A firm is must choose to buy the GSU-3300 or the UGA-3000. Both machines make the firm'sproduction process more efficient which in turn increases incremental cash flows. The GSU-3300produces incremental cash flows of $25,673.00 per year for 8 years and costs $98,456.00. TheUGA-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.SubmitAnswer format: Currency: Round to: 2 decimal places.Show HintGunanswerednot submittedAttempts Remaining: Infinity#4A firm is must choose to buy the GSU-3300 or the UGA-3000. Both machines make the firm'sproduction process more efficient which in turn increases incremental cash flows. The GSU-3300produces incremental cash flows of $24,820.00 per year for 8 years and costs $99,835.00. TheUGA-3000 produces incremental cash flows of $28,195.00 per year for 9 years and cost$125,987.00. The firm's WACC is 9.40%. What is the equivalent annual annuity of the UGA-3000?Assume that there are no taxes.

UGA-3000Cash Flows (CF): $28,744 per yearNumber of years (n): 9Initial Cost (C0): $123,316WACC (r):…

Answered: A firm is must choose to buy the…

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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Beyer Company is considering buying an asset for $350,000. It is expected to produce the following net cash flows. Compute the payback period for this investment. (Cumulative net cash outflows must be entered with a minus sign. Round your Payback Period answer to 2 decimal places.)
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 $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.
Brunette Company is contemplating investing in a new piece of manufacturing machinery. The amount to be invested is $180,000. The present value of the future cash flows generated by the project is $163,000. Should they invest in this project? Oa. yes, because the rate of return on the project is equal to the desired rate of return used to calculate the present value of the future cash flows Ob. no, because net present value is +$17,000 Oc. no, because the rate of return on the project is less than the desired rate of return used to calculate the present value of the future cash flows Od. yes, because the rate of return on the project exceeds the desired rate of return used to calculate the present value of the future cash flows
The Martian Corporation, a space vehicle development company, is starting a new division that will develop the next-generation launch missile engine configuration. Use a hand application of the MIRR method to determine the EROR for the estimated net cash flows (in $1000 units) of $-60,000 in year 0, $15,000 in years 1 through 7, and $-1,000 in year 8. Assume a borrowing rate of 8% and an investment rate of 25% per year. The external rate of return is %.
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 Pan American Bottling Company is considering the purchase of a new machine that would increase the speed of bottling and save money. The net cost of this machine is $57,000. The annual cash flows have the following projections. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. Year 1 2 3 4 5 Cash Flow $ 22,000 24,000 26,000 32,000 14,000 a. If the cost of capital is 11 percent, what is the net present value of selecting a new machine? Note: Do not round intermediate calculations and round your final answer to 2 decimal places. Net present value b. What is the internal rate of return? Note: Do not round intermediate calculations, Enter your answer as a percent rounded to 2 decimal places. Intemal rate of return %
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…
(Calculating free cash flows) At present, Solartech Skateboards is considering expanding its product line to include gas-powered skateboards; however, it is questionable how well they will be received by skateboarders. Although you feel there is a 60 percent chance you will sell 8,000 of these per year for 10 years (after which time this project is expected to shut down because solar-powered skateboards will become more popular), you also recognize that there is a 20 percent chance that you will only sell 1,000 and also a 20 percent chance you will sell 18,000. The gas skateboards would sell for $110 each and have a variable cost of $35 each. Regardless of how many you sell, the annual fixed costs associated with production would be $120,000. In addition, there would be an initial expenditure of $1,000,000 associated with the purchase of new production equipment which will be depreciated using the bonus depreciation method in year 1. Because of the number of stores that will need…
WhiteScreen LLC is evaluating Project T, which requires an initial investment of RO 18000. The expected net cash flows are RO 5000 pa for four years at today’s prices. However, these are expected to rise by 5.5% pa because of inflation. The firm’s cost of capital is 15%. What is the NPV for Project T being evaluated by WhiteScreen LLC using the discounting real cash flows? -1802 -2803 2500 14792
1
You are operating an old machine that is expected to produce a cash inflow of $6,100 in each of the next 3 years before it fails. You can replace it now with a new machine that costs $21,100 but is much more efficient and will provide a cash flow of $11,650 a year for 4 years. Calculate the equivalent annual cost of the new machine if the discount rate is 14%. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Equivalent annual cost of the purchase price Should you replace your equipment now? O Yes No

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