Question

A firm is evaluating a 12 year project that costs 120,000 and has annual net cash flows of 16500 per year. the firms costs of capital is 11% what is the equivalent annual annuity of this project ?

Answer #1

A firm is evaluating an 8-year project that costs $200,000 and
has annual net cash flows of $50,000 per year. The firm’s cost of
capital is 13%. What is the equivalent annual annuity of the
project ?
$4,992
$41,677
$8,323
$39,939
$91,677

PROBLEM 2
Winston Clinic is evaluating a project that costs $52,125 and
has expected net cash flows of $12,000 per
year for eight years. The first inflow occurs one year after the
cost outflow, and the project has a cost of
capital of 12 percent.
a. What is the project's payback?
b. What is the project's NPV? Its IRR?
c. Is the project financially acceptable? Explain your
answer.

Your firm is considering two projects. Your boss asked you to
use the Equivalent Annual Annuity method. Project A has an expected
life of seven years, will cost $50,000,000, and will produce net
cash flows of $12,000,000 each year. Project B has a life of
fourteen years, will cost $60,000,000, and will produce net cash
flows of $10,000,000 each year. The firm’s cost of capital is 12%.
What is the equivalent annual annuity for each project? Which
project should the...

Seabreeze Clinic is evaluating a project that costs $148,000 and
has expected
net cash
inflows of $45,000 per year for six years. (Round answers to 2
decimal places.)
The cost of
capital is 10%.
a.
What is the
project's payback?
b.
What is the
project's NPV?
c.
What is the
project's IRR?
d.
Should the
clinic adopt the project? Explain why or why not.

An expansion project being considered by your firm has an
initial cost of $8,000,000 and expected net cash flows of
$1,500,000 per year for the first 2 years, 1,800,000 for the third
and fourth years, and $1,900,000 per year for the fifth and sixth
years. All cash flows will occur at the end of each year. Assume
that the project will be terminatedat the end of the sixth year.
Your firm’s cost of capital is 11%. Calculate the Net Present...

A firm is evaluating a project that will increase annual cash
sales by $145,000 and increase annual cash costs by $94,000. The
project will initially require $110,000 in fixed assets that will
be depreciated straight-line to a zero book value over the
four-year life of the project. The applicable tax rate is 32
percent and the required rate of return is 10%. Compute the Net
Present Value of the Project.
$27,826
$43,480
$63,920
$29,920

You are evaluating a capital budgeting project that costs
$25,000 and is expected to generate cash flows equal to $10,000 per
year for four years. The required rate of return is 10 percent.
Compute the project’s (a) net present value, (b) profitability
index, and (c) internal rate of return. (d) Should the project be
purchased?

MIRR
A project has an initial cost of $55,000, expected net cash
inflows of $11,000 per year for 12 years, and a cost of capital of
8%. What is the project's MIRR? (Hint: Begin by
constructing a time line.) Do not round intermediate calculations.
Round your answer to two decimal places.
Unequal Lives
Shao Airlines is considering the purchase of two alternative
planes. Plane A has an expected life of 5 years, will cost $100
million, and will produce net...

You are evaluating a project that costs $650,000, has a five
year life, and has no salvage value. Assume that depreciation is
straight line to zero over the life of the project. Sales are
projected at 60,000 units per year. Price per unit is $46, variable
cost per unit is $28, and fixed costs are $720,000 per year. The
tax rate is 25 percent, and you require a 11 percent return on this
project.
1.Calculate the accounting break-even point.
2.Calculate...

A firm is considering a four year capital project which is
expected to have net cash inflows of $20,000, $15,000, $13,000 and
$10,000 respectively in the four years following the start of the
project. The cost of the project is $35,000 while the firm's
weighted average cost of capital is 20%. What is the net present
value of the project?
a
$15,500
b
-$5,300
c
$4,417
d
$23,000
B.
If the firm is considers a five year capital project which...

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