a five-year time horizon:Initial investment:Cost of equipment (zero salvage value)$ 530, 000Annual revenues and costs:$ 300,000$ 130,000$ 50,000$ 40,000Sales revenuesVariable expensesDepreciation expenseFixed out-of-pocket costsClick here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tablesprovided.This proposal's Internal rate of return is closest to:Multiple Choice7%.12%.5%.10%.

Internal Rate of Return: It is a financial ratio that helps in measuring the potential and capacity…

Assume the following Information for a capital budgeting proposal with a five-year time horizon: Initial investment: Cost of equipment (zero salvage value) $ 530, 000 Annual revenues and costs: Sales revenues $ 300,000 Variable expenses Depreciation expense Fixed out-of-pocket costs $ 130, 000 $ 50,000 $ 40,000 Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided. This proposal's Internal rate of return Is closest Multiple Choice 7%. 12%. 5%. 10%.

Assume the following Information for a capital budgeting proposal with a five-year time horizon: Initial investment: Cost of equipment (zero salvage value) $ 530, 000 Annual revenues and costs: Sales revenues $ 300,000 Variable expenses Depreciation expense Fixed out-of-pocket costs $ 130, 000 $ 50,000 $ 40,000 Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided. This proposal's Internal rate of return Is closest Multiple Choice 7%. 12%. 5%. 10%.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 2PA

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Clearcast Communications Inc. is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated operating income, and net cash flow for each proposal are as follows: The companys capital rationing policy requires a maximum cash payback period of three years. In addition, a minimum average rate of return of 12% is required on all projects. If the preceding standards are met, the net present value method and present value indexes are used to rank the remaining proposals. Instructions 1. Compute the cash payback period for each of the four proposals. 2. Giving effect to straight-line depreciation on the investments and assuming no estimated residual value, compute the average rate of return for each of the four proposals. Round to one decimal place. 3. Using the following format, summarize the results of your computations in parts (1) and (2). By placing the computed amounts in the first two columns on the left and by placing a check mark in the appropriate column to the right, indicate which proposals should be accepted for further analysis and which should be rejected. 4. For the proposals accepted for further analysis in part (3), compute the net present value. Use a rate of 12% and the present value table appearing in Exhibit 2 of this chapter. 5. Compute the present value index for each of the proposals in part (4). Round to two decimal places. 6. Rank the proposals from most attractive to least attractive, based on the present values of net cash flows computed in part (4). 7. Rank the proposals from most attractive to least attractive, based on the present value indexes computed in part (5). 8. Based on the analyses, comment on the relative attractiveness of the proposals ranked in parts (6) and (7).
Assume the following information for a capital budgeting proposal with a five-year time horizon: Initial investment: Cost of equipment (zero salvage value) $ 500,000 Annual revenues and costs: $ 300,000 $ 130,000 $ 50,000 $ 40,000 Sales revenues Variable expenses Depreciation expense Fixed out-of-pocket costs Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. If the company's discount rate is 12%, then the net present value for this investment is closest to: Multiple Choice $211,600. $(31,350). $(111,600). $(211,600).
Assume the following information for a capital budgeting proposal with a five-year time horizon: Initial investment: Cost of equipment (zero salvage value) $ 460,000 Annual revenues and costs: Sales revenues $ 300,000 Variable expenses $ 130,000 Depreciation expense $ 50,000 Fixed out-of-pocket costs $ 40,000 Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using the tables provided. This proposal’s internal rate of return is closest to:
Assume the following information for a capital budgeting proposal with a five-year time horizon: Initial investment: Cost of equipment (zero salvage value) $ 570,000 Annual revenues and costs: Sales revenues $ 300,000 Variable expenses $ 130,000 Depreciation expense $ 50,000 Fixed out-of-pocket costs $ 40,000 Click here to view Exhibit 14B-1 and Exhibit 14B-2 to determine the appropriate discount factor(s) using the tables provided. This proposal’s internal rate of return is closest to: Multiple Choice 4%. 9%. 2%. 7%.
Assume the followling Information for a capital budgeting proposal with a five-year time horizon: Initial investment: Cost of equipment (zero salvage value) $ 560,000 Annual revenues and costs: $ 300, 000 $ 130,000 $ 50,000 $ 40,000 Sales revenues Variable expenses Depreciation expense Fixed out-of-pocket costs Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided. If the company's discount rate is 12%, then the net present value for this Investment is closest to: Multiple Choice $271,600. $(171,600). $1271,600). $191,350).
Assume the following information for a capital budgeting proposal with a five-year time horizon: Initial investment: Cost of equipment (zero salvage value) $ 530,000 Annual revenues and costs: Sales revenues $ 300,000 Variable expenses $ 130,000 Depreciation expense $ 50,000 Fixed out-of-pocket costs $ 40,000 Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided. If the company’s discount rate is 12%, then the net present value for this investment is closest to:
Assume the following information for a capital budgeting proposal with a five- year time horizon: Initial investment: Cost of equipment (zero salvage value) Annual revenues and costs: Sales revenues Variable expenses Depreciation expense Fixed out-of-pocket costs The payback period for this investment is closest to: Multiple Choice O O 2.71 years. 5.75 years. 3.54 years. 1.21 years. $ 460,000 $ 300,000 $ 130,000 $ 50,000 $ 40,000
Given the following attributes of an investment project with a five-year life: investment outlay, year0, $5,000; after-tax cash inflows, year 1, $800; year 2, $900; year 3, $1,500; year 4, $1,800; and year5, $3,200. (a) Use the built-in NPV function of Excel to estimate the NPV of this project. Roundyour answer to the nearest whole dollar. Assume an after-tax discount rate of 12.0%. (b) Estimatethe payback period, in years, for this project under the assumption that cash inflows occur evenlythroughout the year. Round your answer to one 1 decimal place.
Assume that a company Is consideringa capital Investment project with a four-year time horizon and the following cash flows: Cost of new equipment Working capital required Annual net cash inflows Maintenance and repairs in third year Salvage value of equipment in fourth year $ 210,000 $ 50,000 $ 100,000 $40,000 $ 35,000 Click here to vlew Exhlbit 14B-1 and Exhibit 14B-2, to determine the approprlate discount factor(s) using the tables provided. The working capital will be released at the end of the project and the company's required rate of return Is 17%. The net present value of the project Is closest to: Multiple Choice $34,830. $44.730. $(30,530). $60.730.
Assume the following information for a capital budgeting proposal with a five-year time horizon: Initial investment: Cost of equipment (zero salvage value) $ 590,000 Annual revenues and costs: Sales revenues $ 300,000 Variable expenses $ 130,000 Depreciation expense $ 50,000 Fixed out-of-pocket costs $ 40,000 This proposal’s simple rate of return is closest to: Multiple Choice 22%. 14%. 15%. 27%.
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 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. Assuming the company’s required rate of return is 12%, the profitability index of the project is closest to:
Given the following attributes of an investment project with a 5-year life and an after-tax discountrate of 12%, calculate both the IRR and MIRR of the project using the built-in functions in Excel:investment outlay, time 0, $5,000; after-tax cash inflows, year 1, $800; year 2, $900; year 3, $1,500;year 4, $1,800; and year 5, $3,200. What accounts for the difference in these two measures?