Acme Company plans to replace some obsolete equipment with newequipment that costs $232,000 and has a useful life of 16 years and a salvagevalue of $40,000. Acme expects that the new equipment will reduce operatingcosts (labor, energy, etc.) by $59,000 per year. Acme can sell the oldequipment for $20,000. What is the simple rate of return on the investment inthe new equipment? Round to one decimal place.23.9%21.6%20.5%22.2%

To calculate the simple rate of return (SRR) on the investment in the new equipment for Acme…

Answered: Acme Company plans to replace some…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Michael Scott Paper, Inc. is considering a new machine that requires an initial investment of $650, 000, including installation costs, and has a useful life of ten years. The expected annual after - tax cash flows for the machine are $90, 000 during the first two years, $115.000 during years three through six, and $85, 000 during the remaining years of its useful life. What is the net present value (NPV) when the discount rate is 5% ?
U.S. Steel is considering a plant expansion to produce austenitic, precipitation hardened,duplex, and martensitic stainless steel round bars that is expected to cost $16 million nowand another $10 million 1year from now. If total operating costs will be $1.4 million peryear starting 1year from now, and the estimated salvage value of the plant is virtuallyzero, how much must the company make annually in years 1 through 9 to recover itsinvestment plus a return of 17% per year? The companymust make$_______million annually in years1 through9 to recover itsinvestment plus a return of 17% per year.
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U.S. Steel is considering a plant expansion to produce austenitic, precipitation hardened, duplex, and martensitic stainless steel round bars that is expected to cost $14 million now and another $10 million 1 year from now. If total operating costs will be $1.3 million per year starting 1 year from now, and the estimated salvage value of the plant is virtually zero, how much must the company make annually in years 1 through 9 to recover its investment plus a return of 23% per year? The company must make $ 7.560 million annually in years 1 through 9 to recover its investment plus a return of 23% per year
U.S. Steel is considering a plant expansion to produce austenitic, precipitation hardened, duplex, and martensitic stainless steel round bars that is expected to cost $13 million now and another $10 million 1 year from now. If total operating costs will be $1.2 million per year starting 1 year from now, and the estimated salvage value of the plant is virtually zero, how much must the company make annually in years 1 through 10 to recover its investment plus a return of 15% per year?
15 UPS is considering the purchase of a electric truck that would cost $150,000 and would last for 5 years. At the end of 5 years, the truck would have a salvage value of $20,000. By reducing labor and other operating costs, the machine would provide annual cost savings of $45,000. The company requires a minimum return of 19% on all investment projects. The net present value of the proposed project is closest to (Ignore income taxes.): PV factor of $1 annuity for 5 years at 19% is 3.058 and PV of $1 over 5 years is 0.419 A. $85,000 B. -$12,390 C. -$4,010 D. $145,990
Your company is deciding whether to invest in a new machine. The new machine will increase cash flow by $435,000 per year. You believe the technology used in the machine has a 10-year life; in other words, no matter when you purchase the machine, it will be obsolete 10 years from today. The machine is currently priced at $2.8 million. The cost of the machine will decline by $215,000 per year until it reaches $2.155 million, where it will remain. If your required return is 9 percent, calculate the NPV today. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) If your required return is 9 percent, calculate the NPV if you wait to purchase the machine until the indicated year. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Should you purchase…
Suppose you are considering an investment project that requires $800,000, has a six-year life, and has a salvage value of $100,000. Sales volume is projected to be 65,000 units per year. Price per unit is $63, variable cost per unit is $42, and fixed costs are $532,000 per year. The depreciation method is a five-year MACRS. The tax rate is 35% and you expect a 20% return on this investment.(a) Determine the break-even sales volume.(b) Calculate the cash flows of the base case over six years and its NPW.(c) lf the sales price per unit increases to $400, what is the required break-even volume?(d) Suppose the projections given for price, sales volume, variable costs, and fixed costs are all accurale to wi thin ± 15%. What would be the NPW figures of the best-case and worst-case scenarios?
K Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product are $4.98 million. The product is expected to generate profits of $1.09 million per year for 10 years. The company will have to provide product support expected to cost $98,000 per year in perpetuity. Assume all profits and expenses occur at the end of the year. a. What is the NPV of this investment if the cost of capital is 5.6%? Should the firm undertake the project? Repeat the analysis for discount rates of 1.6% and 14.5%, respectively. b. What is the IRR of this investment opportunity? c. What does the IRR rule indicate about this investment? a. What is the NPV of this investment if the cost of capital is 5.6%? Should the firm undertake the project? Repeat the analysis for discount rates of 1.6% and 14.5%, respectively. If the cost of capital is 5.6%, the NPV will be $ (Round to the nearest dollar.) Should the firm undertake the project? (Select the best choice…
A company is investing in a solar panel system to reduce its electricity costs. The system requires a cash payment of $125,374.60 today. The system is expected to generate net cash flows of $13,000 per year for the next 35 years. The investment has zero salvage value. The company requires an 8% return on its investments. Compute the net present value of this investment.
9
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