A machinery with an initial cost of $330,000 and a service life of 7 years is being considered for purchase. Its estimated annual costs include labor costs of $55,000 per year and other operation and maintenance (O&M) costs of $30,000 per year. All the estimated costs are in today's dollars. The corresponding annual inflation rates are 5.66% for labor costs and 3.7% for O&M costs. The 3.7% is also the general inflation rate. Based on a market rate-of-return of 12%, and assuming zero salvage value at the end of its service life, answer the following two questions 1. The PW cost of this machinery is O A. $717,919 O B. $772,541 C. $804,502 D. $793,222 2. The EUAC of the machinery in real dollars is O A. $142,094 O B. $152,356 O C. $173,809 O D. $148,384

A machinery with an initial cost of $330,000 and a service life of 7 years is being considered for purchase. Its estimated annual costs include labor costs of $55,000 per year and other operation and maintenance (O&M) costs of $30,000 per year. All the estimated costs are in today's dollars. The corresponding annual inflation rates are 5.66% for labor costs and 3.7% for O&M costs. The 3.7% is also the general inflation rate. Based on a market rate-of-return of 12%, and assuming zero salvage value at the end of its service life, answer the following two questions 1. The PW cost of this machinery is O A. $717,919 O B. $772,541 C. $804,502 D. $793,222 2. The EUAC of the machinery in real dollars is O A. $142,094 O B. $152,356 O C. $173,809 O D. $148,384

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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Two costs for construction of a small, remote mine are for labor and transportation. Labor costs are expected to be $350,000 the first year, with inflation of 6% annually. Unit transportation costs are expected to inflate at 5% annually, but the volume of material being moved changes each year. In Time-0 dollars, the transportation costs are estimated to be $40,000, $60,000, $50,000, and $30,000 in Years 1 through 4. The inflation rate for the value of the dollar is 3%. If the firm uses an i′ of 7%, what is the equivalent annual cost in Time-0 dollars for this 4-year project?
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DSSS CorporationDSSS Corporation is considering a new project to manufacture widgets. The cost of the manufacturing equipment is $135,000. The cost of shipping and installation is an additional $2,600. The asset will fall into the 3-year MACRS class. The year 1- 4 MACRS percentages are 33.33%, 44.45%, 14.81%, and 7.41%, respectively. Sales are expected to be $215,000 per year. Cost of goods sold will be 64% of sales. The project will require an increase in net working capital of $2,600. At the end of three years, DSSS plans on ending the project and selling the manufacturing equipment for $30,000. The marginal tax rate is 36% and DSSS Corporation’s appropriate discount rate is 12%. The fixed expenses is $12,000.Refer to DSSS Corporation. What is the after-tax cash flow from selling the machine at the end of year 3? Group of answer choices $21,935 $30,000 $8,065 $2,600
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The management of California Corporation is considering the purchase of a new machine costing $400,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability of this investment: Year Operating Income Net Cash Flow 1 $100,000 $180,000 2 40,000 120,000 3 20,000 100,000 4 10,000 90,000 5 10,000 90,000 The present value index (rounded to two decimal places) for this investment is a. 1.45 b. 1.14 c. 0.70 d. 0.88
Click to see additional instructions A company is considering an investment in a new product with a 10-year horizon (product will be sold for 10 years). The upfront investment is $5 million and it is assumed to depreciate on a straight-line basis for 10 years, with no residual value. Fixed costs are assumed to be $550,000 per year. The company estimates variable cost per unit (v) to be $120 and expects to sell each unit for $425. There are no taxes and the required rate of return is 17% per year. Assume that the investment would occur today, and all future cash-flows will occur at the end of each year beginning in one year. What is the annual financial breakeven quantity? [Keep at least 3 decimals for intermediate answers. Round your final answer UP to the next highest WHOLE unit. (ie 421.2 would be rounded to 422)]
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DSSS CorporationDSSS Corporation is considering a new project to manufacture widgets. The cost of the manufacturing equipment is $135,000. The cost of shipping and installation is an additional $2,600. The asset will fall into the 3-year MACRS class. The year 1- 4 MACRS percentages are 33.33%, 44.45%, 14.81%, and 7.41%, respectively. Sales are expected to be $215,000 per year. Cost of goods sold will be 64% of sales. The project will require an increase in net working capital of $2,600. At the end of three years, DSSS plans on ending the project and selling the manufacturing equipment for $30,000. The marginal tax rate is 36% and DSSS Corporation’s appropriate discount rate is 12%. The fixed expenses is $12,000.Refer to DSSS Corporation. What is the total cash flow generated in year 3? Group of answer choices $63,875 $73,727 $49,192 $24,535

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