Question

A project will produce an operating cash flow of $358,000 a year for four years. The initial cash outlay for equipment will be $785,000. The net aftertax salvage value of $42,000 will be received at the end of the project. The project requires $78,000 of net working capital that will be fully recovered when the project ends. What is the net present value of the project if the required rate of return is 14 percent?

$237,613 |
||

$251,159 |
||

$274,300 |
||

$290,184 |
||

$309,756 |

Assume a machine costs $540,000 and lasts eight years before it is replaced. The operating cost is $37,500 a year. Ignore taxes. What is the equivalent annual cost if the required rate of return is 14 percent? (Hint: the EAC should account for both initial investment and annual operating costs)

$125,516.07 |
||

$138,247.15 |
||

$153,907.81 |
||

$166,470.92 |
||

$178,503.40 |

Answer #1

**Solution :**

**1. The Net Present value of the project = $
251,159**

**The solution is Option 2 = $ 251,159**

**2.The Equivalent Annual Cost of the machine = $
153,907.81**

**Thus the solution is Option 3 = $
153,907.81**

Please find the attached screenshots of the excel sheet containing the detailed calculation for the solution.

A project will produce an operating cash flow of $283,000 a year
for four years. The initial cash outlay for equipment will be
$631,000. An aftertax salvage value of $42,000 for the equipment
will be received at the end of the project. The project requires
$56,000 of net working capital that will be fully recovered. What
is the net present value of the project if the required rate of
return is 16 percent?
$166,218.32
$159,009.65
$151,870.15
$143,218.96
$137,642.18

A project will produce an operating cash flow of $475,000 a year
for four years. The initial cash outlay for equipment will be
$1,080,000. The net aftertax salvage value of $81,000 will be
received at the end of the project. The project requires $142,000
of net working capital up front that will be fully recovered. What
is the net present value of the project if the required rate of
return is 14 percent?
$294,047.25
$308,116.57
$281,547.93
$317,286.90
$272,430.06

A project will produce an operating cash flow of $385,000 a year
for three years. The initial cash outlay for equipment will be
$850,000. The net aftertax salvage value of $50,000 will be
received at the end of the project. The project requires $72,000 of
net working capital up front that will be fully recovered. What is
the net present value of the project if the required rate of return
is 14 percent?
$45,915.26
$51,208.72
$59,612.87
$54,174.86
$47,320.15

Wellpoint Company is considering an investment project that will
produce an operating cash flow of $415,200 a year for five years.
The initial cash outlay for equipment will be $1,027,000. An
aftertax salvage value of $82,160 for the equipment will be
received at the end of the project. The project requires $154,050
of net working capital that will be fully recovered. What is the
net present value of the project if the required rate of return is
14 percent?
$388,174.80...

Assume a machine costs $108,000 and lasts seven years before it
is replaced. The operating cost is $17,600 a year. Ignore taxes.
What is the equivalent annual cost if the required rate of return
is 14 percent? (Hint: the EAC should account for both initial
investment and annual operating costs)
$33,218.72
$35,610.58
$38,127.49
$42,784.78
$46,412.03

Assume a machine costs $108,000 and lasts six years before it is
replaced. The operating cost is $17,200 a year. Ignore taxes. What
is the equivalent annual cost if the required rate of return is 15
percent? (Hint: the EAC should account for both initial investment
and annual operating costs)

A project will produce an operating cash flow of $10,000 a year
for three years. The initial cash investment in the project will be
$20,600. An additional $2,5000 of net working capital will be
required throughout the life of the project. What is the internal
rate of return for the project?
Group of answer choices
21.44%
18.43%
14.30%
30.24%
4.54%

Assume a machine costs $1,230,000 and lasts six years before it
is replaced. The operating cost is $74,500 a year. Ignore taxes.
What is the equivalent annual cost if the required rate of return
is 13 percent? (Hint: the EAC should account for both initial
investment and annual operating costs)
$382,188.48
$376,410.27
$364,294.60
$357,412.78
$301,416.83

Assume a machine costs $1,530,000 and lasts eight years before
it is replaced. The operating cost is $115,000 a year. Ignore
taxes. What is the equivalent annual cost if the required rate of
return is 16 percent? (Hint: the EAC should account for both
initial investment and annual operating costs)
$467,243.12
$485,642.76
$509,748.77
$526,411.32
$543,577.98

1. A project will produce an operating cash from of $33,000 a
year for 10 years. The initial fixed asset investment in the
project will be $195,000. The net after-tax salvage value is
estimated at $50,000 and will be received during the last year of
the project’s life. What is the net present value (NPV) of the
project if the required rate of return is 10 percent?

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 17 minutes ago

asked 40 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago

asked 2 hours ago

asked 2 hours ago

asked 2 hours ago

asked 3 hours ago