Salsa Company is considering an investment in technology to improve its operations. The investment costs $243,000 and following net cash flows. Management requires a 9% return on investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Year 1 2 Net cash Flow $ 47,700 52,500 75,900 3 4 5 Required: 95,800 125,800 1. Determine the payback period for this investment. 2. Determine the break-even time for this investment. 3. Determine the net present value for this investment. 4. Should management invest in this project based on net present value?

Salsa Company is considering an investment in technology to improve its operations. The investment costs $243,000 and following net cash flows. Management requires a 9% return on investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Year 1 2 Net cash Flow $ 47,700 52,500 75,900 3 4 5 Required: 95,800 125,800 1. Determine the payback period for this investment. 2. Determine the break-even time for this investment. 3. Determine the net present value for this investment. 4. Should management invest in this project based on net present value?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Anderson Systems is considering a project that has the following cash flow and WACC data. The project's NPV is $___________. Enter two decimals. WACC = 9% Year 0 1 2 3 Cash Flows -$1,000 $500 $500 500
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Morrisey Company has two investment opportunities. Both investments cost $6,900 and will provide the same total future cash inflows. The cash receipt schedule for each investment is given below: Investment I Investment II Period 1 $ 1,950 $ 1,950 Period 2 1,950 3,140 Period 3 2,950 4,330 Period 4 5,520 2,950 Total $12,370 $12,370 What is the net present value of Investment Il assuming an 12% minimum rate of return? (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided. Do not round your intermediate calculations. Round your answer to the nearest whole dollar.) Multiple Choice $2,301 $9,201 $12,370 $(8,903)
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ABC Inc. is considering a project that has the following cash flow data. What is the project's IRR? Year 0 1 2 3 4 Cash flows -$550 $300 $290 $280 $270
Gonzalez Company is considering two new projects with the following net cash flows. The company's required rate of return on investments is 10%. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Year Initial investment 1. 2. 3. Net Cash Flows Project 1 $(60,000) 15,000 27,400 22,000 Project 2 $(55,500) 35,000 15,000 22,000 a. Compute payback period for each project. Based on payback period, which project is preferred? b. Compute net present value for each project. Based on net present value, which project is preferred?
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