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Pls answer the all questions with solutions 1. The Company is considering three investment opportunities with cash flows as described below: Project A: Cash investment
Pls answer the all questions with solutions 1. The Company is considering three investment opportunities with cash flows as described below: Project A: Cash investment now P15,000 Cash inflow at the end of 5 years P21,000 Cash inflow at the end of 8 years P21,000 Project B: Cash investment now P11,000 Annual cash outflow for 5 years P3,000 Additional cash inflow at the end of 5 years P21,000 Project C: Cash investment now P21,000 Annual cash outflow for 4 years P11,000 Cash outflow at the of 3 years P5,000 Additional cash inflow at the end of 4 years P15,000 Required: Compute the net present value of each project assuming The Company uses a 12% discount rate. 2. Urs Inc. is considering a project that would have a ten-year life and would require a P1,000,000 investment in equipment. At the end of ten years, the project would terminate and the equipment would have no salvage value. The project would provide net operating income each year as follows: Sales P 2,000,000 Variable expenses (1,400,000) Contribution margin 600,000 Fixed expenses (400,000) Net operating income P 200,000 All of these items, except for depreciation of P100,000 a year, represent cash flows. The depreciation is included in the fixed expenses. The company's required rate of return is 12%. Required: a. Compute the project's net present value. b. Compute the project's internal rate of return to the nearest whole percent. c. Compute the project's payback period. d. Compute the project's simple rate of return. 3. Mik, Inc., is considering the purchase of a machine that would cost P480,000 and would last for 7 years, at the end of which, the machine would have a salvage value of P82,000. The machine would reduce labor and other costs by P101,000 per year. Additional working capital of P2,000 would be needed immediately, all of which would be recovered at the end of 7 years. The company requires a minimum pretax return of 9% on all investment projects. Required: Determine the net present value of the project. 4. Laj Inc., is considering the purchase of a car that would cost P195,661, would have a useful life of 9 years, and would have no salvage value. The car would bring in cash inflows of P47,000 per year in excess of its cash operating costs. Required: Determine the internal rate of return on the investment in the new car. 5. Grim Company is considering purchasing a machine that would cost P403,200 and have a useful life of 9 years. The machine would reduce cash operating costs by P74,667 per year. The machine would have a salvage value of P60,480 at the end of the project. Required: a. Compute the payback period for the machine. b. Compute the simple rate of return for the machine
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