A company with a MARR of 15% must install one of two production machines that provide equivalent service (same benefits). Machine X has an initial cost of $40,000 with an annual operating and maintenance (O&M) cost of $30,000 and a salvage value of $5,000 after its 5-year life. Machine Y has an initial cost of $60,000 with an annual operating and maintenance (0&M) cost of $20,000 and a salvage value of $12,000 after its 5-year life. The net present worth (NPW) for machine X is: O $-158,850 O 5-120,800 O $-130,908 O $-138,808 O 5-143,653

A company with a MARR of 15% must install one of two production machines that provide equivalent service (same benefits). Machine X has an initial cost of $40,000 with an annual operating and maintenance (O&M) cost of $30,000 and a salvage value of $5,000 after its 5-year life. Machine Y has an initial cost of $60,000 with an annual operating and maintenance (0&M) cost of $20,000 and a salvage value of $12,000 after its 5-year life. The net present worth (NPW) for machine X is: O $-158,850 O 5-120,800 O $-130,908 O $-138,808 O 5-143,653

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

See similar textbooks

Similar questions

A construction company is evaluating two options for an elevator, each of which has a useful life in 10 years. Option 1 costs $45, 000 to install and $2700 annually, with a salvage value of $ 3000 in year 10. Option 1 also requires a significant overhaul in year 6 with a cost of $8, 000. Option 2 costs $54, 000, costs $2, 800 annually, and has a salvage value of $5000 in year 10. Annual interest is 4%, compounded monthly. Which option would you choose? Show your work.
A machine with an eight-year life and $5000 salvage is purchased for $40,000. Annual costs of operation are $800. The machine operator is paid $12.90 per hour. Power is consumed by the machine at the rate of $2.15 per hour, 2000 units are produced each year on the machine, which requires 48 minutes per unit. Use a 10% interest rate to find the unit cost.
A company sells Gizmos to consumers at a price of $117 per unit. The cost to produce Gizmos is $27 per unit. The company will sell 15,000 Gizmos to consumers each year. The fixed costs incurred each year will be $190,000. There is an initial investment to produce the goods $3,400,000 which will be depreciated straight line over the 10-year life of the investment to a salvage value of $0. The opportunity cost of capital is 6% and the tax rate is 34%. What is the operating cash flow each year?
who has an average wage of $48,890 per year. In addition, the equipment will have operating and energy costs of $12, 190 per year. Determine the average rate of return on the equipment, giving effect to straight-line depreciation on the investment. If required, round to the nearest whole percent. % Maui Fabricators Inc. is considering an investment in equipment that will replace direct labor. The equipment has a cost of $126,000 with a $11,000 residual value and a 5-year life. The equipment will replace one employee who has an average wage of $48,890 per year. In addition, the equipment will have operating and energy costs of $12,190 per year. Determine the average rate of return on the equipment, giving effect to straight-line depreciation on the investment. If required, round to the nearest whole percent. %
Calculate the hourly operating cost (under average conditions) for a 180- horsepower motor grader which costs $230,000 and is used in general contracting for 1500 hours per year for 10 years. The per gallon price of diesel fuel is $2.90. Salvage value is estimated to be $85,000 and a set of tires costs $5,000 for 2000 hours of average useful life. Assume a repair factor of 40% based on 10,000 hours of useful life as a percentage of hourly straight-line depreciation. (Use discount rate of 8%).
Machines that have the following costs are under consideration for a new manufacturing process. Compute the Equivalent Annual Worth with an interest rate of 8%, compounded semiannually. The machine last 4 years. First cost: $40,000 Semiannual Operating cost: $8,970 Semiannual incomes: $14,000 Salvage value: $10,000 a. EAW = $2,285 Ob. EAW = $175 O c. EAW = $1,958 O d. EAW $ 21,745
Natural Foods Inc. is planning to invest in new manufacturing equipment to make a new garden tool. The new garden tool is expected to generate additional annual sales of 7,600 units at $38 each. The new manufacturing equipment will cost $123,500 and is expected to have a 10-year life and a $9,500 residual value. Selling expenses related to the new product are expected to be 5% of sales revenue. The cost to manufacture the product includes the following on a per-unit basis: Direct labor $6.50 Direct materials 21.00 Fixed factory overhead-depreciation 1.50 Variable factory overhead 3.30 Total $32.30 Determine the net cash flows for the first year of the project, Years 2–9, and for the last year of the project. Use the minus sign to indicate cash outflows. Do not round your intermediate calculations but, if required, round your final answers to the nearest dollar. Natural Foods Inc.Net Cash Flows Year 1 Years 2-9 Last Year Initial investment $fill in the blank 1…
Factor Company is planning to add a new product to its line. To manufacture this product, the company needs to buy a new machine at a $495,000 cost with an expected four-year life and a $10,000 salvage value. Additional annual information for this new product line follows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Required: 1. Determine income and net cash flow for each year of this machine's life. $ 1,960,000 1,502,000 121,250 167,000 2. Compute this machine's payback period, assuming that cash flows occur evenly throughout each year. 3. Compute net present value for this machine using a discount rate of 8%. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Determine income and net cash flow for each year of this machine's…
You are given the following financial data about an assembly machine to be implemented at a company: - Investment cost at year 0 (n=0) is $22,000 - Investment cost at the end of the first year (n=1) is $18,500 - Useful life: 15 years - Salvage value (at the end of 15 years): $7,000 Annual revenues: $18,000 per year - Annual expenses: $5,000 per year Assuming the first revenues and expenses will occur starting from the end of year 2, determine the conventional (non-discounted) payback period.
if a company is considering buying a system that costs 450,000 with an estimated 10-year life and a salvage value of 70,000, the estimated operating results with the new machine are, incremental revenue = 180,000, incremental expenses = 123,000 which is made up by, expenses other than depreciation = 85,000, depreciation (straight-line basis) = 38,000, and incremental income = 57,000, and all revenue and expenses other than depreciation use cash, how do I find the annual net cash flow, time of the payback period, return on investment percentage, and the Net present value, discounted at an annual rate of 6% (present value of $1 due in 10 years, discounted at 6%, is 0.558; present value of $1 received annually for 10 years, discounted at 6%, is 7.360)?
Factor Company is planning to add a new product to its line. To manufacture this product, the company needs to buy a new machine at a $491,000 cost with an expected four-year life and a $20,000 salvage value. Additional annual information for this new product line follows. (PV of $1. EV of $1. PVA of $1, and EVA of $1) (Use appropriate factor(s) from the tables provided.) Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Required: 1. Determine income and net cash flow for each year of this machine's life. 2. Compute this machine's payback period, assuming that cash flows occur evenly throughout each year. 3. Compute net present value for this machine using a discount rate of 7%. $ 1,990,000 1,509,000 117,750 162,000 Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute net present value…
Machine A costs $1,520,000 to buy and install and costs $48,000 per year to operate. The machine has a five-year useful life and zero salvage value. The required return is 15.5%. What is the equivalent annual cost of Machine A? (Answer: $506,819)

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS