A CNC mill was purchased 4 years ago for $50,000.The current market value is $26,000, which will declineas follows over the next 5 years: $20,000, $16,250, $14,000, $12,000, and $8500. The O&M costs areestimated to be $6000 this year. These costs areexpected to increase by $2000 per year starting year 2.MARR = 10% The marginal cost for defender in year 2Group of answer choices $13,750 $is14,600 $ 13,875 $15,400 $12,400

Variables in the question:Value of CNC mill over the next 5 years :Year 1=$20000Year 2=$16250Year…

Answered: A CNC mill was purchased 4 years ago…

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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A manufacturer of automated optical inspection devices is deciding on a project to increase the productivity of the manufacturing processes. The estimated costs for the two feasible alternatives being compared are shown below. Use the internal rate of return (IRR) method to determine which alternative should be selected if the analysis period is 8 years and the company's MARR is 4% per year. Alternative M N Initial costs $30,000 $45,000 Net annual cash flow $4,500 $7,000 Life in years 8 8 (a) IRR of base alternative = (b) IRR of incremental cash flow = (c) Choose Alternative
The Carter Corporation, a firm in the 25% marginal tax bracket, with a 15% required rate of return or discount rate, is considering a new project. This project involves the introduction of a new product. This product is expected to last 5 years and then, because it is somewhat of a fad product, it will be terminated. Cost of new plant and equipment:$380,000,000 Shipping and installation costs: 20,000,000 Unit sales: YearUnits Sold 1 2,000,000 2 2,000,000 3 2,000,000 4 1,500,000 5 1,500,000 Sales price per unit: $800/unit in years 1-3 and $600/unit in years 4 and 5 Variable cost per unit: $400/unit throughout the five years Annual fixed costs: $250,000,000 There will be an initial working capital requirement of $2,000,000 just to get production started. At the conclusion of the project, the plant and equipment can be sold for $100,000,000. The plant and equipment will be depreciated over five years on a straight-line basis to a zero-salvage value. Required: a)…
A store will cost $750,000 to open. Variable costs will be 38% of sales and fixed costs are $250,000 per year. The investment costs will be depreciated straight-line over the 19 year life of the store to a salvage value of zero. The opportunity cost of capital is 11% and the tax rate is 25%. Find the operating cash flow each year if sales revenue is $750,000 per year. Enter your response below. Correct response: 171, 118.42+ - 10Using an operating cash flow of 171, 118.42, calculate the Net Present Value. Should the store be opened? Enter your response for net present value below. 591, 447.64 Correct response: 591, 447.65 + 100 Find the net present value break - even level of sales revenue Enter your response below.
A marketing company intends to 0 distribute a new product. It is expected to produce net returns of $17,000 per year for the first four yoars and $13,000 per year for the following throe yoars Tha faciltios roquirodto distribute the product will cost $70,000 with a disposal value of $9,000 after seven years. The facilities will require a major facelift costing $10,000 each after three years and after five years. If the companyrequires a return on investment of 10%, should the company distribute the new product?
A company is planning to purchase a machine that will cost $34,800, will have a six-year life, and will have no salvage value. The company expects to sell the machine's output of 3,000 units evenly throughout each year. A projected income statement for each year of the asset's life appears below. What is the accounting rate of return for this machine? Sales Costs: Manufacturing Depreciation on machine Selling and administrative expenses Income Multiple Choice O O O 3 5.80% 5.17% 50.00% 17.24%. 33.33%. E $ 105,000 $ 51,200 5,800 45,000 (102,000) $ 3,000 80 F3 a F4 F5 F6 54 85 R D F ןד C V 6 & 7 T Y DII F7 F8 F9 F10 U 8 9 0 0 G H J K L B N M P
What is the reduction in Variable manufacturing cost
The Carter Corporation, a firm in the 25% marginal tax bracket, with a 15% required rate of return or discount rate, is considering a new project. This project involves the introduction of a new product. This product is expected to last 5 years and then, because it is somewhat of a fad product, it will be terminated. Cost of new plant and equipment: $380,000,000 Shipping and installation costs: 20,000,000 Unit sales: Year Units Sold 2,000,000 2,000,000 2,000,000 1,500,000 1,500,000 Sales price per unit: $800/unit in years 1-3 and $600/unit in years 4 and 5 Variable cost per unit: $400/unit throughout the five years Annual fixed costs: $250,000,000 There will be an initial working capital requirement of $2,000,000 just to get production started. At the conclusion of the project, the plant and equipment can be sold for $100,000,000. The plant and equipment will be depreciated over five years on a straight-line basis to a zero-salvage value.…
a new process for a manufacturing process will have a first cost of $45,000 with annual costs of $38,000. Extra income associated with the new process is expected to be $62,000 per year. What is the discounted payback period at i=12% per year? Options: 2.48 3.23 2.25 4.52

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