Compute nominal payback period, net present value

Assignment Help Macroeconomics

Reference no: EM1373284

Q1. A machine cost $4,000. It lasts two years and has no salvage value [that is, it has no value at the end of those two years of use]. In every year, it produces $ 2400 in income. Should the company invest in machine if the interest rate is 10 percent? Should the companyinvest in the machine if the interest rate is 20%? Why? What if the machine's scrap value was $350?
Q2. Wiley Coyote has been retained to analyze two new projects for the Acme Company. Each project has a cost of $10,000, and the cost of capital for both projects is 12%. The projects net cash flows are as follows:
Year Project 1 Project 2
0 (10,000) (10,000)
1 6,500 3,500
2 3,000 3,500
3 3,000 3,500
4 1,000 3,500

a) Compute each project's nominal payback period, net present value (NPV), and internal rate of return
b) Should both projects be accepted if they are interdependent?
c) Which project should be accepted if they are mutually exclusive?
d) Why does a conflict exist between NPV and IRR rankings?

Qu3. In the 1styear, Bubba's Pork Rind factory sold $ 100,000. A mere thirteen years later, Bubba sold $ 475,000. What is the compound growth rate? If Bubba's sales growth continued unabated, what would Bubba's sales be after the next 13 years?
If, in the above, the initial period had been 10 years, what would the compound growth rate have been then? What would you expect the sales to be after 16 more years?

Reference no: EM1373284

Questions Cloud

Calculate the size of labor force : Productivity often increase during economic expansions and decreasing during economic recessions. Can you think of reasons why?

Cultural variation across international organizations : Cultural variation across international organizations - BUS 311 PROJECT Explanation of the different national culture frameworks and discussion of International mergers and acquisitions

Supply factors of economic growth : Determine the four supply factors of economic growth and also find the demand factor?

Impact of past and current budget deficits : Include an evaluation of the impact of past and current budget deficits or surpluses on the United State economy and on the airline industry.

Compute nominal payback period, net present value : A machine cost $4,000. It lasts two years and has no salvage value [that is, it has no value at the end of those two years of use]. In every year, it produces $ 2400 in income. Should the company invest in machine if the interest rate is 10 percent?

Case study - bernie madoff : How was he able to go undetected for such a long time and how was he able to convince the investors? Where the investors rational or irrational?

Sources for real gdp and producer price index : Differentiate at least two 2-year forecasts from separate sources for real GDP and Producer Price Index

Consumption effects of economic growth : Countries in the developing world are often concerned that their terms of trade may worsen economic growth occurs.

Define the hypothesis and find the standard error : Define the hypothesis and find the standard error of the difference in the means also find the test statistic - Determine the required sample size to be able to use a 99% confidence interval.

User Account

All Pages