Question

The clothing manufacturer, Twisted Pair, is considering introducing a line of cargo pants made entirely from hemp. The project costs $4.6 million and will generate cash flows of $1 million for 5 years.

If the interest rate is 4% annually, what is the project NPV?

Should the project be accepted? Why or why
not?

Answer #1

(NPV,
PI, and IRR
calculations)
Fijisawa Inc. is considering a major expansion of its product
line and has estimated the following cash flows associated with
such an expansion. The initial outlay would be
$2 comma 000 comma 0002,000,000,
and the project would generate incremental free cash flows
of
$600 comma 000600,000
per year for
77
years. The appropriate required rate of return is
66
percent.a. Calculate the
NPV.
b. Calculate the
PI.
c. Calculate the
IRR.
d. Should this project...

McCormick and company is also considering introducing two new
product lines to be made at the new factory (if it is purchased).
as a new member of MCS's finance team, you are asked to determine
whether McCormick and Company should invest in the two product line
expansions. Project A has lower future cash flows than project B,
but Project A is more closely related to McCormick's existing
product line, the company feels that it is less risky than project
B....

Read Book Company is the manufacturer of exercise machines and
is considering producing a new line of equipment in an effort to
increase its market share.
The new production line will cost $850,000 for manufacturing the
parts and an additional $280,000 is needed for installation.
The equipment falls into the MACRS 3-yr class, and would be sold
after four years for $350,000. The equipment line will generate
additional annual revenues of $600,000, and will have additional
annual operating expenses of...

Please show how you got all calculations
McCormick & Company is also considering introducing two new
product lines to be made at the new factory (if it is purchased).
As a new member of MCS's finance team, you are asked to determine
whether McCormick & Company should invest in the two product
line expansions. Project A has lower future cash flows than Project
B, but because Project A is more closely related to McCormick's
existing product line, the company feels...

Parker Products manufactures a variety of household products.
The company is considering introducing a new detergent. The
company's CFO has collected the following information about the
proposed product. (Note: You may or may not need to use
all of this information, use only the information that is
relevant.)
·
The project has an anticipated economic life of 4 years.
·
The company will have to purchase a new machine to produce the
detergent. The machine has an up-front cost (t...

Consider a hypothetical economy that has NO tax. ABC Ltd. is
considering investing in a 2-year project which is expected to
generate the following year-end cash flows: C1 = $110 million, C2 =
$115 million. The yearly discount rate for the project is 10%. The
initial cost of the project is $200 million.
(a) Compute the profit and NPV of the project.
(b) Based on the answer of part (a), should the project be
accepted? Explain.
(c) ABC’s cut-off period...

Apple is considering whether to build the “Global Store” in
Federation Square Melbourne today in 2019. Apple has already
purchased the land on the site and wants to make a decision about
whether to build on it. Assume the store will have a life of 20
years and will generate revenues of $32 million per year AUD over
the 20 years (with the first cash flow at the end of year 1). By
building the store Apple will attract negative...

] Burton, a manufacturer of snowboards, is considering replacing
an existing piece of equipment with a more sophisticated machine.
The following information is given. • The proposed machine will
cost $120,000 and have installation costs of $20,000. It will be
depreciated using a 3 year MACRS recovery schedule. It can be sold
for $60,000 after three years of use (before tax; at the end of
year 3). • The existing machine was purchased two years ago for
$95,000 (including installation)....

Carolyn Nesbitt, the CEO of Macrocorp, is considering a project
to expand the existing business into a new product line that
involves considerable up-front investments in new equipment as well
as an initial investment in net operating working capital. Her
executives’ cash flow projections are fairly aggressive with $500 M
in sales at the end of the first year increasing by 5% annually for
the next five years. Cost of goods sold is expected to be $250M in
the first...

Anchor Inc. has 1,000 bonds
outstanding that are selling for $911.66 each. The bonds carry a
6.0 percent coupon, pay interest semi-annually, and mature in 14
years. The common stock is priced at $40 a share and there are
40,000 shares outstanding. This year, the company paid an annual
dividend in the amount of $2.00 per share. The dividend growth rate
is estimated to be 5.0 percent indefinitely. The company is
considering a project that is equally as risky as...

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