A new garbage truck can be purchased for $64,000. Its expected useful life is six years at which time its market value will be zero. Annual receipts is expected to be $20,000 with expenses of $2,000 per year over the six-year study period. The company's MARR is 18%. a. What is the ROI? b. Determine if this is a good investment using Net Present Worth(NPW) method. What is its Net Annual Worth? с. d. Using IRR method, is this investment acceptable?

A new garbage truck can be purchased for $64,000. Its expected useful life is six years at which time its market value will be zero. Annual receipts is expected to be $20,000 with expenses of $2,000 per year over the six-year study period. The company's MARR is 18%. a. What is the ROI? b. Determine if this is a good investment using Net Present Worth(NPW) method. What is its Net Annual Worth? с. d. Using IRR method, is this investment acceptable?

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 company is trying to decide whether or not to purchase a new model for its fleet. If it purchases the new model, it will remain in company’s fleet for the next three years. It costs $32,000, will generate revenues of $18,500 each of the next three years, and will be sold at the end of the third year for $5,800. Company’s MARR is 16%. Calculate the PW of this investment. [Enter your answer with no dollar
Hydrex Mechanical Products plans to set aside $160,000 now for possibly replacing its large synchronous refiner motors whenever it becomes necessary. The replacement is expected to take place in 3-1/2 years. Determine how much the company will have in its investment set-aside account if it achieves a rate of return of 16% per year compounded quarterly. Find the amount in two different ways using each of the following: (a) tabulated factors, (b) TVM functions on a calculator, and (c) spreadsheet functions.
E1
Alfarsi Industries uses the net present value method to make investment decisions and requires a 15% annual return on all investments. The company is considerin two different Ivestments. Each require an initial investment of $15,000 and will produce cash flows as follows: End of Investment Year $ 8,eee 8,000 $e 2 8,e00 24,000 The present value factors of $1 each year at 15% are 0.8696 2 0.7561 e.6575 The present value of an annuity of $1 for 3 years at 15% is 2.2832 The net present value of Investment B is Muitiple Choce S780
You are preparing to produce some goods for sale. You will sell them in one year and you will incur costs of $70,000 immediately. If your cost of capital is 6.9%, what is the minimumdollar amount you need to sell the goods for in order for this to be a non-negative NPV?The minimum dollar amount is $(Round to the nearest dollar.)
Do not round off on any solution
Assume that a company is considering purchasing a machine for $70,000 that will have a seven-year useful life and no salvage value. The machine will lower operating costs by $18,000 per year and increase sales volume by 1,000 units per year. The company earns a contribution margin of $3.00 per unit. The company's required rate of return is 17%. The internal rate of return for this investment is closest to: Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. Multiple Choice O 23%. 25%. 21%. 19%.
E2
Please answer only b and c
Packaging equipment for Xi Cling Wrap costs $60,000 and is expected to result in end of year net savings of $23,000 per year for 3 years. The equipment will have a market value of $10,000 after 3 years. The equipment can be leased for $21,000 per year, payable at the beginning of each year. Xi Cling’s MARR is 10%/year. Based on an annual worth analysis, determine if the packaging equipment should be purchased or leased.
Peng Company is considering an investment expected to generate an average net income after taxes of $1,950 for three years. The investment costs $45,000 and has an estimated $6,000 salvage value. Assume Peng requires a 15% return on its investments. Compute the net present value of this investment. (Round each present value calculation to the nearest dollar.)
Grady Precision Measurement Tools has forecasted the following sales and costs for a new GPS system: annual sales of 40,000 units at $21 a unit, production costs at 38% of sales price, annual fixed costs for production at $160,000, and straight-line depreciation expense of $210,000 per year. The company tax rate is 30%. What is the annual operating cash flow of the new GPS system?

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