Concord Co. is considering purchasing equipment that has an initial investment of $45000. The company's required rate of return is 12%. Annual cost savings are projected to be $18000 for year 1, $15000 for year 2, and $10000 for year 3. What is the investment's profitability index? Present Value Year of 1 at 12% PV of an Annuity of 1 at 12% 1 0.893 0.893 2 0.797 1.690 3 0.712 2.402 0.78. 1.74. 1.78. ○ 1.72.

Concord Co. is considering purchasing equipment that has an initial investment of $45000. The company's required rate of return is 12%. Annual cost savings are projected to be $18000 for year 1, $15000 for year 2, and $10000 for year 3. What is the investment's profitability index? Present Value Year of 1 at 12% PV of an Annuity of 1 at 12% 1 0.893 0.893 2 0.797 1.690 3 0.712 2.402 0.78. 1.74. 1.78. ○ 1.72.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 5PB: Mason, Inc., is considering the purchase of a patent that has a cost of $85000 and an estimated...

See similar textbooks

Similar questions

Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated revenue producing life of 4 years. Falkland has a cost of capital of 8%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?
Mason, Inc., is considering the purchase of a patent that has a cost of $85000 and an estimated revenue producing lite of 4 years. Mason has a required rate of return that is 12% and a cost of capital of 11%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?
Jasmine Manufacturing is considering a project that will require an initial investment of $52,000 and is expected to generate future cash flows of $10,000 for years 1 through 3, $8,000 for years 4 and 5, and $2,000 for years 6 through 10. What is the payback period for this project?
Buena Vision Clinic is considering an investment that requires an outlay of 600,000 and promises a net cash inflow one year from now of 810,000. Assume the cost of capital is 10 percent. Required: 1. Break the 810,000 future cash inflow into three components: a. The return of the original investment b. The cost of capital c. The profit earned on the investment 2. Now, compute the present value of the profit earned on the investment. 3. Compute the NPV of the investment. Compare this with the present value of the profit computed in Requirement 2. What does this tell you about the meaning of NPV?
A company is considering an investment that will cost $759,000 and have a useful life of 6 years. The cash flows from the project are expected to be $450,000 per year in the first two years then $170,000 per year for the last 4 years. If the appropriate discount rate is 16.0 percent per annum, what is the NPV of this investment (to the nearest dollar)? Select one: O a. $316870 O b. $321617 O c. $1834870 O d. $439045
Johnson Controls has a project with a cost of $7,000 and expected cash flow of stream of $2,000 at the end of year 1, $3,000 at the end of year 2, and $5,000 at the end of year 3. At a discount rate (WACC) of 12.08% what is the net present value (NPV) of this investment?Your answer should be between 7.32 and 16.60, rounded to 2 decimal places, with no special characters.
Lipsion Ltd company is thinking about investing in one of two potential new productsfor sale. The projections are as follows: year revenue/ product s revenue/ product v0 (150,000) outlay (150000) outlay1 14000 150002 24000 253333 44000 520004 84000 63333 Calculate NPV of both products (to 1 d.p.) assuming a discount rate of 7%. Then decide which product should be selected and why ?
An investment offers the following: a series of $1000 annual payments, starting one year from now, for a total of 12 payments. If your opportunity cost (as an EAR) is 5%, what is the investment worth to you today? Group of answer choices $11,079.20 $9,214.56 $10,103.26 $8,863.25 $10,241.19 Give typing answer with explanation and conclusion
The management of MJW Corporation is considering the purchase of a new machine costing $400,000. What is the Net Present Value for this investment, given the following info: The minimum desired rate of return = 10.0% The PV factors for $1 at compound interest of 10.0% for years 1 through 5 are: 1 = 0.909; 20.826; 3= 0.751; 4 = 0.683; 5 = 0.621 Use the following data to help determine the answer: Income From Operations $100,000 $40,000 $20,000 $10,000 $10,000 Year 12345 O negative $99,600 Opositive $55,200 Opositive $36,400 O negative $126,800 Net Cash Flow $180,000 $120,000 $100,000 $90,000 $90,000
Para Co. is reviewing the following data relating to an energy saving investment proposal: Cost P50,000 (nondepreciable) Residual value at the end of 5 years 10,000 Present value of an annuity of 1 at 12% for 5 years 3.60 Present value of 1 due in 5 years at 12% 0.57 39. What would be the annual savings needed to make the investment realize a 12% yield assuming that Para will realize the residual value at the end of year 5?
Oasis Entertainment Systems is setting up to manufacture a new line of video game consoles. The cost of the manufacturing equipment is OMR 1750000. Expected cash flows over the next four years are OMR 725000, OMR 850000, OMR 1200000, and OMR 1500000. Given the company's required rate of return of 15 percent, what is the NPV of this project? Select one: a. 3122607.27 OMR b. 4669806.27 OMR c. None of these d. 2919806.27 OMR e. 1169806.27 OMR
An investment has an installed cost of $527,630. The cash flows over the four-year life of the investment are projected to be $212,200, $243,800, $203,500 and $167,410, respectively. If the discount rate is 10%, at what discount rate is the NPV just equal to 0? (Input in percentage, keep 2 decimals. e.g. if you got 0.10231, input 10.23) Question 10 The Yurdone Corporation wants to set up a private cemetery business. According to the CFO, Barry M. Deep, business is "looking up". As a result, the cemetery project will provide a net cash inflow of $145,000 for the firm during the first year, and the cash flows are projected to grow at a rate of 4% per year forever. The project requires an initial investment of $1,900,000. The company is somewhat unsure about the assumption of a growth rate of 4% in its cash flows. At what constant growth rate would the company just break even if it still required a return of 11% on investment? (Input in percentage, keep 2 decimals. e.g. if you got…