Question 1

Jackson Company is considering the investment in a computer system.The company estimates that it will require an initial outlay of $1,200,000.Other cash flows will be as follows:
  
Required:
Assuming the company limits its analysis to five years,should the company consider this investment if the required rate of return is 12 percent?

Accepted Answer

The answer of Jackson Company is considering the investment in...

Question 2

Berringer Company is considering an investment that will generate cash revenues of $100,000 per year for 8 years,and have cash expenses of $70,000 per year for 8 years.The cost of the asset is $80,000,and it will be depreciated using straight-line depreciation over its 8 year life.Berringer pays income taxes at a rate of 30%.The cost of capital is 12%
Required:
a.Prepare an analysis showing the annual after tax cash flow associated with this asset.
b.Compute the net present value of this investment using the cash flow you computed in a above.

Accepted Answer

The answer of Berringer Company is considering an investment that...

Question 3

Rainer Company is considering a project that will require an initial investment of $750,000 and will return $200,000 each year for five years.If taxes are ignored and the required rate of return is 9%,what is the project's net present value? Based on this analysis,should the company proceed with the project?

Accepted Answer

The answer of Rainer Company is considering a project that...

Question 4

An investment that costs $50,000 will return $22,000 per year for five years.
Required:
Determine the net present value of the investment if the required rate of return is 14 percent (ignoring taxes).Should the investment be undertaken?

Accepted Answer

The answer of An investment that costs $50,000 will return...

Question 5

Falcon Company's most recent capital expenditure project will require an initial investment of $600,000 and is expected to generate the following cash flows:
Year 1 $100,000
Year 2 $250,000
Year 3 $250,000
Year 4 $200,000
Year 5 $100,000
Required:
If the required rate of return is 20% and taxes are ignored,what is the project's net present value?

Accepted Answer

The answer of Falcon Company's most recent capital expenditure project...

Question 6

Wilcox Company is considering an investment that will generate cash revenues of $120,000 per year for 8 years,and have cash expenses of $60,000 per year for 8 years.The cost of the asset is $120,000,and it will be depreciated using straight-line depreciation over its 8 year life.Berringer pays income taxes at a rate of 30%.The cost of capital is 12%
Required:
a.Prepare an analysis showing the annual after tax cash flow associated with this asset.
b.Compute the net present value of this investment using the cash flow you computed in a above.

Accepted Answer

The answer of Wilcox Company is considering an investment that...

Quiz 8: Capital Expenditure Decisions

An investment that costs $50,000 will return $22,000 per year for five years. Required: Determine the net present value of the investment if the required rate of return is 14 percent (ignoring taxes).Should the investment be undertaken?