Question
ach of the following scenarios are independent. Assume that all cash flows are after-tax cash flows. Thomas Company is investing $120,000 in a project that
ach of the following scenarios are independent. Assume that all cash flows are after-tax cash flows.
- Thomas Company is investing $120,000 in a project that will yield a uniform series of cash inflows over the next 4 years.
- Video Repair has decided to invest in some new electronic equipment. The equipment will have a 3-year life and will produce a uniform series of cash savings. The NPV of the equipment is $1,750, using a discount rate of 8%. The IRR is 12%.
- A new lathe costing $60,096 will produce savings of $12,000 per year.
- The NPV of a project is $3,927. The project has a life of 4 years and produces the following cash flows:
Line Item Description | Amount |
---|---|
Year 1 | $10,000 |
Year 2 | $12,000 |
Year 3 | $15,000 |
Year 4 | ? |
- The cost of the project is two times the cash flow produced in Year 4. The discount rate is 10%.
Required:
Round your answers to the nearest dollar.
1. If the internal rate of return is 14% for Thomas Company, how much cash inflow per year can be expected? fill in the blank 1 of 1$per year
2. Determine the investment and the amount of cash savings realized each year for Video Repair.
Line Item Description | Amount |
---|---|
Savings each year | $fill in the blank 2 |
Original investment | $fill in the blank 3 |
3. For Scenario c, how many years must the lathe last if an IRR of 18% is realized? fill in the blank 1 of 1years
4. For Scenario d, find the cost of the project and the cash flow for Year 4.
Line Item Description | Amount |
---|---|
Cost of the project | $fill in the blank 5 |
Cash flow for year 4 | $fill in the blank 6 |
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