A factory costs 800,000 €. You reckon that it will produce an inflow after operating costs of 170,000€ a year for ten years. a. If the opportunity cost of capital is 14%, what is the net present value of the factory? b. What will the factory be worth at the end of five years?

A factory costs 800,000 €. You reckon that it will produce an inflow after operating costs of 170,000€ a year for ten years. a. If the opportunity cost of capital is 14%, what is the net present value of the factory? b. What will the factory be worth at the end of five years?

Name: H1. A factory costs 800,000 €. You reckon that it will produce an infl
Uploaded: 2024-03-20T06:50:59.000Z
Channel: Bartleby
Description: H1. A factory costs 800,000 €. You reckon that it will produce an inflow after operating costs of170,000€ a year for ten years.a. If the opportunity cost of capital is 14%, what is the net present value of the factory?b. What will the factory be wort

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 5PB: Mason, Inc., is considering the purchase of a patent that has a cost of $85000 and an estimated...

See similar textbooks

Similar questions

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?
Limitless Ltd. is planning to buy a new warehouse to store its production output. Theinvestment would require £500,000 to be paid upfront. Thanks to the new warehouse,the company expects to increase its profits by £120,000 annually for the next five years,and then £60,000 for the following five years. 1. Calculate the Net Present Value (NPV) of this investment opportunity if the cost ofcapital is 12%. 2. What is the payback period of this investment?
A community project costs GH¢800, 000. You reckon that it will produce an inflow afteroperating costs of GH¢170, 000 a year for 10 years. If the opportunity cost of capital is14 percent, what is the net present value of the factory? What is its profitability index?
A factory costs $810,000. You reckon that it will produce an inflow after operating costs of $171,000 a year for 11 years. a. If the opportunity cost of capital is 7%, what is the net present value of the factory?
A piece of machinery is projected to provide an income of = 125, 000 - 5000dollars per year I (t) machine is expected to last 12 years. Determine the maximum price that can be paid for the machine when purchased new assuming you could receive 6% return on the money if you chose to invest the money instead of purchasing the equipment. with t in years. The
The net present value of an investment is the present value of the expected cash flow minus the initial investment. The company's managers hf. require a 9% return (required rate of return). The managers are considering buying a device that costs ISK 210,000. The device will create a cash flow of ISK 84,000. during the next three years, at the end of each year. What is the net present value of this investment (net present value of investment)? Group of answer choices a. ISK 21,261 b. ISK 212,604 c. ISK 2,629 d. 42,000 ISK
What is the NPV of a project that COSTS $0.5M today and cash inflows $5,000 monthly, paid annually, for ten years from today if the opportunity cost of capital is 6% ?
If an investment project costs a firm £200 and yields a stream of profits of £100 per year for the next three years what is the internal rate of return on the project?
The company will invest for a 2-year project. The first year, return of the investment is 240.000 USD and the second year, return is 432.000 USD. If the annual interest rate is 20%, how much money should be invested at present value for this investment to be profitable? (20P)
You are examining a new project. You expect to sell 7,000 units per year at €60 net cash flow apiece for the next 10 years. The relevant discount rate is 16 per cent, and the initial investment required is €1,800,000. a. What is the base-case NPV? b. After the first year, the project can be dismantled and sold for €1,400,000. If expected sales are revised based on the first year’s performance, when would it make sense to abandon the investment? In other words, at what level of expected sales would it make sense to abandon the project? c. Explain how the €1,400,000 abandonment value can be viewed as the opportunity cost of keeping the project in one year
What is the NPV of a project that costs $0.5 million and cash inflows $6000 /month paid annualy for ten years if the opportunity cost of capital is 6%?
Example The investment in a new product requires a capital expenditure of € 45,000.-. The economic life time is five years. The annual fixed operational payments are € 95,000.-. The proportional cash outs per unit amounts to € 200.-. The internal interest rate (= WACC) is 10% and the number of selling units are 300/year. What is the minimum sales price/unit (x), which ensures the required profitability of the investment? Use a) the NPV method b) the annuity method!