A company plans to modernize its facilities in 8 years. They estimate saving $3,281 per month if they sell some of their machines now, and salvage them for $19,664. They also think 4 years from now their current $1,350 per month O & M costs will increase by 0.29 per month until they sell the rest of the machines to modernize. How much capital will they have available to modernize if they place all the savings into an account that pays them a nominal 15.42% rate, compounded 7 periods per year?

A company plans to modernize its facilities in 8 years. They estimate saving $3,281 per month if they sell some of their machines now, and salvage them for $19,664. They also think 4 years from now their current $1,350 per month O & M costs will increase by 0.29 per month until they sell the rest of the machines to modernize. How much capital will they have available to modernize if they place all the savings into an account that pays them a nominal 15.42% rate, compounded 7 periods per year?

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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Your company is deciding whether to invest in a new machine. The new machine will increase cash flow by $318,000 per year. You believe the technology used in the machine has a 10-year life; in other words, no matter when you purchase the machine, it will be obsolete 10 years from today. The machine is currently priced at $1,710,000. The cost of the machine will decline by $105,000 per year until it reaches $1,185,000, where it will remain. If your required return is 13 percent, calculate the NPV today. (Do not round. intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV $ Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 If your required return is 13 percent, calculate the NPV if you wait to purchase the machine until the indicated year. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) $ $ $ 318,000.00 $ $ $ 15,545.43 120,545.43 225,545 43 31,200,545 43…
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Haresh
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