Even complicated and confusing topics will be easily developed and covered if you request our help writing an essay. Place an order today!

exercise 5

Please complete the following 5 exercises below in either Excel or a word document (but must be single document). You must show your work where appropriate (leaving the calculations within Excel cells is acceptable). Save the document, and submit it in the appropriate week using the Assignment Submission button.

 

1. Basic present value calculations

Calculate the present value of the following cash flows, rounding to the nearest dollar:

a.       A single cash inflow of $12,000 in five years, discounted at a 12% rate of return.

b.      An annual receipt of $16,000 over the next 12 years, discounted at a 14% rate of return.

c.       A single receipt of $15,000 at the end of Year 1 followed by a single receipt of $10,000 at the end of Year 3. The company has a 10% rate of return.

d.      An annual receipt of $8,000 for three years followed by a single receipt of $10,000 at the end of Year 4. The company has a 16% rate of return.

 

2. Cash flow calculationsand net present value

On January 2, 20X1, Bruce Greene invested $10,000 in the stock market and purchased 500 shares of Heartland Development, Inc. Heartland paid cash dividends of $2.60 per share in 20X1 and 20X2; the dividend was raised to $3.10 per share in 20X3. On December 31, 20X3, Greene sold his holdings and generated proceeds of $13,000. Greene uses the net-present- value method and desires a 16% return on investments.

a.       Prepare a chronological list of the investment's cash flows. Note:Greene is entitled to the 20X3 dividend.

b.      Compute the investment's net present value, rounding calculations to the nearest dollar.

c.       Given the results of part (b), should Greene have acquired the Heartland stock? Briefly explain.

 

 

3. Straightforward net present value and internal rate of return

The City of Bedford is studying a 600-acre site on Route 356 for a new landfill. The startup cost has been calculated as follows:

Purchase cost: $450 per acre

Site preparation: $175,000

 

The site can be used for 20 years before it reaches capacity. Bedford, which shares a facility in Bath Township with other municipalities, estimates that the new location will save $40,000 in annual operating costs.

a.       Should the landfill be acquired if Bedford desires an 8% return on its investment? Use the net-present-value method to determine your answer.

 

 

 

4. Straightforward net-present-value and payback computations

STL Entertainment is considering the acquisition of a sight-seeing boat for summer tours along the Mississippi River. The following information is available:



Cost of boat

$500,000

Service life

10 summer seasons

Disposal value at the end of 10 seasons

$100,000

Capacity per trip

300 passengers

Fixed operating costs per season (including straight-line depreciation)

$160,000

Variable operating costs per trip

$1,000

Ticket price

$5 per passenger

 

All operating costs, except depreciation, require cash outlays. On the basis of similar operations in other parts of the country, management anticipates that each trip will be sold out and that 120,000 passengers will be carried each season. Ignore income taxes.

 

Instructions:

By using the net-present-value method, determine whether STL Entertainment should acquire the boat. Assume a 14% desired return on all investments- round calculations to the nearest dollar.

 

 

5. Equipment replacement decision

Columbia Enterprises is studying the replacement of some equipment that originally cost $74,000. The equipment is expected to provide six more years of service if $8,700 of major repairs are performed in two years. Annual cash operating costs total $27,200. Columbia can sell the equipment now for $36,000; the estimated residual value in six years is $5,000.

New equipment is available that will reduce annual cash operating costs to $21,000. The equipment costs $103,000, has a service life of six years, and has an estimated residual value of $13,000. Company sales will total $430,000 per year with either the existing or the new equipment. Columbia has a minimum desired return of 12% and depreciates all equipment by the straight-line method.

 

Instructions:

a.       By using the net-present-value method, determine whether Columbia should keep its present equipment or acquire the new equipment. Round all calculations to the nearest dollar, and ignore income taxes.

b.      Columbia's management feels that the time value of money should be considered in all long-term decisions. Briefly discuss the rationale that underlies management's belief.

testimonials icon
Running Head: PATIENT SAFETY1Patient SafetyName:Institution:Date:PATIENT SAFETY2Question 1The formation of the World Alliance for Patient Safety has...
testimonials icon
Running head: JUDICIAL REVIEWS IN THE UNITED STATESJudicial Reviews in the United StatesNameCourseTutorDate1JUDICIAL REVIEWS IN THE UNITED STATES2Jud...
testimonials icon
construction: 1-title page 2-body of paper, minimum of 5 pages double spaced, 1 inch margins,12points Sans Serif Font (Time, Times New...
testimonials icon
Business Process Reengineering (BPR) advocates the fundamental examination and redesign of business processes, recognising tb-at the legacy of sc...
testimonials icon
Select a grade 1-5 and an Arizona Mathematics Standards standard related to mastery of basic facts or Base-Ten Concepts.Using the “COE Les...
testimonials icon
A new version of the SAT test is given to 1000 randomly selected high school seniors. The sample mean test score is 1110 and the sample standard de...
testimonials icon
This exercise will help you become more proficient at recognizing, translating, and evaluating if and and stateme...
testimonials icon
Program to be written in C++...
testimonials icon
Order Grade A+ Academic Papers Instantly!...
testimonials icon
Discussion To prepare for this Discussion: Review the Learning Resources for this week and reflect on how actual c...
Calculate Price

When you use PaperHelp, you save one valuable — TIME

You can spend it for more important things than paper writing.

Approx. price
$65
Order a paper. Study better. Sleep tight. Calculate Price!
Created with Sketch.
Calculate Price
Approx. price
$65