please abswer within 30 minutes.. Seeking Internal Rate of Return for option 1, 2 & 3(info below)The senior VP in charge has asked that you make arecommendation for the purchase of new equipment.Ideally, the company wants to limit its capitalinvestment to $500,000. However, if an asset meritsspending more, an investment exceeding this limitmay be considered. You assemble a team to helpyou. Your goal is to determine which option will resultin the best investment for the company. Toencourage capital investments, the government hasexempted taxes on profits from new investments.This legislation is to be in effect for the foreseeablefuture.The average reported operating income for thecompany is $1,740,000.The company uses a 10% discount rate in evaluatingcapital investments.The team is considering the following optionsOption 1:The asset cost is $300,000.The asset is expected to have an 8-year useful lifewith no salvage value.Straight-line depreciation is used.The net cash inflow is expected to be $62,000 eachyear for 8 years.A significant portion of this asset is made fromrecycled material.When disposed of, certain parts of the asset can berecycled.The delivery time for this asset is 8 weeks.Option 2:The asset cost is $521,000.The machine is expected to have a 6-year useful lifewith no salvage value.Straight-line depreciation is used.The net cash inflow is expected to be $142,000 eachyear for 6 years.This asset is the smallest and most efficient in itsproduct line.The delivery time for this asset is 6 weeks.Option 3:The asset cost is $280,000,The asset is expected to have a 4-year useful life withno salvage value.Straight-line depreciation is used.The net cash inflow is expected to be $89,000 eachyear for 4 years.This asset has a lower-than-normal rating because offrequent maintenance needs.This asset is similar to the existing unit and wouldrequire the least amount of training time foremployees.The delivery time for this asset is 3 weeks.

Given: Internal rate of return (IRR):At IRR, cash outflow will be equal to the present value of cash…

Seeking Internal Rate of Return for option 1, 2 & 3 (info below) The senior VP in charge has asked that you make a recommendation for the purchase of new equipment. Ideally, the company wants to limit its capital investment to $500,000. However, if an asset merits spending more, an investment exceeding this limit may be considered. You assemble a team to help

Seeking Internal Rate of Return for option 1, 2 & 3 (info below) The senior VP in charge has asked that you make a recommendation for the purchase of new equipment. Ideally, the company wants to limit its capital investment to $500,000. However, if an asset merits spending more, an investment exceeding this limit may be considered. You assemble a team to help

Essentials of Business Analytics (MindTap Course List)

2nd Edition

ISBN:9781305627734

Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Chapter12: Integer Linear Optimization_models

Section: Chapter Questions

Problem 3P: Spencer Enterprises is attempting to choose among a series of new investment alternatives. The...

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A company is considering three alternative Investment projects with different net cash flows. The present value of net cash flows is calculated using Excel and the results follow. Potential Projects Present value of net cash flows (excluding initial investment) Initial investment Complete this question by entering your answers in the tabs below. a. Compute the net present value of each project. b. If the company accepts all positive net present value projects, which of these will It accept? c. If the company can choose only one project, which will it choose on the basis of net present value? Required A Required B Compute the net present value of each project. Potential Projects Project A Present value of net cash flows Initial investment Net present value Required C Project E Project C $10,685 (10,000)
The CEO asked you to take charge of the following projects for the company. However, he told you that because of the limited funds available, you have to pursue the projects one at a time. Using the profitability index, decide on which of the projects you are going to accomplish first, second, and third. Project 1 requires an initial investment of P500,000, will provide future cash inflow of P1,300,000, and present value of the future cash inflow of P850,000. Project 2 requires an initial investment of P1,000,000, will provide future cash flow of P3,000,000, and present value of the future cash flow is P1,550,000 Project 3 requires an initial investment of P1,500,000, will provide future cash flow of P5,000,000 and the present value of the future cash flow is P2,835,000.
A company manager asked you to evaluate an investment opportunity. Select and explain two (2) investment criteria you will use to make a decision as to whether to accept or reject the opportunity. You are the CFO of Midas Mining Ltd and the company is looking to expand its mining operations. Your staff have narrowed it down to two (2) projects, with the cash flows presented in the table below. However, given the substantial cash outlay, your company can only choose one of the projects (A or B). Information Project A Project B Cost $5 550 000 $6 640 000 Required: a) Perform a project evaluation, using the Net Present Value (NPV) The prevailing discount rate is 12%. b) Identify which project (if any) should be accepted by Midas Mining Ltd.
4. In time value of money, we use five categories of information, viz., present value, future value, discount rate, number of compounding periods and interim payments. In particular, the choice of the right discount rates is a challenge as it represents a combination of risk factors, such as business; inflation; environmental; social and political risks. Your company is planning an investment project in commercial forestry. Prepare a briefing note appraising the top management on the potential risks in evaluating a project in commercial forestry and how will this impact the project decisions.
Shaylee Corporation has $2.00 million to invest in new projects. The company's managers have presented a number of possible options that the board must prioritize. Information about the projects follows: Initial investment Present value of future cash flows Required: 1. Is Shaylee able to invest in all of these projects simultaneously? 2-a. Calculate the profitability index for each project. 2-b. What is Shaylee's order of preference based on the profitability index? Complete this question by entering your answers in the tabs below. Req 1 Project A $ 435,000 785,000 Req 2A and 2B Is Shaylee able to invest in all of these projects simultaneously? Is Shaylee able to invest in all of these projects simultaneously? Project C $ 740,000 1,220,000 Project D $ 965,000 1,580,000
Can you help me answer this with a step by step explanation and display any formulas used.? There is a firm, which we are prospecting as a purchase candidate. It has the following features we find attractive. First, it will enable us to sell to the clients of this firm what we already are selling our existing clients. The revenue addition will be $12 million. However, it will induce $3 million more expenses in attaining that higher level of revenue. Secondly, it will enable us to sell a division of the firm that does not rally connect with our operations for $5 million. Thirdly, since there is a lot of repetition of positions ( we are in the same line of business) we can lay off 50 employees permanently. The average salary of those employees is $60,000. The coc of the firm is 10%. Calculate the amount that we can bid to acquire this company.
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SNA company management is considering two competing investment Projects A and B. Year Project A Project B Initial Investment 1000 1000 1 275 300 2 275 300 3 275 300 4 275 300 5 275 300 DISCOUNT RATE 3.15% help management to choose the most desirable Project .You must use each technique from 1 to 4 and get the answer? 1)Payback Period Technique.2) Discounted Payback Period Technique.3) Net Present Value Technique4) Profitability Index Technique.
You are a project manager for your company and you are faced with five potential projects that you can invest in. Free cash flow projections and additional relevant data are given for each project in the table below. Assume that there are no cash flows after year 3. Assume that you can only take each project once and that you can only choose one project. Which project would you invest in? Select the best answer. Project Project A Project B Project C Project D Project E O I. Project A II. Project B III. Project C IV. Project D O V. Project E FCF Forecasts by Year (in $1,000) 0 2 1 500 (400) (400) (300) (250) (300) 75 60 75 135 115 175 3 650 210 190 200 Interest Rate (EAR) 8.0% 10.0% 10.0% 12.0% 12.0% IRR 25.00% 17.57% 15.92% 17.81% 19.96%
MCS Corporation is considering two possible investments and needs your help in determining which will be the better financial option. Perform the necessary calculations using Microsoft Excel so that maximum precision can be obtained. (Unless indicated otherwise, enter your answers rounded to the nearest whole dollar/input code: 0). Investment Option "North" This potential investment is a little more risky and longer term, so it has a minimum rate of return of 17.60%. This investment would require an initial outlay of cash to purchase a piece of equipment for $131,000, and at the end of the 8- year life of this investment is expected to have a salvage value of $39,300. For each year of this investment, net annual cash inflows are expected to be $29,500. 1. How much is the present value of the purchase of equipment? 2. How much is the present value of the salvage value? 3. How much is the present value of the annual cash inflows? 4. How much is the Net Present Value? 5. What is the value…
Spencer Enterprises is attempting to choose among a series of new investment alternatives. The potential investment alternatives, the net present value of the future stream of returns, the capital requirements, and the available capital funds over the next three years are summarized as follows: Develop and solve an integer programming model for maximizing the net present value. Assume that only one of the warehouse expansion projects can be implemented. Modify your model from part (a). Suppose that if test marketing of the new product is carried out, the advertising campaign also must be conducted. Modify your formulation from part (b) to reflect this new situation.
1. Basic NPV methods tell us that the value of a project today is NPV0. Time value of money issues also lead us to believe that if we choose not to do the project that it will be worth NPV1 one period from now, such that NPV0 > NPV1. Why then do we see some firms choosing to defer taking on a project. Be complete and thorough in your answer. 2. Briefly describe the agency relationship that exists between the shareholders and the managers of the firm and how it can result in what is referred to as the agency conflict?