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- Mason, Inc., is considering the purchase of a patent that has a cost of $85000 and an estimated revenue producing lite of 4 years. Mason has a required rate of return that is 12% and a cost of capital of 11%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?(b)Honeydew Sdn. Bhd has been presented with an opportunity to invest in a project. Investment Required is RM60,000,000, Annual Gross Income is RM14,000,000, Annual Operating Costs is RM5,500,000 and nil for Salvage Value after 10 years. The project is expected to operate as shown for ten years. If your management expects to make 10% on its investment before taxes. Calculate the Internal Rate of Return (IRR) for this project and would you recommend Honeydew Sdn. Bhd this project? Explain.Veroni Ventures a key distributor of Voltic Water and other assorted products is considering investing Ghc335,600 in a project at Kasoa with a five-year life. The project will result in an increase in the company's turnover of Ghc350,000 at additional fixed cost of Ghc110,000 and a variable costs ofGHS150,000. At the end of the project in five years’ time, the assets will be sold for Ghc35,000. Thecompany's required rate of return is 10%. Assuming you are the financial director of such company:(c) How will you determine the Net Present Value of the project of Veroni’s Ventures?(d) Calculate the sensitivity of the investment decision in (a) to the estimates ofi. Variable Costs ii. Discount Rate
- Honeydew Bhd has been presented with an opportunity to invest in a project. Investment Required is RM60,000,000, Annual Gross Income is RM14,000,000, Annual Operating Costs is RM5,500,000 and nil for Salvage Value after 10 years. The project is expected to operate as shown for ten years. If your management expects to make 10% on its investment before taxes. Calculate the Internal Rate of Return (IRR) for this project and would you recommend Honeydew Sdn. Bhd this project? Explain.Your company is considering a project which will require the purchase of $715,000 in new equipment. The company expects to sell the equipment at the end of the project for 25% of its original cost, but some assets will remain in the CCA class. Annual sales from this project are estimated at $256,000. Initial net working capital equal to 32.00% of sales will be required. All of the net working capital will be recovered at the end of the project. The firm requires a 10.00% return on similar investments. The tax rate is 35%, and the project life is 5 years. There are no other operating expenses. If the equipment is in a 33.00% CCA class, what is the present value of the CCA tax shield? Options $153,510 $157,348 $161,186 $165,024 $168,861XYZ Company is looking to invest in some new machinery to replace its current malfunctioning one. The new machine, which costs P420,000, would increase annual revenue by P200,000 and annual cash expenses by P50,000. The machine is estimated to have a useful life of 12 years and P30,000 salvage value. Solve for the: A. Payback period in years B. Payback period reciprocal C. Accounting rate of return on initial investment D. Accounting rate of return on average investment.
- Your company is considering a project which will require the purchase of $635,000 in new equipment. The company expects to sell the equipment at the end of the project for 25% of its original cost, but some assets will remain in the CCA class. Annual sales from this project are estimated at $224,000. Initial net working capital equal to 28.00% of sales will be required. All of the net working capital will be recovered at the end of the project. The firm requires an 8.00% return on similar investments. The tax rate is 35%, and the project life is 5 years. There are no other operating expenses. Assume the present value of the CCA tax shield is $102,000. What is the project's NPV? Options $126,121 $129,530 $132,939 $136,347 $139,756The company is considering a project that requires an initial investment of $120M to build a new plant, and purchase equipment. The investment will be depreciated on diminishing value basis at 18% per annum. The new plant will be built on some of the company's land which has a current, after-tax market value of $9.5M. The company will produce units at a cost of $260 each and will sell them for $390 each. There are annual fixed costs of $0.5M. Unit sales are expected to be 270,000 each year for the next 10 years, at which time the project will be abandoned. At that time, the plant and equipment is expected to be worth $24M (before tax) and the land is expected to be worth $13M (after tax). To supplement the production process, the company will need to purchase $5M worth of inventory. That inventory will be depleted during the final year of the project. The required return is 12%. The company's marginal tax rate is 40%. You are required to calculate the project’s: (C) Payback period, the…The company is considering a project that requires an initial investment of $120M to build a new plant, and purchase equipment. The investment will be depreciated on diminishing value basis at 18% per annum. The new plant will be built on some of the company's land which has a current, after-tax market value of $9.5M. The company will produce units at a cost of $260 each and will sell them for $390 each. There are annual fixed costs of $0.5M. Unit sales are expected to be 270,000 each year for the next 10 years, at which time the project will be abandoned. At that time, the plant and equipment is expected to be worth $24M (before tax) and the land is expected to be worth $13M (after tax). To supplement the production process, the company will need to purchase $5M worth of inventory. That inventory will be depleted during the final year of the project. The required return is 12%. The company's marginal tax rate is 40%. You are required to calculate the project’s: (D) ARR (to two decimal…
- The company is considering a project that requires an initial investment of $120M to build a new plant, and purchase equipment. The investment will be depreciated on diminishing value basis at 18% per annum. The new plant will be built on some of the company's land which has a current, after-tax market value of $9.5M. The company will produce units at a cost of $260 each and will sell them for $390 each. There are annual fixed costs of $0.5M. Unit sales are expected to be 270,000 each year for the next 10 years, at which time the project will be abandoned. At that time, the plant and equipment is expected to be worth $24M (before tax) and the land is expected to be worth $13M (after tax). To supplement the production process, the company will need to purchase $5M worth of inventory. That inventory will be depleted during the final year of the project. The required return is 12%. The company's marginal tax rate is 40%. You are required to calculate the project’s: (A) NPV(B) IRR (% to…The company is considering a project that requires an initial investment of $120M to build a new plant, and purchase equipment. The investment will be depreciated on diminishing value basis at 18% per annum. The new plant will be built on some of the company's land which has a current, after-tax market value of $9.5M. The company will produce units at a cost of $260 each and will sell them for $390 each. There are annual fixed costs of $0.5M. Unit sales are expected to be 270,000 each year for the next 10 years, at which time the project will be abandoned. At that time, the plant and equipment is expected to be worth $24M (before tax) and the land is expected to be worth $13M (after tax). To supplement the production process, the company will need to purchase $5M worth of inventory. That inventory will be depleted during the final year of the project. The required return is 12%. The company's marginal tax rate is 40%. You are required to calculate the project’s:ARR (to two decimal…An equipment which can be purchase for P700,000 is expected to generate a net cash flow of P200,000 annually for five years which is the estimated service life of the equipment. Its salvage value at the end of the service life is estimated to be 5% of its purchased cost. a. What is the rate of return of the initial investment? b. What is the simple pay-back period? c. If the company's minimum attractive rate of return(MARR) is set at 15%, using NPW is this investment acceptable? d. What is the internal rate of return(IRR) of this machine? e. What is the external rate of return(ERR) at the 15% MARR?
