User Account

All Pages

What is the benefit-cost ratio for the project

Assignment Help Financial Management
Reference no: EM131985728

1. Payback Analysis

Two new wind-farm tower projects are proposed for a small company that installs them in south western Pennsylvania. Project A will cost $250,000 to complete and is expected to have an annual net cash flow of $75,000. Project B will cost $150,000 to complete and should generate annual net cash flows of $52,000. As a small company, the owner and senior management team are very concerned about their cash flow.

Use the payback period method and determine which project is better from a cash flow standpoint.

Show your work and include any formulas used to calculate PP.

2. Net Present Value

A recent project nominated for consideration at your company has a four-year cash flow of $20,000; $25,000; $30,000; and $50,000. The cost of the project is $75,000.

a. If the required rate of return is 20%, conduct a discounted cash flow calculation to determine the NPV.

b. What is the benefit-cost ratio for the project?

c. What would the NPV of the above project be if the inflation rate was expected to be 4% in each of the next four years?

Reference no: EM131985728

Questions Cloud

Effective annual return friendly earns on lending business : What is the effective annual return Friendly’s earns on this lending business? If you were brave enough to ask, what APR would Friendly’s say you were paying?
How can organizations identify credit risk : In your opinion, which stakeholder is most adversely impacted by the above conditions? Employees, shareholders, debt holders, or society as a whole?
How crisis management plan and drp are similar or different : Discuss the how Crisis Management Plan (CMP) and DRP are similar or different. Research and find at least three approaches for developing a CMP.
Shops and the remainder : A distributor purchased 550 kilograms of potatoes for $165. He distributed these at a rate of $6.4 per 20 kilograms to 15 shops
What is the benefit-cost ratio for the project : What would the NPV of the above project be if the inflation rate was expected to be 4% in each of the next four years?
Promised yield to maturity for illinois outstanding issue : determine the promised yield to maturity for Illinois’ outstanding issue of 6 percent coupon bonds.
Find the number of televisions per capita in the us : If the US population that year was 152.3 million, find the number of televisions per capita in the US. Express your answer rounded correctly to four decimal.
Data wrangling - child mortality : ICT702 - Data Wrangling - Child Mortality - Develop creative approaches to solving the wrangling/analysis problems - Write programs that produce correct
Describe how technology is changing the face : The traditional retail model has focused on finding high-margin, high-volume products or services because limited space means reduced space inventory.

Reviews

Write a Review

Financial Management Questions & Answers

  Bonds make annual payments

Lycan, Inc., has 8.6 percent coupon bonds on the market that have 9 years left to maturity. The bonds make annual payments and have a par value of $1,000. If the YTM on these bonds is 10.6 percent, what is the current bond price?

  Determine the expected price for common stock

Simon Enterprises current common stock dividend (year 0) is $2.50 per share and is expected to continue growing at a rate of 5% per year for the foreseeable future. Currently the risk-free rate is 7.5% and the estimated market risk premium (i.e., km ..

  Game theory explained

Read "Game Theory Explained," located on the PBS website. Discuss your perspective on the use of game theory. How do "Nash Equilibrium" and the idea of one "player" impacting another "player" within an organization affect the economic decisions and g..

  What is Chriss annual percentage return and EAR

Chris invested $150,000 17 months ago. Currently the investment is worth $180,000. Chris knows that the investment paid interest monthly, but he does not know what yield on his investment. What is Chris's annual percentage return (APR) and EAR?

  What is the firms breakeven point in units

Cranberry Wood Products Inc. spends an average of $9.30 in labor and $12.60 in materials on every unit it sells. Sales commissions and shipping amount to another $3.10. All other costs are fixed and add up to $141,000 per month. What is Cranberry's c..

  Equity is expensive and debt is lower cost that equity

Some say debt is expensive is equity is free. Some say equity is expensive and debt is lower cost that equity.

  Invest an annual annuity

Sam invests the amount of $22,750 in the bank today and, in addition, starting a year from today, she will invest an annual annuity of $21,950 for 17 consecutive years. Which of the following comes closest to the value of these investments at the end..

  Compute the value of the average collection period

Compute the value of the average collection period.

  Which terms in the equation for taylor rule

Which terms in the equation for Taylor rule can be influenced by the government through monetary policy?

  Common stock as source of funds when compared to debt

What are at least two of the advantages of using common stock as a source of funds when compared to debt? When is the constant growth model appropriate to use when valuing a firms stock? Discuss at least two instances that would cause a company's sto..

  Calculate the weighted average cost of capital and equity

Based on the information below, calculate the weighted average cost of capital. Great Corporation has the following capital situation. Debt: One thousand bonds were issued five years ago at a coupon rate of 10%. Equity: Great Corp has 120,000 shares ..

  What is the annual equivalent cost

The initial cost of a pickup truck is $12837 and will have a salvage value of $3810 after five years. Maintenance is estimated to be a uniform gradient amount of $129 per year, with zero dollar for first year maintenance. The operation cost is estima..

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