A company is considering replacing its air conditioner. Management has narrowed the choices to two alternatives that offer comparable performance and considerable savings over their present system. The effective annual interest rate is 10%. (a) Compute B/C ratio for each alternative (b) Which alternative should be selected based on incremental analysis? $7000 II $9000 Initial cost Annual savings $1500 Salvage value Life $1900 -$1250 $500 15 years 15 years

A company is considering replacing its air conditioner. Management has narrowed the choices to two alternatives that offer comparable performance and considerable savings over their present system. The effective annual interest rate is 10%. (a) Compute B/C ratio for each alternative (b) Which alternative should be selected based on incremental analysis? $7000 II $9000 Initial cost Annual savings $1500 Salvage value Life $1900 -$1250 $500 15 years 15 years

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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Coronado, Inc. is considering purchasing equipment costing $39000 with a 7-year useful life. The equipment will provide cost savings of $8700 and will be depreciated straight-line over its useful life with no salvage value. Coronado Inc. requires a 9% rate of return. What is the approximate internal rate of return for this investment? Period 7 10% O 11% 000 9% 8% 7% 5.389 8% Present Value of an Annuity of 1 5.206 9% 5.033 10% 4.868 11% 4.712 14% 4.288
Compare two alternatives, 1 and 2, on the basis of a present worth evaluation using 10% per year and a study period of 8 years. Alternative First Cost Annual Operating Cost Overhaul in Year 4 Salvage Value Life Answer to the nearest whole dollars for currency, and the nearest percentage (no decimals) for interest, and a whole number for the number of years. Do NOT enter commas. DO enter minus signs for negative values. 1) What is the Present Worth of Project 1? $ 1 2 ($13,000) ($49,000) ($6,000) ($5,000) $0 ($3,350) $1,800 $6,800 4 years 8 years
Harris Corporation has provided the following data concerning an investment project that it is considering: Initial investment Annual cash flow Salvage value at the end of the project Expected life of the project Discount rate $ 160,000 $ 54,000 $ 11,000 O $67,000 O $160,516 O $516 O $(5,776) 4 15 per year years % Use Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using the tables provided. The net present value of the project is closest to:
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Three machines are being considered for purchase. If the interest rate is 10%, which machine should be bought? a) Select the best alternative using annual worth analysis. b) Select the best alternative using present worth analysis. A B CInitial cost 150000 210000 300000 Annual operating cost 20000 15000 8000 Repairs will have to be made every 5 years 20000 50000 38000 Salvage value 40000 60000 80000 Useful life 10 years 15 years 20 years
You may attempt this question 2 more times for credit An airline is considering a project of replacement and upgrading of machinery that would improve efficiency. The new machinery costs $450 today and is expected to last for 10 years with no salvage value. Straight line depreciation will be used. Project inflows connected with the new machinery will begin in one year and are expected to be $250 each year for 10 consecutive years and project outflows will also begin in one year and are expected to be $100.00 each year for 10 consecutive years. The corporate tax rate is 34% and the required rate of return is 6%. Calculate the project's net present value. $ Place your answer in dollars and cents. Do not include a dollar sign or comma in your answer. Work your analysis with at least four decimal places of accuracy. YOU ARE NOT FINISHED. NOW GO ON TO THE SECOND PART! PART 2. Given your estimate of the NPV, should you accept or reject the project? Type the word "accept" if you believe you…