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Pani-rosa [81]
2 years ago
10

An office building is expected to create operating cash flows of $30,500 a year for three years, based on tenants' rental income

. The purchase of the fixed assets for this building will cost $63,000. These assets will have no value at the end of the project. An additional $2,000 of net working capital will be required throughout the life of the project. Calculate the net present value of this project if the required rate of return is 14 percent
Business
1 answer:
Tasya [4]2 years ago
5 0

Answer:

The net present value of this project is $5,809.78.

Explanation:

Note: See the attached excel file for the calculation of net present value of this project.

In the attached excel file, the discounting factor is calculated as follows:

Discounting factor = 1 / (100% + required rate of return)^n

Where n is a particular year in focus.

From the attached excel file, we have:

Net present value = $5,809.78

Therefore, the net present value of this project is $5,809.78.

Download xlsx
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Which of these statements is true?
AnnZ [28]
The correct statement is Inflation is problematic if unexpected

Money loses purchasing power during inflation and there's too much of it.
8 0
3 years ago
In an economy where heating oil is the primary source of heat for most households, new supplies of natural gas, a substitute for
Otrada [13]

Answer:

Price Decreases & Quantity Decreases

Explanation:

As a result of the discovery of an alternative which is cheaper, consumers increase demand for natural gas. The demand for heating oil would fall. This would lead to a fall in price and quantity.

I hope my answer helps you

8 0
3 years ago
The daily demand for parts from a machining workcell JMB to an assembly workcell is 1,600 units. The average processing time is
Karolina [17]

Answer:

Daily demand for parts = 1600 units

Avg processing time = 25 seconds.

Capacity of a container = 250 units

Waiting time of a container before the JMB = 6 hours

Number of containters currently deployed = 10

Solution:

Total number of parts carried by the containter = 10 x 250 = 2500 parts.

Total numbers carried in excess as safety stock = 2500-1600 = 900

Percentage of safety stock = (900/1600) x 100 = 56.25%

If one container is removed total parts carried = 2250 units

Processing time at machine for 250 parts after loading in JMB = 250 x 25 seconds = 1.736 hours, but it has to wait for another 4.26 hours for the next container to be loaded because of the waiting time of the containter is 6 hours.

Processing time at machine for 1600 parts = 1600 x 25 seconds = 11.11 hours

Number of containers required for 1600 parts = 1600/250= 6.4 ~ 7 containters

Waiting time of 7 containers = 7 x 4.26 = 29.82 hours.

If one of the containers has to be removed 1600 parts has to be carried in 6 containers ie., 29.82hours - 6 hours = 23.82hours

Waiting time per container before loading = 23.82/6 = 3.97 hours.

Reduced Total waiting time of the container = 3.97 hours + the processing time of 250 parts = 3.97 + 1.736 =5.7hours ~ 5 hours and 42 minutes

4 0
3 years ago
Westchester Corp. is considering two equally risky, mutually exclusive projects, both of which have normal cash flows. Project A
inn [45]

Answer:

d. If the WACC is 9%, Project B's NPV will be higher than Project A's.

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The internal rate of return is the return in which the NPV is zero i.e cash inflows equal to the initial investment

While the WACC refers to the cost of capital by considering the capital structure i.e cost of equity, cost of preferred stock and cost of debt by taking their weightage

Now if the WACC is 9% so project B NPV would be higher as compared to project A as we can see that project B IRR is greater than the project A IRR

Therefore option d is correct

5 0
2 years ago
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