ABC is considering the purchase of a $3,000 souffle maker, which has a life of 3 years and will be fully depreciated by the straight-line method. The machine will produce 1,000 souffles per year, with each costing $1 to make and priced at $3. In order for the machine to work, an increase in net working capital of $1,000 is required at the beginning and it will be fully recovered at the end of year 3. The discount rate is 8%. The corporate income tax rate is 40%. Find the NPV of the project. Goal (c)

ABC is considering the purchase of a $3,000 souffle maker, which has a life of 3 years and will be fully depreciated by the straight-line method. The machine will produce 1,000 souffles per year, with each costing $1 to make and priced at $3. In order for the machine to work, an increase in net working capital of $1,000 is required at the beginning and it will be fully recovered at the end of year 3. The discount rate is 8%. The corporate income tax rate is 40%. Find the NPV of the project. Goal (c)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: Maintenance money for an athletic complex has been sought. Mr. Kendall, the Athletic Director, would…

A: Maintenance cost refers to the expenses incurred to preserve and sustain the functionality and value…

Q: A machine that has been used for 8 years has a market value of $2,500 now, which decreases by $100…

A: Given information Current market value of machine=$2500 Depreciation =$100 each year for next 5 year…

Q: Blue Origin Engine Factory purchased a new vertical turning lathe in 2023 at a cost of $190,000.…

A: It is a system of depreciation commonly used for tax purposes in the United States. MACRS determines…

Q: Faleye Consulting is deciding which of two computer systems to purchase. It can purchase…

A: Introduction:Equivalent Annual Annuity-This method is used for evaluating projects with different…

Q: The following pair of assets differ only in the MARR. The problem asks you to determine the effect…

A: Depreciation rate=20%

Q: The following pair of assets differ only in the MARR. The problem asks you to determine the effect…

A: Economic lives for an asset refers to the time period when the asset is useful for the owners. The…

Q: The following pair of assets differ only in the MARR. The problem asks you to determine the effect…

A: To find the economic life of an asset , we find the annual worth of cumulative operating costs and…

Q: A construction firm purchased a used crane 2 years ago for $445,000. Its operating cost is $325,000…

A: Annual worth (AW) analysis is the method of calculating the present worth of two alternative…

Q: A piece of equipment has a first cost of $175,000, a maximum useful life of 7 years, and a market…

A: Given The first cost of the equipment is $175,000 Salvage value S=120,000-11000k Annual operating…

Q: 3. Angstrom Technologies intends for the company to use the newest and finest equipment in its labs.…

A: Initial Cost of up-gradation = 43000 Operating cost in year 1 = 22000 Operating cost in year 2 =…

Q: 2.5. An electric cooperative is considering the use of a concrete electric pole in the expansion of…

Q: Sooky has a spotter truck with a book value of $43,000 and a remaining useful life of five years. At…

A: The purchase price of the new spotter truck is $123,000.The trade-in value of the old spotter truck…

Q: Question 4 Concrete incorporated owns a concrete block factory and is considering adding a new…

A: * SOLUTION :-

Q: Hayden Inc. has a number of copiers that were bought four years ago for $27,000. Currently…

A: Solution:-The inquiry pertains to performing a cost analysis to ascertain the equivalent annual cost…

Q: The following pair of assets differ only in the MARR. The problem asks you to determine the effect…

A: The economic life of an asset refers to the period over which the asset is expected to be…

Q: Maintenance money for an athletic complex has been sought. Mr. Kendall, the Athletic Director, would…

A: Variable maintenance costs, often referred to as Variable Maintenance Cost per Unit, are the costs…

Q: A manufactu operating cos product is $30 determine the value.

A: Solution provided below,

Q: Solve step by step detailed answer

A: 2. Annual Worth of the New Machine: PV for new machine considering salvage value: PVinitial=136,750…

Q: mic) Liberty Airways is considering an investment of $830,000 in ticket purchasing kiosks at…

A: Net Present Value (NPV) is used to evaluate the profitability of an investment or project. It…

Q: A company is evaluating the addition of equipment to its present operations. They need to purchase…

A: Current market value = $160,000 Gross revenue = $30,000 Maintenance cost = $5,000 Life = 4Years…

Question

ABC is considering the purchase of a $3,000 souffle maker, which has a life of 3 years
and will be fully depreciated by the straight-line method. The machine will produce
1,000 souffles per year, with each costing $1 to make and priced at $3. In order for
the machine to work, an increase in net working capital of $1,000 is required at the
beginning and it will be fully recovered at the end of year 3. The discount rate is 8%.
The corporate income tax rate is 40%. Find the NPV of the project. Goal (c)
O $1,150.22
O $725.36
O $917.19
O $1,350.85

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

The capital recovery cost for the linear accelerator is $99,921. a. The annual equivalent operating and maintenance costs for the linear accelerator are: [Select] b. The annual equivalent cost for the linear accelerator is: [Select] [Select $125,997 $122,305 $127,843 $124,151 $120,459
DBS Builders Pte Ltd purchased an asphalt paver eight years ago for $280,000. The estimated operation and maintenance (O&M) costs for the next three years are $56,000, $68,000, and $82,000, respectively. The asphalt paver can be sold for $65,000 now, for $57,000 next year, for $45,000 two years from now, and for $28,000 three years from now. 4. The latest asphalt paver in the market costs $290,000 and has an estimated service life of five years. The salvage value is estimated to be $50,000 after five years. The expected annual O&M costs will be $6,000 for the first year and increase by $3,800 per year thereafter. If a before-tax minimum attractive rate of return (MARR) of 12% is estimated, what replacement decision should DBS Builders make?
Please do this problem in excel( including calculations)
A piece of new equipment has been proposed by engineers to increase the productivity of a certain manual welding operation. The investment cost is $25,000, and the equipment will have a market value of $5,000 at the end of a study period of seven years. Increased productivity attributable to the equipment will amount to $8,000 per year after extra operating costs have been subtracted from the revenue generated by the additional production. 1-1 If the firm's MARR is 20% per year, is this proposal a sound one? Use the PW method.
The Smith and Jones Research and Development firm has bought a new laboratory equipment (MACRS-GDS 3-year property class) to be used in a research project that will last 3 years. The cost of equipment is $750,000 but require bringing a technician to install the equipment and train the personal with an additional cost of $75,000. The equipment’s supplier will buy back the equipment at the end of the project for $50,000. The O&M costs per year incurred by the equipment are $70,000. The firm signed a contract with the DOD that states that they will receive a one lump-sum of $Y at the end of the life of the research project that will generate a rate of return of 8%. The firm will finance the equipment with a loan at 6% interest rate per year, and considering that the firm will not generate any revenue until the end of year 3, the bank has agreed that principal and accrued interests will be paid at the end of year three. Perform an ATCF analysis to determine the value of Y$ that will…
help please answer in text form with proper workings and explanation for each and every part and steps with concept and introduction no AI no copy paste remember answer must be in proper format with all working