8. The following data on a proposed investment project have been provided: The w
ID: 2485039 • Letter: 8
Question
8. The following data on a proposed investment project have been provided:
The working capital would be released for use elsewhere at the end of the project. The net present value of the project is closest to:
A $3,730
B $0
C $32,450
D $88,370
9. Riveros, Inc., is considering the purchase of a machine that would cost $120,000 and would last for 8 years. At the end of 8 years, the machine would have a salvage value of $29,000. The machine would reduce labor and other costs by $25,000 per year. Additional working capital of $9,000 would be needed immediately. All of this working capital would be recovered at the end of the life of the machine. The company requires a minimum pretax return of 18% on all investment projects. The net present value of the proposed project is closest to:
A ($18,050)
B ($63,683)
C ($10,336)
D ($16,942)
10.The following data pertain to an investment proposal:
The net present value of the proposed investment is closest to:
A $4,713
B $2,445
C $2,268
D $19,000
14. Pro-Mate, Inc. is a producer of athletic equipment. The company is considering the purchase of a machine to produce baseball bats. The machine will cost $60,000 and have a 10-year useful life. The following annual revenues and expenses are projected:
The machine will have no salvage value. Assume cash flows occur uniformly throughout a year except for the initial investment.
The payback period for the new machine is about:
A 6.0 years
B 1.5 years
C 5.4 years
D 3.75 years
Cost of equipment $50,000 Working capital required $30,000 Salvage value of equipment $0 Annual cash inflows from the project $20,000 Required rate of return 20% Life of the project 8 yearsExplanation / Answer
8)
NPV = - 80000 + 20000*(1-(1+.20)^-8)/.20 + 30000/1.20^8
=3720.24
Correct option:
$3,730
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