Calculate the npv for the proposed investment

Assignment Help Finance Basics
Reference no: EM13284276

Charlie Company is attempting to evaluate the feasibility of investing $95,000 in a piece of equipment that has a 5-year life. The firm has estimated the cash inflows associated with the proposal as shown below. Assume the firm has a 12% cost of capital.

                                             Year                      Cash inflows

                                                1                            $20,000

                                                2                              25,000

                                                3                              30,000

                                                4                              35,000

                                                5                              40,000

a.   Calculate the payback period for the proposed investment.

b.     Calculate the NPV for the proposed investment.

 

Reference no: EM13284276

Questions Cloud

What is the value of the firm according to mm : Your firm has debt worth $200,000, with a yield of 9%, and equity worth $300,000. It is growing at a 5% rate, and its tax rate is 40%. A similar firm with no debt has a cost of equity of 12%. What is the value of the firm according to MM with corp..
Richter betty and manet olympia both use the gaze : Richter's Betty and Manet's Olympia both use the gaze of the subjects for dramatic effect, but in what ways do the two paintings differ in their respective lines of sight?
Explain thermal equilibrium is achieved : Consider a glass of 218 mL of water at 30°C. Calculate the mass of ice at -15°C that must be added to cool the water to 10°C after thermal equilibrium is achieved. To find the mass of water use the density of water = 1.0 g/mL.
Determine what intermediate power settings are available : Two heating elements with resistance R1 and R2 are to beused that can be operated in parallel, seperately, or inseries. The highest power is to be 1280W, and the lowestpower is to be 240W. Draw a cicuit diagram.A) What are the values needed for R1 ..
Calculate the npv for the proposed investment : Charlie Company is attempting to evaluate the feasibility of investing $95,000 in a piece of equipment that has a 5-year life. The firm has estimated the cash inflows associated with the proposal as shown below. Assume the firm has a 12% cost of c..
How much charge resides on the outer surface : The membrane that surrounds a certain type of living cell has a surface area of 5.00 10-9 m2 and a thickness of 1 10-8 m. how much charge resides on the outer surface
Specify what each state in the diagram means : Design a circuit whose output becomes 1 whenever it sees the totalnumber of odd 0s and the total number of even 1s. Design a circuit whose output becomes 1 whenever it sees the total number of odd 0sand the total number of even 1s.
Explain the nature of your unknown solid : Suppose it is found that the actual molecular mass of your unknown solid is exactly two times larger than that which you determined experimentally. What could you conclude about the nature of your unknown solid and the assumptions you made in your..
What is the value of safeco stock : "Financial analysts forecast Safeco Corp. (SAF) growth for the future to be a constant 10 percent. Safeco's recent dividend was $1.20. What is the value of Safeco stock when the required return is 12 percent?"

Reviews

Write a Review

Finance Basics Questions & Answers

  What is the expected amount of return this investment

Assume that an investment is forecasted to produce the following returns: a 10% probability of a $1,400 return; a 50% probability of a $6,600 return; and a 40% probability of a $1,500 return. What is the expected amount of return this investment w..

  Computation of the weighted average cost of capital

Computation of the weighted average cost of capital and Jake's Sound Systems has 210,000 shares of common stock outstanding at a market price of $36 a share

  What fraction of the payment made at the end

Your company is planning to borrow $1,500,000 on a 7-year, 12%, annual payment, fully amortized term loan. What fraction of the payment made at the end of the second year will represent repayment of principal? Round your answer to two decimal plac..

  How can the u.s. stop going further in debt

why would one want to se a rent to own store for mechandise ? think of at least three reason and record them below.

  Determining derivative securities

Choose a company of your choice and based upon its industry affiliation, identify and describe what types of derivative securities the company might use to reduce its risk exposure.

  What is the maximum price

If Valorous has an equity cost of capital of 8%, what is the maximum price that a prudent investor would be willing to pay for a share of Valorous stock today?

  Compute the amount reported in income statement

Bath Corporation holds 85% of the common stock of Mark Company. Bath also holds a 75% interest in the voting common stock of Stow, Incorporated. On December 31, 2002, Mark Company purchased 10% of the stock of Bath;

  Calculate the present value of each dividend for years

Company is growing quickly. Dividends are expected to grow at 20 percent per year during the next three years, 10 percent over the following year, and then 6 percent per year thereafter. The required rate of return on this stock is 12 percent. The..

  Use a formal strategic planning process

How do you explain the success of firms which do not use a formal strategic planning process?

  Calculate the equivalent units for kali maniufacturing

Problem 1:Kali Manufacturing Inc. began the year with the following. Units ,beginning work-in-process 20,000 20% complete,Transferred to finished goods 60,000 ,Ending inventory 10,000 70% complete,Materials added at the beginning of the proceRequired..

  What is the most they can pay for a new house

Ben remembers from finance class that the shorter the amortization period, the less total interest you will pay. Calculate how much interest they would save if they made monthly payments over a 20 year amortization rather than a 25 year amortiza..

  Determining currency rates

What is the net interest income earned in dollars on this one-year transaction if the spot rate of U.S. dollars for Australian dollars and U.S. dollars for BPs at the end of the year are 0.588 and 1.848, respectively?

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!

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