The Concord Company is planning to purchase $491,000 of equipment with an estimated 7-year life and no estimated salvage value.The company has projected the following annual cash flows for the investment:Projected CashYearFlows1$222,0002146,0003116,000452,100570,000640,500748,700Total$695,300Click here to view the factor table.Calculate the net present value of the proposed equipment purchase. Concord uses a 11% discount rate. (For calculation purposes,use 4 decimal places as displayed in the factor table provided and round final answer to O decimal place, e.g. 58,971.)Net present value+A

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Answered: The Concord Company is planning to…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 22E

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Similar questions

Garnette Corp is considering the purchase of a new machine that will cost $342,000 and provide the following cash flows over the next five years: $99,000, $88,000, $92,000. $87,000, and $72,000. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return in Excel. see Appendix C.
Consolidated Aluminum is considering the purchase of a new machine that will cost $308,000 and provide the following cash flows over the next five years: $88,000, 92,000, $91,000, $72,000, and $71,000. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return in Excel, see Appendix C.
Gallant Sports s considering the purchase of a new rock-climbing facility. The company estimates that the construction will require an initial outlay of $350,000. Other cash flows are estimated as follows: Assuming the company limits its analysis to four years due to economic uncertainties, determine the net present value of the rock-climbing facility. Should the company develop the facility if the required rate of return is 6%?
Roberts Company is considering an investment in equipment that is capable of producing more efficiently than the current technology. The outlay required is 2,293,200. The equipment is expected to last five years and will have no salvage value. The expected cash flows associated with the project are as follows: Required: 1. Compute the projects payback period. 2. Compute the projects accounting rate of return. 3. Compute the projects net present value, assuming a required rate of return of 10 percent. 4. Compute the projects internal rate of return.
San Lucas Corporation is considering investment in robotic machinery based upon the following estimates: a. Determine the net present value of the equipment, assuming a desired rate of return of 10% and annual net cash flows of 700,000. Use the present value tables appearing in Exhibits 2 and 5 of this chapter. b. Determine the net present value of the equipment, assuming a desired rate of return of 10% and annual net cash flows of 500,000, 700,000, and 900,000. Use the present value tables (Exhibits 2 and 5) provided in the chapter in determining your answer. c. Determine the minimum annual net cash flow necessary to generate a positive net present value, assuming a desired rate of return of 10%. Round to the nearest dollar. d. Interpret the results of parts (a), (b), and (c).
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?
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?
he Novak Company is planning to purchase $502,100 of equipment with an estimated seven-year life and no estimated salvage value. The company has projected the following annual cash flows for the investment. Year Projected Cash Flows 1 $193,500 2 141,500 3 94,500 4 79,200 5 79,200 6 45,000 7 45,000 Total $677,900 (a) Calculate the payback period for the proposed equipment purchase. Assume that all cash flows occur evenly throughout the year. Payback period years and months. (b) If Novak requires a payback period of three years or less, should the company make this investment? The company should notshould make this investment.
The Marigold Company is planning to purchase $577,000 of equipment with an estimated seven-year life and no estimated salvage value. The company has projected the following annual cash flows for the investment. Year 1 2 3 456 7 Total Projected Cash Flows $214,000 169,500 124,500 Payback period 55,200 55,200 48,500 The company 48,500 (a) Calculate the payback period for the proposed equipment purchase. Assume that all cash flows occur evenly throughout the year. $715,400 years and (b) If Marigold requires a payback period of 4 years or less, should the company make this investment? months. make this investment.
Stomberg Corporation has provided the following data concerning an investment project that it is considering: Initial investment Annual cash flow Salvage value at the end of the project Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using the tables provided. The life of the project is 4 years. The company's discount rate is 10%. The net present value of the project is closest to: $184,000 $579,982 O$29,982 $20,420 $ 550,000 $ 180,000 per year 14,000
The Amani Company is planning a $200,000 equipment investment that has an estimated eight-year life with no estimated salvage value. The company has projected the following annual cash flows for the investment. Year Cash Inflows $120,000 $70,000 $60,000 $60,000 $60,000 Total $370,000 1 4. Assuming that the cash inflows occur evenly over the year, what is the payback period for the investment? (Ignore income taxes in this problem.)
Stomberg Corporation has provided the following data concerning an investment project that it is considering: Initial investment Annual cash flow Salvage value at the end of the project $ 550,000 $ 180,000 per year 14,000 The life of the project is 4 years. The company's discount rate is 10%. The net present value of the project is closest to: $184,000 $579,982 O $29,982 $20,420

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