A firm is must choose to buy the GSU-3300 or the UGA- 3000. Both machines make the firm's production process more efficient which in turn increases incremental cash flows. The GSU-3300 produces incremental cash flows of $24,456.00 per year for 8 years and costs $100,996.00. The UGA-3000 produces incremental cash flows of $28,731.00 per year for 9 years and cost $125,838.00. The firm's WACC is 7.18%. What is the equivalent annual annuity of the GSU-3300? Assume that there are no taxes. Submit Answer format: Currency: Round to: 2 decimal places.

A firm is must choose to buy the GSU-3300 or the UGA- 3000. Both machines make the firm's production process more efficient which in turn increases incremental cash flows. The GSU-3300 produces incremental cash flows of $24,456.00 per year for 8 years and costs $100,996.00. The UGA-3000 produces incremental cash flows of $28,731.00 per year for 9 years and cost $125,838.00. The firm's WACC is 7.18%. What is the equivalent annual annuity of the GSU-3300? Assume that there are no taxes. Submit Answer format: Currency: Round to: 2 decimal places.

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 firm is must choose to buy the GSU-3300 or the UGA-3000. Both machines make the firm’s production process more efficient which in turn increases incremental cash flows. The GSU-3300 produces incremental cash flows of $25,089.00 per year for 8 years and costs $98,160.00. The UGA-3000 produces incremental cash flows of $27,680.00 per year for 9 years and cost $126,360.00. The firm’s WACC is 9.22%. What is the equivalent annual annuity of the GSU-3300? Assume that there are no taxes.
Murray’s Coffee House is trying to choose between two new coffee bean roasters. The required rate of return for either machine is 10%. (Assuming the Project’s cash flows can be repeated) Shown below are the after-tax cash flows associated with each machine: year CFX CFY 0 (50,000) (30,000) 1 20,000 20,000 2 20,000 20,000 3 20,000 4 20,000 i. Calculate the replacement chain NPV for each project. ii. Calculate the equivalent annual annuity for each project.
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A firm is must choose to buy the GSU-3300 or the UGA-3000. Both machines make the firm’s production process more efficient which in turn increases incremental cash flows. The GSU-3300 produces incremental cash flows of $24,524.00 per year for 8 years and costs $103,457.00. The UGA-3000 produces incremental cash flows of $27,949.00 per year for 9 years and cost $126,391.00. The firm’s WACC is 7.61%. What is the equivalent annual annuity of the UGA-3000? Assume that there are no taxes.: Currency: Round to: 2 decimal places.
The Sandbox's Company has cash needs of P5 million per month. If Sandbox needs more cash, it can sell marketable securities, incurring a fee of P300 for each transaction. If Sandbox leaves its funds in marketable securities, it expects to earn approximately 0.50% per month on their investment. 1. Using the Baumol model, how much would be the Sandbox’s minimum total costs associated with cash infusion? 2. If Sandbox gets a cash infusion of P1 million each time it needs cash, what are the holding costs associated with its cash investment? 3. Using the Baumol model, what level of cash infusion minimizes Sandbox’s costs associated with cash?
The Tech company. Inc. is currently making windfall profits from the sales of financial programming software, so the company is looking for new investment opportunities to invest the profits and maintain its growth. The firm decided to undertake one of these two projects. Project A: invest in the development and improvement of the already existing software (create a new version) Project B: launch into the manufacture of computer equipment (external hard drives) The cash flow projections for the two projects are as follows: 0 1 2 3 4 I0 FM1 FM2 FM3 FM4 Project A 100,000 60,000 40,000 30,000 20,000 Project B 350,000 60,000 100,000 130,000 160,000 The rate of return required by senior management is 10% 1. Calculate simple payback period and discounted payback period, and give your recommendation, if the maximum period acceptable to senior management is 3 years? 2. Calculate the NPV (net present value) of each project and give…
Suppose you are considering building a factory that produces turbo jets. Price of a turbo jet right now is $200. Next year the price could go up to $220 or go down to $180 or stay at $200 with equal probabilities. The price then remains fixed for a long time. (This assumption makes this cash flow risky). This will be your revenue. Cost of factory is $300 and it can be built right away since you have infrastructure in place. WACC is 30%. Cost of debt is 10%. You have the option to wait one year and see whether the price goes up or down and then invest only if price is above $180? What is the NPV? 414.22 167.52 312.82 566.67
You are purchasing a factory at $550,000. Your projected cash flow streams from the factory will be $135,000 in year 1, $152,000 in year 2, and $285,000 in year 3. What is the rate of return on this factory investment?
You are planning to produce a new action figure called "Nia." However, you are very uncertain about the demand for the product. If it is a hit, you will have net cash flows of $80 million per year for three years (starting next year [i.e., at t = 1]). If it fails, you will only have net cash flows of $40 million per year for two years (also starting next year). There is an equal chance that it will be a hit or failure (probability = 50 percent). You will not know whether it is a hit or a failure until the first year's cash flows are in (i.e., at t = 1). You must spend $140 million immediately for equipment and the rights to produce the figure. If you can sell your equipment for $90 million once the first year's cash flows are received, calculate the value of the abandonment option. (The discount rate is 10 percent.) Multiple Choice $24.38 $18.56 -$5.82 $0.00
1
A firm is must choose to buy the GSU-3300 or the UGA-3000. Both machines make the firm's production process more efficient which in turn increases incremental cash flows. The GSU-3300 produces incremental cash flows of $25,673.00 per year for 8 years and costs $98,456.00. The UGA-3000 produces incremental cash flows of $28,744.00 per year for 9 years and cost $123,316.00. The firm's WACC is 7.34%. What is the equivalent annual annuity of the GSU-3300? Assume that there are no taxes. Submit Answer format: Currency: Round to: 2 decimal places. Show Hint G unanswered not submitted Attempts Remaining: Infinity #4 A firm is must choose to buy the GSU-3300 or the UGA-3000. Both machines make the firm's production process more efficient which in turn increases incremental cash flows. The GSU-3300 produces incremental cash flows of $24,820.00 per year for 8 years and costs $99,835.00. The UGA-3000 produces incremental cash flows of $28,195.00 per year for 9 years and cost $125,987.00. The…

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