15... Hobie Corp. has the following information for the purchase of a new machine in its manufacturing process: Cost of the machine $225,000 4 years Expected useful life-the cost of the machine will be depreciated on a straight-line basis to a terminal disposal value of zero. Working capital investment upon machine purchase (fully recovered at the end of the useful life) Annual cost savings with the new machine Machine's expected salvage value at the end of four years Required rate of return 8% Hobie's tax rate 15% a. Calculate the net present value (NPV) of the project (round your solution to dollars). c. Should the project be accepted or rejected? Why? $12,000 $ 66,000 $8,000 b. What is the payback period of the project (round your solution to two decimal places)?

15... Hobie Corp. has the following information for the purchase of a new machine in its manufacturing process: Cost of the machine $225,000 4 years Expected useful life-the cost of the machine will be depreciated on a straight-line basis to a terminal disposal value of zero. Working capital investment upon machine purchase (fully recovered at the end of the useful life) Annual cost savings with the new machine Machine's expected salvage value at the end of four years Required rate of return 8% Hobie's tax rate 15% a. Calculate the net present value (NPV) of the project (round your solution to dollars). c. Should the project be accepted or rejected? Why? $12,000 $ 66,000 $8,000 b. What is the payback period of the project (round your solution to two decimal places)?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

15. Hobie Corp. has the following information for the purchase of a new machine in its
manufacturing process:
Cost of the machine
Expected useful life-the cost of the machine will be
depreciated on a straight-line basis to a terminal
disposal value of zero.
Working capital investment upon machine purchase
(fully recovered at the end of the useful life)
Annual cost savings with the new machine
Machine's expected salvage value at the end of four
years
Required rate of return
Hobie's tax rate
a. Calculate the net present value (NPV) of the project (round your solution to dollars).
$ 225,000
4 years
c. Should the project be accepted or rejected? Why?
$12,000
$ 66,000
$8,000
8%
15%
b. What is the payback period of the project (round your solution to two decimal places)?

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