Hi i need help with my wiley plus homework 1) Wallowa Company is considering a l

Question

Hi i need help with my wiley plus homework

1) Wallowa Company is considering a long-term investment project called ZIP. ZIP will require an investment of $105,736. It will have a useful life of 4 years and no salvage value. Annual cash inflows would increase by $81,610, and annual cash outflows would increase by $46,170. The company’s required rate of return is 12%.Calculate internal rate of return

2) Wallowa Company is considering a long-term investment project called ZIP. ZIP will require an investment of $122,000. It will have a useful life of 4 years and no salvage value. Annual revenues would increase by $79,830, and annual expenses (excluding depreciation) would increase by $40,390. Wallowa uses the straight-line method to compute depreciation expense. The company’s required rate of return is 12%. Compute the annual rate of return

3)Palo Alto Corporation is considering purchasing a new delivery truck. The truck has many advantages over the company’s current truck (not the least of which is that it runs). The new truck would cost $55,900. Because of the increased capacity, reduced maintenance costs, and increased fuel economy, the new truck is expected to generate cost savings of $8,420. At the end of 8 years the company will sell the truck for an estimated $28,160. Traditionally the company has used a rule of thumb that a proposal should not be accepted unless it has a payback period that is less than 50% of the asset’s estimated useful life. Larry Newton, a new manager, has suggested that the company should not rely solely on the payback approach, but should also employ the net present value method when evaluating new projects. The company’s cost of capital is 8%. Compute the cash payback period and net present value of the proposed investment?

Explanation / Answer

Answer: 1

IRR is the rate of Return at which NPV of the Project is Zero.

IRR Using Excel = 67.34%

At 67.34%

Answer: 2

Annual Return (Based on Cash Flows)

Annual Return (Based on Net Operating Income)

Answer: 3

NPV = $7700.712

PayBack Period

Year Cash Flows PV F @ 67.34% PV Of Cash Flows 0 -105736 1 -105736 1 81610 0.59759 48769.32 2 81610 0.35711 29143.75 3 81610 0.2134 17415.57 4 81610 0.12753 10407.72 Total (NPV) 0

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