A recapping plant is planning to acquire a new Diesel generating set to replace its present unit which they run during brownouts. The new set would cost P135, 000 with a five (5) year life, and no estimated salvage value. Variable cost would be P150, 000 a year. The present generating set has a book value of P75, 000 and a remaining life of 5 years. Its disposal value now is P7, 500, but it would be zero after 5 years. Variable operating cost would be P187, 500 a year. Money is worth 10%. Which is profitable, to buy the new generator set or retain the present set? Support your answer by showing your computation.

A recapping plant is planning to acquire a new Diesel generating set to replace its present unit which they run during brownouts. The new set would cost P135, 000 with a five (5) year life, and no estimated salvage value. Variable cost would be P150, 000 a year. The present generating set has a book value of P75, 000 and a remaining life of 5 years. Its disposal value now is P7, 500, but it would be zero after 5 years. Variable operating cost would be P187, 500 a year. Money is worth 10%. Which is profitable, to buy the new generator set or retain the present set? Support your answer by showing your computation.

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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Rader Railway is determining whether to purchase a new rail setter, which has a base price of $425,000 and would cost another $44,000 to install. The setter will be depreciated according to the MACRS 3-year class of assets, and it would be sold after three years for $210,000. Using the setter requires a $29,000 increase in net working capital. Although it would have no effect on revenues, the setter should save the firm $161,000 per year in before-tax operating costs (excluding depreciation). Rader's marginal tax rate is 40 percent, and its required rate of return is 12 percent. Should the setter be purchased? Do not round intermediate calculations. Round your answer to the nearest cent. Use a minus sign to enter a negative value, if any. The setter_____ be purchased because the net present value________, that is $ , is zero.
A mining company is considering a new project. Because the mine has received a permit, the project would be legal; but it would cause significant harm to a nearby river. The firm could spend an additional $10 million at Year 0 to mitigate the environmental Problem, but it would not be required to do so. Developing the mine (without mitigation) would cost $60 million, and the expected cash inflows would be $20 million per year for 5 years. If the firm does invest in mitigation, the annual inflows would be $21 million. The risk-adjusted WACC is 10%. Calculate the NPV and IRR with mitigation. Round your answers to two decimal places. Do not round your intermediate calculations. Enter your answer for NPV in millions. For example, an answer of $10,550,000 should be entered as 10.55.NPV $ millionIRR % Calculate the NPV and IRR without mitigation. Round your answers to two decimal places. Do not round your intermediate calculations. Enter your answer for NPV in millions. For example, an…
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Fun Land is considering adding a miniature golf course to its facility. The course would cost $75000, would be depreciated on a straight line basis over its 4-year life, and would have a zero salvage value. The estimated income from the golfing fees would be $40000 a year with $12000 of that amount being variable cost. The fixed cost would be $6000. In addition, the firm anticipates an additional $15000 in revenue from its existing facilities if the course is added. The project will require $7000 of net working capital, which is recoverable at the end of the project. What is the net present value of this project at a discount rate of 12 percent and a tax rate of 35 percent? $19,812.09 $20,360.22 $15,429.48 $13,199.40 $24,738.41
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Delia Landscaping is considering a new 4-year project. The necessary fixed assets will cost $162, 000 and be depreciated on a 3-year MACRS and have no salvage value. The MACRS percentages each year are 33.33 percent, 44.45 percent, 14.81 percent, and 7.41 percent, respectively. The project will have annual sales of $102,000, variable costs of $27, 500, and fixed costs of $12,100. The project will also require net working capital of $2,700 that will be returned at the end of the project. The company has a tax rate of 21 percent and the project's required return is 12 percent. What is the net present value of this project?
Delia Landscaping is considering a new 4-year project. The necessary fixed assets will cost $157,000 and be depreciated on a 3-year MACRS and have no salvage value. The MACRS percentages each year are 33.33 percent, 44 45 percent, 14 81 percent, and 7.41 percent, respectively. The project will have annual sales of $98,000, variable costs of $27,400, and fixed costs of $12,000. The project will also require net working capital of $2,600 that will be returned at the end of the project. The company has a tax rate of 21 percent and the project's required return is 10 percent. What is the net present value of this project? Multiple Choice $3112 $3.395 $16.360 56718 $4.645
Lumberjack Power, operator of a nuclear power plant, is planning to replace its current equipment with some that is more environmentally friendly. The old equipment has annual operating expenses of $6750 and can be kept for 8 more years. The equipment will have a salvage value of $4000, if sold 8 years from now, and has a current market value of $24,000, if it is sold now. The new equipment has an initial cost of $62,000 and has estimated annual operating expenses of $6250 each year. The estimated market value of the new equipment is $19,000 after 8 years of operation. If the company's MARR is 16% per year, should the equipment be replaced? Use a study period of 8 years and the present worth method.
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Delia Landscaping is considering a new 4-year project. The necessary fixed assets will cost $189,000 and be depreciated on a 3-year MACRS and have no salvage value. The MACRS percentages each year are 33.33 percent, 44.45 percent, 14.81 percent, and 7.41 percent, respectively. The project will have annual sales of $126,000, variable costs of $33,700, and fixed costs of $12,700. The project will also require net working capital of $3,300 that will be returned at the end of the project. The company has a tax rate of 21 percent and the project's required return is 9 percent. What is the net present value of this project? ASAP, PLEASE

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