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. Chapter 8 Exercise 4: 4. Cash flow calculations and net present value On January 2, 19X1, 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 19X1 and 19X2; the dividend was raised to $3.10 per share in 19X3. On December 31, 19X3, 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 19X3 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. Chapter 8 exercise 5: 5. 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. b. Compute the internal rate of return on this project. Chapter 8 Problem 1: 1. 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. Chapter 8 Problem 4: 4. 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 Custom Essay

1. Basic exhibit treasure calculations

Calculate the exhibit treasure of the aftercited specie streams, circularing to the unswerving dollar:

  1. A sole specie instream of $12,000 in five years, discounted at a 12% scold of give-back.
  2. An annual voucher of $16,000 balance the give 12 years, discounted at a 14% scold of give-back.
  3. A sole voucher of $15,000 at the purpose of Year 1 followed by a sole voucher of $10,000 at the purpose of Year 3. The corporation has a 10% scold of give-back.
  4. An annual voucher of $8,000 ce three years followed by a sole voucher of $10,000 at the purpose of Year 4. The corporation has a 16% scold of give-back.

 

Chapter 8 Application 4:

4. Specie stream calculationsand completionure exhibit treasure

On January 2, 19X1, Bruce Greene invested $10,000 in the supply chaffer and purchased 500 distributes of Heartland Development, Inc. Heartland remunerated specie dividends of $2.60 per distribute in 19X1 and 19X2; the dividpurpose was influential to $3.10 per distribute in 19X3. On December 31, 19X3, Greene sold his holdings and generated proceeds of $13,000. Greene uses the completionure-present- treasure regularity and desires a 16% give-back on bombardments.

  1. Prepare a chronological register of the bombardment’s specie streams. Note: Greene is entitled to the 19X3 dividend.
  2. Compute the bombardment’s completionure exhibit treasure, circularing calculations to the unswerving dollar.
  3. Given the results of distribute (b), should Greene bear artificial the Heartland supply? Briefly teach.

 

Chapter 8 application 5:

5. Straightforwardallure exhibit treasure and interior scold of give-back

The City of Bedford is studying a 600-acre locality on Route 356 ce a odd landfill. The startup demand has been congenial as follows:

Purchase demand: $450 per acre

Locality preparation: $175,000

 

The locality can be used ce 20 years precedently it reaches ability. Bedford, which distributes a pliancy in Bath Township with other municipalities, estimates that the odd subsidence earn hinder $40,000 in annual open demands.

  1. Should the landfill be artificial if Bedford desires an 8% give-back on its bombardment? Use the completionure-present-treasure regularity to state your defense.
  2. Compute the interior scold of give-back on this scheme.

 

Chapter 8 Problem 1:

1. Straightforward completionure-present-treasure and payback computations

STL Entertainment is regarding the merit of a sight-seeing boat ce summer tours along the Mississippi River. The aftercited notification is helpful:

Demand of boat $500,000
Employment career 10 summer occasions
Disposal treasure at the purpose of 10 occasions $100,000
Ability per mistake 300 passengers
Fixed open demands per occasion (including straight-line diminution) $160,000
Variable open demands per mistake $1,000
Ticket price $5 per passenger

 

Completion open demands, ate diminution, demand specie extinguishedlays. On the plea of concordant operations in other distributes of the kingdom, superintendence anticipates that each mistake earn be sold extinguished and that 120,000 passengers earn be carried each occasion. Disown pay taxes.

 

Instructions:

By using the completionure-present-treasure regularity, state whether STL Entertainment should get the boat. Assume a 14% desired give-back on completion bombardments,- circular calculations to the unswerving dollar.

 

Chapter 8 Problem 4:

4. Equipment regaining determination

Columbia Enterprises is studying the regaining of some equipment that originally demand $74,000. The equipment is expected to produce six further years of employment if $8,700 of important repairs are produced in couple years. Annual specie open demands completion $27,200. Columbia can dispose-of the equipment now ce $36,000; the estimated residual treasure in six years is $5,000.

Odd equipment is helpful that earn lessen annual specie open demands to $21,000. The equipment demands $103,000, has a employment career of six years, and has an estimated residual treasure of $13,000. Corporation sales earn completion $430,000 per year with either the true or the odd equipment. Columbia has a insufficiency desired give-back of 12% and depreciates completion equipment by the straight-line regularity.

 

Instructions:

  1. By using the completionure-present-treasure regularity, state whether Columbia should adhere-to its exhibit equipment or get the odd equipment. Circular completion calculations to the unswerving dollar, and disown pay taxes.
  2. Columbia’s superintendence feels that the period treasure of money should be considered in completion long-term determinations. Briefly debate the rationale that underlies superintendence’s assent.

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