Machine A Machine B R100 000 R110 000 Initial cost 5 years 5 years Expected economic life R10 000 0. Expected disposal/residual value R. R Expected net cash inflows 34 000 33 000 End of: Year 1 27 000 33 000 Year 2 Year 3 32 000 33 000 Year 4 30 000 33 000 Year 5 26 000 33 000 Depreciation per year 18 000 22 000 The company estimates that its cost of capital is 14%. Calculate the payback period for Machine A and B (answers must be expressed in years, and days). 2.1 2.2 Calculate the accounting rate of return (on average investment) for Machine A. (answer roun to 2 decimal places).
Q: We have a $1,000, 8-year, 5% bond that is currently priced at 104 (104% of the par value or $1,040).…
A: As per Bartleby guidelines, If multiple questions are posted , only first 1 question will be…
Q: Consider a European Call Option with a strike of 82. The current price of the underlying asset is…
A: Here, Strike Price is $82 Current Price is $80 Time To Expiry is 5 months Value of Call Option is…
Q: ana has to pay RM1,200 every month for 360 months to settle a housing loan at 4% compounded…
A: Here we will use the concept of time value of money. As per the concept of time value of money the…
Q: Which method of reporting Operating Cash Flows is used more often by companies? Multiple Choice…
A: Cash generated by a company's routine operations is known as operating cash flow. Investors place a…
Q: Answer within 30minutes please Sarah invests $900 into her bank account with an annual interest…
A: Rule 72 refers to the concept or the rule which makes it a simple calculation for the person to…
Q: A series of equal end-of-quarter deposits of $1,000 extends over a period of three years. Compute…
A: Annuity is a number of payments of equal amounts at equal intervals of time. The future worth of…
Q: m for a corporation has decided to move forward with a project that will cost $82 million and now…
A: Weighted Average Cost of Capital = Cost of equity * Weight of equity +Cost of debt * Weight of debt.
Q: ABC Inc expects to have EPS (earning per share) of $5 in the coming year. The firms plan to pay all…
A: Old price of stock is $50 Dividend is $5
Q: 3b. Inflation is expected to average 2.4% per year for the next 44 years. What percentage of the…
A: We have to find the % loss in the purchasing power of the dollar under the given inflation scenario.
Q: The NPV of a project is $8,000. If the IRR is 12%, which of the following is the required rate of…
A: Solution:- Net Present Value (NPV) means the net value in today’s term after deducting present value…
Q: Palmer products has outstanding bonds with an annual 8% coupon. The bonds have a par value of $1,000…
A: Solution: Yield to maturity (YTM) means the rate of return yield by the bond if it is held till…
Q: O. /4
A: Method 1: 3/6..dividing numerator and denominator by 3 Then It is equal to 1/2 1/2 > 1/4…
Q: A gold-mining firm is concerned about short-term volatility in its revenues. Gold currently sells…
A: Data given: Current market price of gold per ounce = $2100 Upper Price of gold per ounce = $2200…
Q: BMW just paid an annual dividend of 2 per share. Management has promised shareholders to increase…
A: The current price of the stock can be calculated as per the dividend growth model
Q: The difference between the forward rate and the expected future spot rate is called:
A: The forward rate is a price at which the transaction or settlement will take place in the future. It…
Q: Compute the price of a share of stock that pays a 2 per year dividend and that you expect to be able…
A: Shares, often known as stocks or stock shares, indicate a corporation's equity ownership divided…
Q: duration of this bond?
A: A zero-coupon bond has a price of $350 with a face value of $1,000. The maturity period is 9.55…
Q: At the beginning of the year you deposit $3,000 in a savings account. How much will accumulate in 3…
A: Future value refers to the value of current assets at some future date on the basis of the assumed…
Q: Normal backwardation maintains that, for most commodities, there are natural hedgers who desire to…
A: Futures options are a type of asset that allows traders to buy and sell futures contracts at…
Q: The following is an amortization schedule for a loan of $5000 to be repaid over two years at 7%…
A: Data given: Loan amount = $5000 N=2 years Rate = 7% compounded semiannually Working Note #1 Given…
Q: 3000.00 120.00 706.47 706.47 706.47 706.47 2293.53 C 120.00 A B 120.00 D 2205.32 794.68 0.00 120.00…
A: Sinking fund is amount being deposited each period to achieve the future value required in the…
Q: Jason Corporation has invested in a machine that cost $80,000, that has a useful life of eight…
A: Given: Particulars Amount Initial cost $80,000 Use life 8 Payback period 5
Q: You have borrowed $40,000 to buy a new car and have an 8%, 48 month loan. How much interest will you…
A: A loan amortization schedule can be defined as a table showing the periodic repayment of principal,…
Q: 7d. A large profitable corporation is considering à capital InVe two-year project period. The annual…
A: The after-tax cash flow is the residual income of the company. To calculate the after-tax cash flow…
Q: what would be the predicted new bond price according to duration?
A: Bond valuation refers to a method which is used to compute the current value or present value (PV)…
Q: Joshua Industries is considering a new project with revenue of $478,000 for the indefinite future.…
A: Adjusted present value means that we have to determine the NPV (net present value) of a project in…
Q: The Seattle Corporation has been presented with an investment oppore yield end of year cash flows of…
A: The NPV of the investment is calculated as present value of cash inflows less initial investment
Q: The expected value and the standard deviation of returns for asset A is 12.7% and 2.3% 12.7% and…
A: Expected return = Sum of weighted probability return. Standard deviation = Square root of variance.
Q: Okay credit is between
A: A credit score is a three-digit figure that varies between 300 and 900. The credit reporting…
Q: Malenia is looking to purchase a 10-year, $10,000 face value zero coupon bond. Assuming the current…
A: Price of zero-coupon bond = Face value / (1 + r) n Wherre, r = interest rate N = Time period a)…
Q: Using the same information, what is the amount of the S Corporation premium if the cash flow for the…
A: Cash flow is basically the inflow and outflow of money, where we deal with operating activities,…
Q: cash flow on
A: Cash flows refer to the exchange of money in and out of the company. It shows the company’s…
Q: Weston Industries has a debt–equity ratio of 1.5. Its WACC is 11 percent, and its cost of debt is 7…
A: Weighted average cost of capital (WACC) When a firm has both equity and debt as its sources of…
Q: Given the following information, what is the financial break-even point? Initial investment =…
A: Given that: Fixed cost=$58000 price=$130 variable cost per unit=$95 Thus formula of financial break…
Q: Suppose we need to make 10 end-of-year payments of $5, 000 to pay off a loan. Assuming the rate of…
A: Interest rate = 5% Loan amount = $5,000 Time period = 10 years
Q: The Seattle Corporation has been presented with an investment yield end of year cash flows of…
A: NPV is calculated as sum of present value of cash inflows less initial investment
Q: Consider the following two securities X and Y. Security Retum Standard deviation Beta 1.5 20% 10%…
A: The systematic risk of the portfolio is a measure of the beta of the portfolio
Q: Five years ago, you invested in the Future Investco Mutual Fund by purchasing 1,100shares of the…
A: Solution:- Compound rate of return means the annual rate of return earned. We know, amount at…
Q: 15% n=7 Initial Cost (A)100 (B)60 (C)80 Uniform Annual Benefit (A)26 (B)15 (C)17 a)…
A: Budget is the process by which a firm assesses truly massive projects or investments.A new plant's…
Q: All of the following statements regarding common stock valuation are correct EXCEPT I. fundamental…
A: Fundamental analysis seeks to estimate the intrinsic value of the stock through valuation models…
Q: The expected returns for the two assets are given below: Asset G 17% Year Asset F 2013 16% 2014 17…
A: Year Asset F Asset G 2013 16% 17% 2014 17% 16% 2015 18% 15% 2016 19% 15%
Q: 21. Aluminum maker Alcoa has a beta of about 1.9, whereas Hormel Foods has a beta of 0.37. If the…
A: First, we will calculate the Cost of Equity by applying the required formula for both companies and…
Q: Consider the following cash flows. The interest rate is 10%. What is the total wealth after 2 years…
A: Given, we are supposed to find out the cashflow price and the amount which is to be received after…
Q: Which of the following generally indicates an improvement in a company’s financial position? The…
A: Financial position is defined as the current balances of the recorded the equities, liabilities, and…
Q: Using the balance sheet provided, what is the decimal value for the XYZ Company Balance Sheet Assets…
A: Balance Sheet: A balance sheet is a statement which provides financial data related to the assets,…
Q: A call center agent receiving a monthly salary of P21,000 with mandatory annual deductions of…
A: Gross salary is a monthly or annual salary of an individual before deducting any deductions
Q: The legal document that spells out the rights of the bond holders and terms of a corporate bond is…
A: Solution:- When a company issues bond, it signs an agreement between the company and the bond…
Q: Compute the interest paid on a 4-year lease for a $25,894 car if the annual rate of depreciation is…
A: Present Value of lease is $25,894 Time period is 4 years Annual interest rate is 3% To Find:…
Q: ROUND ALL ANSWERS TO NEAREST DOLLAR How much will $10,000 grow to in 3 years, assuming an Interest…
A: Note: Since you have specifically used question number 10 to get solved, so we are solving the same…
Q: You purchase an RV by making a down payment of $10,700. The terms of your finance agreement have an…
A: Cash Price = Down Payment + total Installment amount paid
Step by step
Solved in 4 steps
- MACHINE A MACHINE B INITIAL COST R100 000 R110 000 EXPECTED ECONOMIC LIFE 5 YEARS 5 YEARS EXPECTED DISPOSAL/RESIDUAL VALUE R10 000 EXPECTED NET CASH INFLOWS R R END OF: YEAR 1 34 000 33 000 YEAR 2 27 000 33 000 YEAR 3 32 000 33 000 YEAR 4 30 000 33 000 YEAR 5 26 000 33 000 DEPRECIATION PER YEAR 18 000 22 000 COMPANY ESTIMATES COST CAPITAL = 14% 2) Calculate the accounting rate of return (on average investment) for Machine A. (answer rounded offto 2 decimal places).MACHINE A MACHINE B INITIAL COST R100 000 R110 000 EXPECTED ECONOMIC LIFE 5 YEARS 5 YEARS EXPECTED DISPOSAL/RESIDUAL VALUE R10 000 EXPECTED NET CASH INFLOWS R R END OF: YEAR 1 34 000 33 000 YEAR 2 27 000 33 000 YEAR 3 32 000 33 000 YEAR 4 30 000 33 000 YEAR 5 26 000 33 000 DEPRECIATION PER YEAR 18 000 22 000 COMPANY ESTIMATES COST CAPITAL = 14% 4)Calculate the internal rate of return for Machine B.Find the present value of the stream of cash flows shown in the follwing tables. Assume that the firms opportunity cost is 15% A: Year Cash Flow 1 -$2000 2 $3000 3 $3900 4 $6100 5 $8100 B: Year Cash Flow 1 $11000 2-5 $5000/yr 6 $7000 C: Year Cash Flow 1-5 $12000/yr 6-10 $8100/yr
- 1. For the following cash flow compute: Investment Annual operating Cost Annual Revenues Operating cost will increase by Arithmetic Gradient of G-$500 annually from the second year thru the 6th year Salvage Value at the end of 6 year Investment life n-6 years MARR= 10% $65,000 42,000 60,000 3,000 Hint for IRR use 20% Draw the cash-flow Diagram and compute PW,AW,FW b. IRR a. C. ERR1. For the following cash flow compute: Investment $65,000 42,000 60,000 Annual operating Cost Annual Revenues Operating cost will increase by Arithmetic Gradient of G=$500 annually from the second year thru the 6 year Salvage Value at the end of 6 year Investment life n=6 years MARR= 10% 3,000 Hint for IRR use 20% a. Draw the cash-flow Diagram and compute PVW AW.FW b. IRR C. ERRUse Annual Cash Flow Analysis to choose which Alternative should the company choose, if the interest rate 12%. Data Alt. A Alt. B Alt. C Useful Life, Years 13 11 First Cost $2,300,000 $2,780,000 $2,540,000 Salvage Value $82,000 $118,000 $97,000 Annual Benefit $580,000 $670,000 $650,000 M&O $65,000 $78,000 $71,000 M&O Gradient $11,000 $15,000 $12,500
- calculate the net present value; Initial capital investment 180,000 Estimated useful life 3 years Estimated annual cash inflow each year 80,000 Desired rate of return 10% Assume straight-line depreciation in all computations, and ignore income taxes.Cost of plant R3 600 000Import duty R 900 000Installation cost R 300 000Net cash flows Year 1-10 R1 400 000 per annum (excluding residual value)Residual/scrap value R1 200 000The company uses straight-line depreciation. The cost of capital for projects of similar risk is 18%. 2.1 Calculate the investment’s Accounting Rate of Return (ARR). Briefly explain if the ARR is acceptable or not based on a target rate of return of 40%. Assume a payback period of 4 years. Determine the payback period and state if the investment isacceptable or not. Calculate and comment on the viability of the proposed investment based on the net present value(NPV) method. Discuss whether the advantages of using the NPV method outweigh the disadvantagesFind teh present value of the streams of cash flows shown in the following table. Assume that the firms opportunity cost is 14% A: Year Cash Flow 1 -$2100 2 2900 3 4000 4 5900 5 8200 B: Year Cash Flow 1 $9000 2-5 $5000/yr 6 $7200 C: Year Cash Flow 1-5 $12000/yr 6-10 $8000/yr The presevent vaule of stream A, B, and C
- Vista Limited intends purchasing a new machine and has a choice between the following two machines:Equipment AEquipment BInitial costR220 000R240 000Expected useful life5 years5 yearsScrap valueNilNilExpected net cash inflows:RREnd of:Year 155 00070 000Year 260 00070 000Year 362 00070 000Year 460 00070 000Year 570 00070 000The company estimates that its cost of capital is 12%. Required:2.1 Calculate the Payback Period of both equipment. (Answers must be expressed in years, months and days). 2.2 Calculate the Accounting Rate of Return (on initial investment) for both equipment A and B. (Answers must be expressed to 2 decimal places). 2.3 Calculate the Net Present Value of each equipment. (Round off amounts to the nearest Rand.) 2.4 Calculate the Internal Rate of Return of Equipment B.1.) Accounting measures of performance Consider an asset with the following cash flows: Cash flows ($ millions) Year 0 -12 1 2 3 +5.20 +4.80 +4.40 Table Summary: The heading Period spans columns 2 through 5. The firm uses straight-line depreciation. Thus, for this project, it writes off $4 million per year in years 1, 2, and 3. The discount rate is 10%. a. Show that the project's book profitability is its true profitability.A Ltd. is considering a Project having a life of 5 year with following cash flows Project I 30,000 Outflow Inflow T-1 T-2 8,000 9,000 T-3 T-4 T-5 9,000 7,000 5,000 P.V. Table Year 10% 909 20 269 309% 35%6 741 .833 .794 796 2. .826 .694 .630 500 592 751 .683 549 406 301 579 455 482 397 350 .621 402 315 269 223 Calculate IRR of the above project.