Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
12. Boe Corporation is investigating buying a small used aircraft for the
use of its executives. The aircraft would have a useful life of 9 years.
The company uses a discount rate of 10% in its capital budgeting.
The net present value of the investment, excluding the salvage value
of the aircraft, is -P439,527. Management is having difficulty
estimating the salvage value of the aircraft. To the nearest whole peso
how large would the salvage value of the aircraft have to be to make
the investment in the aircraft financially attractive?
13. Trovato Corporation is considering a project that would require an
investment of P48,000. No other cash outflows would be involved.
The present value of the cash inflows would be P51,840. The
profitability index of the project is:
14. The management of Lanzilotta Corporation is considering a project
that would require an investment of P263,000 and would last for 8
years. The annual net operating income from the project would be
P66,000, which includes depreciation of P31,000. The scrap value of
the project's assets at the end of the project would be P15,000. The
payback period of the project is closest to:
15. Jonette, Inc., is considering the purchase of a machine that would
cost P240,000 and would last for 5 years, at the end of which, the
machine would have a salvage value of P48,000. The machine would
reduce labor and other costs by P62,000 per year. Additional working
capital of P7,000 would be needed immediately, all of which would be
recovered at the end of 5 years. The company requires a minimum
pretax return of 17% on all investment projects. What is the net
present value of the project?
16. The Rapp Company is considering buying a new machine which will
require an initial outlay of P15,000. The company estimates that over
the next four years this machine would save P6,000 per year in cash
operating expenses. At the end of four years, the machine would have
no salvage value. The company's required rate of return is 14%. What
is the net present value of the project?
The Moore Corporation is considering the acquisition of a new machine.
The machine can be purchased for P90,000, it will cost P6,000 to
transport to Moores plant and P9,000 to install. It is estimated that the
machine will last 10 years, and it is expected to have an estimated
salvage value of P5,000. Over its 10-year life, the machine is expected to
produce 2,000 units per year with a selling price of P500 and combined
materials and labor costs of P450 per unit. Federal tax regulations permit
machines of this type to be depreciated using the straight-line method
over 5 years with no estimated salvage value. Moore has a marginal tax
rate of 40%.
17. What is the net cash outflow at the beginning of the first year that
Moore Corporation should use in a capital budgeting analysis?
18. What is the net cash flow for the third year that Moore Corporation
should use in a capital budgeting analysis?
19. What is the net cash flow for the tenth year of the project that Moore
Corporation should use in a capital budgeting analysis?
Henderson Inc. has purchased a new fleet of trucks to deliver its
merchandise. The trucks have a useful life of 8 years and cost a total of
P500,000. Henderson expects its next increase in after-tax cash flow to
be P150,000 in Year 1, P175,000 in Year 2, P125,000 in Year 3, and
P100,000 in each of the remaining years.
20. Ignoring the time value of money, how long will it take Henderson to
recover the amount of investment?
21. What is the payback reciprocal for the fleet of trucks?
22. Assume the net cash flow to be P130,000 a year. What is the
payback time for the fleet of trucks?
23. The following data are available on a proposed investment project:
Initial investment
P142,500
Annual cash inflows
P 30,000
Life of the investment
8 years
Required rate of return
10%
The internal rate of return, interpolated to the nearest hundredth of a
percent, would be:
24. Overland Company has gathered the following data on a proposed
investment project:
P150,000
P 40,000
10 years
-010%
27. Two projects being considered are mutually exclusive and have the
following projected cash flows:
Year
Project A Cash Flow
Project B Cash Flow
0
-P50,000
-P50,000
1
15,625
0
2
15,625
0
3
15,625
0
4
15,625
0
5
15,625
99,500
If the required rate of return on these projects is 10 percent, which would
be chosen and why?