A Company is considering an investment proposal, involving an initial cash outlay of TZS 450,000. The proposal has an expected life of 7 years and zero salvage value. At a required rate of return of 12 percent, the proposal has a profitability index of 1.182. Required: Calculate annual cash inflows.
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- Your company is planning to purchase a new log splitter for is lawn and garden business. The new splitter has an initial investment of $180,000. It is expected to generate $25,000 of annual cash flows, provide incremental cash revenues of $150,000, and incur incremental cash expenses of $100,000 annually. What is the payback period and accounting rate of return (ARR)?The management of Ryland International Is considering Investing in a new facility and the following cash flows are expected to result from the investment: A. What Is the payback period of this uneven cash flow? B. Does your answer change if year 6s cash inflow changes to $920,000?Jasmine Manufacturing is considering a project that will require an initial investment of $52,000 and is expected to generate future cash flows of $10,000 for years 1 through 3, $8,000 for years 4 and 5, and $2,000 for years 6 through 10. What is the payback period for this project?
- Buena Vision Clinic is considering an investment that requires an outlay of 600,000 and promises a net cash inflow one year from now of 810,000. Assume the cost of capital is 10 percent. Required: 1. Break the 810,000 future cash inflow into three components: a. The return of the original investment b. The cost of capital c. The profit earned on the investment 2. Now, compute the present value of the profit earned on the investment. 3. Compute the NPV of the investment. Compare this with the present value of the profit computed in Requirement 2. What does this tell you about the meaning of NPV?Redbird Company is considering a project with an initial investment of $265,000 in new equipment that will yield annual net cash flows of $45,800 each year over its seven-year life. The companys minimum required rate of return is 8%. What is the internal rate of return? Should Redbird accept the project based on IRR?If a copy center is considering the purchase of a new copy machine with an initial investment cost of $150,000 and the center expects an annual net cash flow of $20,000 per year, what is the payback period?
- Garnette Corp is considering the purchase of a new machine that will cost $342,000 and provide the following cash flows over the next five years: $99,000, $88,000, $92,000. $87,000, and $72,000. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return in Excel. see Appendix C.Kumi Ltd is considering an investment in a project, which requires an immediate payment of GHS15,000, followed by a further investment of GHS5,400 at the end of the first year. The subsequent return phase net cash inflows are expected to arise at the end of the following years:Year 1 2 3 4 5 cashflows (GHS) 6,500 7,750 5,750 4,750 3,750You are required to estimate the internal rate of return of this project assuming the company’s cost of capital of 16%.Kumi Ltd is considering an investment in a project, which requires an immediate payment of GHS15,000, followed by a further investment of GHS5,400 at the end of the first year. The subsequent return phase net cash inflows are expected to arise at the end of the following years: Year 1 2 3 4 5 Cash inflow (GHS) 6,500 7,750 5,750 4,750 3,750 You are required to estimate the internal rate of return of this project assuming the company’s cost of capital is 16%.
- Happy Holiday Sdn. Bhd. (HHSB) has hired you to perform a feasibility study of a new project of integrated concept of Homestay that requires a RM5, 500,000 initial investment. HHSB expects a total annual operating cash flow of RM968,000 for the next 10 years. The relevant discount rate is 10 percent. Cash flows occur at year end. Required: i) calculate the Net Present Value (NPV) of the homestay. ii) assuming after one year, the estimate of the remaining annual cash flows will be revised either upward to RM1, 925,000 or downward to RM319,000. Each revision has an equal probability of occurring. At that time, the project can be sold for RM1,430,000. Calculate the revised NPV given that the company can abandon the project after one year.The Horizon Company will invest $79,000 in a temporary project that will generate the following cash inflows for the next three years. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. Cash Flow $ 22,000 35,000 42,000 The firm will also be required to spend $21,000 to close down the project at the end of the three years. a. Compute the net present value if the cost of capital is 9 percent. Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places. Year 1 2 3 Net present value b. Should the investment be undertaken? O No O YesBeyer Company is considering buying an asset for $350,000. It is expected to produce the following net cash flows. Compute the payback period for this investment. (Cumulative net cash outflows must be entered with a minus sign. Round your Payback Period answer to 2 decimal places.)