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- Markoff Products is considering two competing projects, but only one will be selected. Project A requires an initial investment of $42,000 and is expected to generate future cash flows of $6,000 for each of the next 50 years. Project B requires an initial investment of $210,000 and will generate $30,000 for each of the next 10 years. If Markoff requires a payback of 8 years or less, which project should it select based on payback periods?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?Gardner Denver Company is considering the purchase of a new piece of factory equipment that will cost $420,000 and will generate $95,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further Instructions on internal rate of return in Excel, see Appendix C.
- 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?Redbird Company is considering a project with an initial investment of $265,000 in new equipment that will yield annual net cash flows of $45,800 each year over its seven-year life. The companys minimum required rate of return is 8%. What is the internal rate of return? Should Redbird accept the project based on IRR?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?
- Caduceus Company is considering the purchase of a new piece of factory equipment that will cost $565,000 and will generate $135,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return In Excel, see Appendix C.CAGELCO is considering the purchase of a new turbo generator set that will last 5 years with a cost of P 500, 000. Maintenancewill cost P 6,000 for the first year, decreasing by P 1, 000each year to P2,000 the 5thyear. If the interest rate is 8% per year, compounded annually, how much money should the company set aside for this machine? show your solutionCastillo’s Warehouse will need to purchase a new forklift for its warehouse operations three years from now, when its new warehouse facility becomes operational. If the price of the new forklift is $38,000 and Castillo's can invest its money at 7.25% compounded monthly, how much should it put aside today to achieve its goal?
- CircleCo is considering the purchase of new construction crane, which would cost approximately $400,000 initially. produce cash flows of $4,500 per month for the next 8 years and has a resale value of $50,000 in assets at the end of 8 years. i With an interest rate of 4.5% what is this project's net present value? li) What is this project's Internal Rate of Return? ili) How do you use the IRR to determine if a project should be accepted?Giant Equipment Ltd. is considering two projects to invest next year. Both projects have the same start-up costs. Project A will produce annual cash flow of $42 000 at the beginning of each year for eight years. Project B will produce cash flow of $48 000 at the end of each year for seven years. The company requires a 12% return. Required:a. Whichprojectshouldthecompanyselectandwhy?b. Which project should the company select if the interest rate is 14% andthe cash flow in Project B is also at the beginning of each year?Please give me subheading answer.Golden Country Homes are to install a street lighting that costs $120,000. Annualmaintenance costs are expected to be $65,000 for the first 20 years and $85,000 foreach year thereafter. The lighting will be needed for an indefinitely long period oftime. With an interest rate of 10% per year, what is the capitalized cost of thisproject?