My answers, please let me know if they are correct?
#1: 346,400 ( 800000*3.433)-2400000
#2 : 20%
#3: 3 years
#4 : 16.67 = 400,000/2,400,000
Tranter, Inc., is considering a project that would have afive-year life and would require a $2,400,000 investment inequipment. At the end of five years, the project would terminateand the equipment would have no salvage value. The project wouldprovide net operating income each year as follows: (Ignore incometaxes.)
Sales $ 3,500,000 Variableexpenses 2,100,000 Contributionmargin 1,400,000 Fixed expenses: Fixed out-of-pocketcash expenses $ 600,000 Depreciation 400,000 1,000,000 Net operatingincome $ 400,000
Click here to view Exhibit 13B-2, to determine the appropriatediscount factor(s) using tables.
All of the above items, except for depreciation, represent cashflows. The company's required rate of return is 14%.
Required: a. Compute the project's net present value
b. Compute the project's internal rate of return to the nearestwhole percent.
c.Compute the project's payback period.
d. Compute the project's simple rate of return.
My answers, please let me know if they are correct?
#1: 346,400 ( 800000*3.433)-2400000
#2 : 20%
#3: 3 years
#4 : 16.67 = 400,000/2,400,000
Tranter, Inc., is considering a project that would have afive-year life and would require a $2,400,000 investment inequipment. At the end of five years, the project would terminateand the equipment would have no salvage value. The project wouldprovide net operating income each year as follows: (Ignore incometaxes.) |
| Sales | $ | 3,500,000 | |||
| Variableexpenses | 2,100,000 | ||||
| Contributionmargin | 1,400,000 | ||||
| Fixed expenses: | |||||
| Fixed out-of-pocketcash expenses | $ | 600,000 | |||
| Depreciation | 400,000 | 1,000,000 | |||
| Net operatingincome | $ | 400,000 | |||
Click here to view Exhibit 13B-2, to determine the appropriatediscount factor(s) using tables. |
All of the above items, except for depreciation, represent cashflows. The company's required rate of return is 14%. |
| Required: | |||||||
| a. | Compute the project's net present value
| ||||||
Related questions
Tranter, Inc., is considering a project that would have afive-year life and would require a $600,000 investment inequipment. At the end of five years, the project would terminateand the equipment would have no salvage value. The project wouldprovide net operating income each year as follows: (Ignore incometaxes.) |
| Sales | $ | 1,900,000 | |||
| Variableexpenses | 1,300,000 | ||||
| Contributionmargin | 600,000 | ||||
| Fixed expenses: | |||||
| Fixed out-of-pocketcash expenses | $ | 400,000 | |||
| Depreciation | 140,000 | 540,000 | |||
| Net operatingincome | $ | 60,000 | |||
| Click here to view Exhibit13B-2, to determine the appropriate discount factor(s) usingtables. |
All of the above items, except for depreciation, represent cashflows. The company's required rate of return is 7%. |
| Required: | |
| a. | Compute the project's net present value. (Negativeamount should be indicated by a minus sign. Round discountfactor(s) to 3 decimal places, intermediate and final answers tothe nearest dollar amount. Omit the "$" sign in yourresponse.) |
| Net presentvalue | $ |
| b. | Compute the project's internal rate of return to the nearestwhole percent. (Round discount factor(s) to 3 decimalplaces and final answer to the nearest whole percent. Omit the "%"sign in your response.) |
| Internal rate ofreturn | % |
| c. | Compute the project's paybackperiod. (Round your answer to 1 decimalplace.) |
| Payback period | years |
| d. | Compute the project's simplerate of return. (Round your final answer to the nearestwhole percent. Omit the "%" sign in your response.) |
| Simple rate ofreturn | % |
Tranter, Inc., is considering a project that would have aeleven-year life and would require a $1,995,000 investment inequipment. At the end of eleven years, the project would terminateand the equipment would have no salvage value. The project wouldprovide net operating income each year as follows: (Ignore incometaxes.) |
| Sales | $ | 2,100,000 | |||
| Variableexpenses | 1,400,000 | ||||
| Contributionmargin | 700,000 | ||||
| Fixed expenses: | |||||
| Fixed out-of-pocketcash expenses | $ | 350,000 | |||
| Depreciation | 110,000 | 460,000 | |||
| Net operatingincome | $ | 240,000 | |||
| Click here to view Exhibit13B-2, to determine the appropriate discount factor(s) usingtables. |
All of the above items, except for depreciation, represent cashflows. The company's required rate of return is 9%. |
| Required: | |
| a. | Compute the project's net present value. (Negativeamount should be indicated by a minus sign. Round discountfactor(s) to 3 decimal places, intermediate and final answers tothe nearest dollar amount. Omit the "$" sign in yourresponse.) |
| Net presentvalue | $ |
| b. | Compute the project's internal rate of return to the nearestwhole percent. (Round discount factor(s) to 3 decimalplaces and final answer to the nearest whole percent. Omit the "%"sign in your response.) |
| Internal rate ofreturn | % |
| c. | Compute the project's paybackperiod. (Round your answer to 1 decimalplace.) |
| Payback period | years |
| d. | Compute the project's simplerate of return. (Round your final answer to the nearestwhole percent. Omit the "%" sign in your response.) |
| Simple rate ofreturn | % |
Tranter, Inc., is considering a project that would have anine-year life and would require a $4,004,000 investment inequipment. At the end of nine years, the project would terminateand the equipment would have no salvage value. The project wouldprovide net operating income each year as follows: (Ignore incometaxes.) |
| Sales | $ | 3,000,000 | |||
| Variableexpenses | 1,850,000 | ||||
| Contributionmargin | 1,150,000 | ||||
| Fixed expenses: | |||||
| Fixed out-of-pocketcash expenses | $ | 380,000 | |||
| Depreciation | 300,000 | 680,000 | |||
| Net operatingincome | $ | 470,000 | |||
| Click here to view Exhibit13B-2, to determine the appropriate discount factor(s) usingtables. |
All of the above items, except for depreciation, represent cashflows. The company's required rate of return is 11%. |
| Required: | |
| a. | Compute the project's net present value. (Negativeamount should be indicated by a minus sign. Round discountfactor(s) to 3 decimal places, intermediate and final answers tothe nearest dollar amount. Omit the "$" sign in yourresponse.) |
| Net presentvalue | $ |
| b. | Compute the project's internal rate of return. (Rounddiscount factor(s) to 3 decimal places and final answer to theclosest interest rate. Omit the "%" sign in yourresponse.) |
| Internal rate ofreturn | % |
| c. | Compute the project's paybackperiod. (Round your answer to 1 decimalplace.) |
| Payback period | years |
| d. | Compute the project's simplerate of return. (Round your final answer to the closestinterest rate. Omit the "%" sign in your response.) |
| Simple rate ofretuer | % |
