8. Maxmillan Corp is planning to buy a new computer system for $800,000 with a useful life of six years. At the end of six years, the system will have no value. Over the six years the system will save them $240,000 each year for the first three years and $120,000 each year for the last three years. a. What is the NPV of the project if Maxmillan requires a return of 16%? b. What is the IRR for this project? c. At what required rate of return is the project's NPV = 0? d. How are NPV and IRR related? e. At a required rate of return of 16%, is the project acceptable? %3D
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- A new computer system will require an initial outlay of $15,000 but it will increase the firm's cash flows by $4,000 a year for each of the next 8 years. Is the system worth installing if the required rate of return is 8 percent? What if it is 13 percent? How high can the discount rate be before you would reject the project? RépondreTransférerA new computer system will require an initial outlay of $15,000 but it will increase the firm's cash flows by $4,000 a year for each of the next 8 years. Is the system worth installing if the required rate of return is 8 percent? What if it is 13 percent? How high can the discount rate be before you would reject the project?Assumption Corporation is considering replacing an obsolete machine with a new machine. The new machine would cost P250,000 and would have a ten-year useful life. The new machine would cost P12,000 per year to operate and maintain, but would save P55,000 per year in labor and other costs. The old machine can be sold now for P10,000. The simple rate of return on the new machine is closest to: a. 17.9% b. 7.5% c. 22.0% d. 7.2%
- PQR, Inc., is considering investing $160,000 in a machine that may last 4 years with no residual value. The new machine will generate annual operating income of $60,000 per year for 4 years. What is the Simple rate of return? OA. 12.5% B. 10.5% O C. 14% OD. 15.66%You can make an investment that will immediately cost $52,000. If you make the investment, your after-tax operating profit will be $13,000 per year for five years. After the five years, the profit will be zero, and the scrap value also will be zero. You will finance the investment with internally generated funds and receive the profit at the end of each year. The net present value equation for this investment is: NPV=$| (Carefully enter your answer as an algebraic expression, using the proper notation in the proper format. Do not use the letter x to denote the multiplication sign.)A new heat exchanger will cost $220,000, and it will save $50,000 annually. After 10 years it will have no salvage value. The firm’s real interest rate is 15%. If inflation is 5%, is this project worth doing? Analyze in actual and constant value dollars.
- You are evaluating a project that will cost $502,000, but is expected to produce cash flows of $127,000 per year for 10 years, with the first cash flow in one year. Your cost of capital is 10.7% and your company's preferred payback period is three years or less. a. What is the payback period of this project? b. Should you take the project if you want to increase the value of the company? a. What is the payback period of this project? The payback period is years. (Round to two decimal places.) b. Should you take the project if you want to increase the value of the company? (Select from the drop-down menus.) If you want to increase the value of the company you take the project since the NPV is will not will3.) Diamond Company is considering purchasing a machine that would cost $756,000 and have a useful life of 8 years. The machine would reduce cash operating costs by $132,632 per year. The machine would have a salvage value of $151,200 at the end of the project. Note: Assume the rate of NPV is 15%. Compute: Net present value Internal rate of return Profitability index Payback period Simple rate of return Should the company purchase the machine? Why or why not?You are evaluating a project that will cost $508,000, but is expected to produce cash flows of $126,000 per year for 10 years, with the first cash flow in one year. Your cost of capital is 11.3% and your company's preferred payback period is three years or less. a. What is the payback period of this project? b. Should you take the project if you want to increase the value of the company? a. What is the payback period of this project? The payback period is years. (Round to two decimal places.)
- You are evaluating a project that will cost $474,000, but is expected to produce cash flows of $130,000 per year for 10 years, with the first cash flow in one year. Your cost of capital is 11.5% and your company's preferred payback period is three years or less. a. What is the payback period of this project? b. Should you take the project if you want to increase the value of the company?You are evaluating a project that will cost $543,000, but is expected to produce cash flows of $127,000 per year for 10 years, with the first cash flow in one year. Your cost of capital is 10.9% and your company's preferred payback period is three years or less. a. What is the payback period of this project? b. Should you take the project if you want to increase the value of the company?JFINEX Corporation is considering a new project that will cost 150,000. The project is expected to generate equal annual cash flows over the next seven years. The required return for this project is 8%. What is the project's internal rate of return if the profitability index is 1.1?" Lower than 8% Higher than 8% 8% None of the above