User Account

All Pages

Compute the net present value of cash flows

Assignment Help Accounting Basics
Reference no: EM132712487

A company is deciding whether to purchase new equipment that costs P5,000,000. Management estimates the life of the new asset to be five years and expects it to generate additional annual profits of P2M on year1, P1.5M on year 2 &; 3, P1M on year 4 &; 5. In the sixth year, the company plans to sell the equipment for its salvage value of P500,000. Another similar investment can generate a 12% return. This is higher than the company's current hurdle rate of 10%.

Problem a. Compute the net present value of cash flows

Problem b. Compute the Internal Rate of Return (IRR)

Problem c. What is your recommendation to the company for this project?

Reference no: EM132712487

Questions Cloud

Think of for healthcare organization : What are some other location advantages you can think of for a healthcare organization to consider when looking at competitive advantage?
Determine the average cycle time for element : The observed times and performance ratings for six cycles are shown in the following table.
Critically discuss two recent developments : Critically discuss two recent developments in the international financial environment which appear to have impacted on your chosen company
Creating a wellness plan proposal : For this assignment, be creating a wellness plan proposal with the dual goal of promoting health and wellness in your organization and also reducing health care
Compute the net present value of cash flows : Compute the net present value of cash flows. A company is deciding whether to purchase new equipment that costs P5,000,000.
Contrast benefits and drawbacks to organization : Compare and contrast benefits and drawbacks to the organization and the patient/family and/or provider
What was the price of the bond when was issued : What was the price of this bond when it was issued? Explain whether the bond was traded at a discount, at par or at a premium?
Calculate the company cost of capital using the gordon : Fanny Bhd is an all equity company in the steel industry. Calculate the company's cost of capital using the Gordon's dividend growth model
Discuss systems processes thinking : Discuss systems processes thinking. How can we use systems processes thinking to evaluate errors and prevent them?

Reviews

Write a Review

Accounting Basics Questions & Answers

  How much control does fed have over this longer real rate

Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest.   How much control does the Fed have over this longer real rate?

  Coures:- fundamental accounting principles

Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.

  Accounting problems

Accounting problems,  Draw a detailed timeline incorporating the dividends, calculate    the exact Payback Period  b)   the discounted Payback Period. the IRR,  the NPV, the Profitability Index.

  Theory of interest - term structure of interest rates

Term Structure of Interest Rates

  Write a report on internal controls

Write a report on Internal Controls

  Prepare the bank reconciliation for company

Prepare the bank reconciliation for company.

  Cost-benefit analysis

Create a cost-benefit analysis to evaluate the project

  Theory of interest

Theory of Interest: NPV, IRR, Nominal and Real, Amortization, Sinking Fund, TWRR, DWRR

  Liquidity and profitability

Distinguish between liquidity and profitability.

  What is the expected risk premium on the portfolio

Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.

  Simple interest and compound interest

Simple Interest, Compound interest, discount rate, force of interest, AV, PV

  Capm and venture capital

CAPM and Venture Capital

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd