12nts303:38:35eBookHintPrinteferencesYour firm is contemplating the purchase of a new $580,000 computer-based order entrysystem. The system will be depreciated straight-line to zero over its five-year life. It willbe worth $92,000 at the end of that time. You will be able to reduce working capital by$117,000 (this is a one-time reduction). The tax rate is 24 percent and the required returnon the project is 12 percent.If the pretax cost savings are $150,000 per year, what is the NPV of this project? (Do notround intermediate calculations and round your answer to 2 decimal places, e.g.,32.16.)NPVWill you accept or reject the project?RejectAcceptIf the pretax cost savings are $115,000 per year, what is the NPV of this project? (Anegative answer should be indicated by a minus sign. Do not round intermediatecalculations and round your answer to 2 decimal places, e.g., 32.16.) 12ints03:38:24eBookHintPrintReferencesIf the pretax cost savings are $115,000 per year, what is the NPV of this project? (Anegative answer should be indicated by a minus sign. Do not round intermediatecalculations and round your answer to 2 decimal places, e.g., 32.16.)NPVWill you accept or reject the project?RejectAcceptAt what level of pretax cost savings would you be indifferent between accepting theproject and not accepting it? (Do not round intermediate calculations and roundyour answer to 2 decimal places, e.g., 32.16.)Cost savings

Net Present value is the capital budgeting technique which uses Time value of money to evaluate…

Answered: 12 ts 03:38:35 eBook Hint Print…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Current Attempt in Progress Sandhill Corp. management is planning to convert an existing warehouse into a new plant that will increase its production capacity by 45 percent. The cost of this project will be $9,965,338. It will result in additional cash flows of $2,080,200 for the next eight years. The discount rate is 13.19 percent. Excel Template (Note: This template includes the problem statement as it appears in your textbook. The problem assigned to you here may have different values. When using this template, copy the problem statement from this screen for easy reference to the values you've been given here, and be sure to update any values that may have been pre-entered in the template based on the textbook version of the problem.) a. What is the payback period? (Round answer to 2 decimal places, e.g. 15.25) The project's payback period is years b. What is the NPV for this project? (Round intermediate calculations and final answers to 0 decimal places, e.g. 1,251. Do not round…
onsider the following financial informationabout a retooling project at a computer manufacturing company:• The project costs $2.5 million and has a five-yearservice life.• The retooling project can be classified as sevenyear property under the MACRS rule.• At the end of the fifth year, any assets held for theproject will be sold. The expected salvage valuewill be about 10% of the initial project cost.• The firm will finance 40% of the project moneyfrom an outside financial institution at an interestrate of 10%. The firm is required to repay the loanwith five equal annual payments.• The firm’s incremental (marginal) tax rate on theinvestment is 35%.• The firm’s MARR is 18%.With the preceding financial information,(a) Determine the after-tax cash flows.(b) Compute the annual equivalent worth for thisproject.
3 10 points Book PYM Reference A new computer system will require an initial outlay of $16.250, but it will increase the firm's cash flows by $3,900 a year for each of the next 6 years a. Calculate the NPV and decide if the system is worth installing if the required rate of return is 8%. Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places. Net present value Worth instaling Yes b. Calculate the NPV and decide if the system is worth installing if the required rate of return is 13% Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places. Net present value Worth inslaring No
eBook Print Item Average Rate of Return-Cost Savings Sager Industries is considering an investment in equipment that will replace direct labor. The equipment has a cost of $91,000 with a $8,000 residual value and a 10-year life. The equipment will replace three employees who has an average total wages of $18,640 per year. In addition, the equipment will have operating and energy costs of $4,400 per year. Determine the average rate of return on the equipment, giving effect to straight-line depreciation on the investment. Previous Check Mu Work Sign out V O 12:15
Question 17 A $65,000 machine with a 7-year class life was purchased 2 years ago. The machine will now be sold for $50,000 and replaced with a new machine costing $78,000, with a 10-year class life. The new machine will non increase sales, but will decrease operating costs by $13,000 per year. Simplified straight line depreciation is employed for both machines, and the marginal corporate tax rate is 34 percent. What is the incremental annual cash flow associated with the project?
QUESTION 1 Frank Einstein Co. is a firm that specializes in selling Halloween decorations. It is evaluating a new project that requires an initial investment of $1.42 million. The asset will be depreciated to zero over its 3-year life. The company's analysts estimate that in the first year, the project will generate $1.09 million in revenues. The revenue will increase by 7% per year in the following two years. The costs in the first year will be $475,000 and they will increase by 5% per year thereafter. The corporate tax rate is 25% and the required return is 12%. What is the NPV of the project?
es Problem 2-30 CCA and UCC (LO5) Our new computer system cost us $136,000. We will outgrow it in five years. When we sell it, we will probably get only 10% of the purchase price. CCA on the computer will be calculated at a 30% rate (Class 10). Calculate the CCA and UCC values for five years. (Round your intermediate calculations and final answers to 2 decimal places. Omit $ sign in your response.) Year 1 2 3 4 5 $ $ $ $ $ $ CCA 61200 Ending UCC $ 74800 $ $ $ $ What will be the after-tax proceeds from the sale assuming the asset pool remains open? Assume a 40% tax rate. (Omit $ sign in your response.) After-tax proceeds
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Exercise 16-34 Profitability Index; Taxes (Section 2) (LO 16-7) The owner of Atlantic City Confectionary is considering the purchase of a new semiautomatic candy machine. The machine will cost $23,000 and last 9 years. The machine is expected to have no salvage value at the end of its useful life. The owner projects that the new candy machine will generate $3,500 in after-tax savings each year during its life (including the depreciation tax shield). Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) Required: Compute the profitability index on the proposed candy machine, assuming an after-tax hurdle rate of (a) 8 percent, (b) 1O percent, and (c) 12 percent. (Round your final answers to 2 decimal places.) Profitability Index (a) 8 percent (b) 10 percent (c) 12 percent

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