Assume a machine costs $250,000 and lasts five years before it is replaced. The operating cost is $37,200 a year. Ignore taxes. What is the equivalent annual cost if the required rate of return is 8.5 percent? (Hint: the EAC should account for both investment and annual operating costs) O $124,166.76 $118,285.43 O $112,404.10 $106,522.77 $100,641.44

Assume a machine costs $250,000 and lasts five years before it is replaced. The operating cost is $37,200 a year. Ignore taxes. What is the equivalent annual cost if the required rate of return is 8.5 percent? (Hint: the EAC should account for both investment and annual operating costs) O $124,166.76 $118,285.43 O $112,404.10 $106,522.77 $100,641.44

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

Tyler, Inc., is considering switching to a new production technology. The cost of the required equipment will be $3,764,394 . The discount rate is 13.01 percent. The cash flows that the firm expects the new technology to generate are as follows. Years CF 0 $(3,764,394) 1–2 0 3–5 $878,248 6–9 $1,534,992 Compute the payback and discounted payback periods for the project. (Round answers to 2 decimal places, e.g. 15.25.) The payback for the project is ............ years, and the discounted payback period is........... years. What is the NPV for the project? Should the firm go ahead with the project? (Round answer to 2 decimal places, e.g. 15.25.) The NPV of the project is $ , and using the NPV rule the project should be rejected/ accepted . What is the IRR, and what would be the decision based on the IRR? (Round answer to 2 decimal places, e.g. 15.25.) The IRR of the project is %, and using the IRR rule the…
A new electronic process monitor costs $990,000. This cost could be depreciated at 30 percent per year (Class 10). The monitor would actually be worthless in five years. The new monitor would save $460,000 per year before taxes and operating costs. If we require a 15 percent return, what is the NPV of the purchase? Assume a tax rate of 40 percent. (Do not round intermediate calculations. Round the final answer to 2 decimal places.) NPV
coaches by 750 units per year. What is the amount to use as the annual sales figure when evaluating this project? Why? 3. Calculating Projected Net Income A proposed new investment has projected sales of $635,000. Variable costs are 40 percent of sales, and fixed costs are $168,000; depreciation is $83,000. Prepare a pro forma income statement assuming a tax rate of 23 percent. What is the projected net income? LO 2
A new process for a manufacturing process will have a first cost of $45,000 with annual costs of $38,000. Extra income associated with the new process is expected to be $62,000 per year. What is the discounted payback period at i = 12% per year? 2.84 3.23 2.25 4.52
You are analyzing a project and have developed the following estimates. The depreciation is $72,000 a year and the tax rate is 35 percent. What is the operating cash flow? Unit Sales 2,900 $220 Price per Unit Variable Costs per Unit $160 Fixed Costs $28,500 a. $119,775 b. $138,275 c. $153,075 d. $164,775
None
(a) New manufacturing equipment costs $225,000, salvage value is $25,000, and average annual earnings of $20,000 after taxes is expected. Find the average annual rate of return. If the earnings are doubled, then what is the rate?(b) Investment for new equipment is $100,000, and the salvage value is $10,000. Average yearly earnings from this equipment are $15,000 after taxes. What is the non-time-value-ofmoney return? When is the payback?
What is the bond, bond valuation, and interest rates of CVS in 2020?
A factory costs $970,000. You reckon that it will produce an inflow after operating costs of $187,000 a year for 15 years. a. If the opportunity cost of capital is 11%, what is the net present value of the factory? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What will the factory be worth at the end of eight years? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Consider a 200,000 SF office building complex, with NOI of $25/SF/year with rents and operating expenses paid in arrears (at the end of the year) annually, and no capital expenditures. The rent will increase by 3% per year. The discount rate is 10%/year. a. What is the value of this office building, assuming that the building is sold at the end of year 10 and the cap rate at that time is expected to be 10%? What is the cap rate at time 0? b. What is the value of this office building, assuming that the building will be held and rented indefinitely (perpetually)? What is the implied cap rate at time 0? c. What is the value if the rents are paid in advance (at the beginning of the year) and the building is rented perpetually?
am. 117.
NPV. Grady Precision Measurement Tools has forecasted the following sales and costs for a new GPS system: annual sales of 45,000 units at $16 a unit, production costs at 37% of sales price, annual fixed costs for production at $200,000. The company tax rate is 38%. What is the annual operating cash flow of the new GPS system? Should Grady Precision Measurement Tools add the GPS system to its set of products? The initial investment is $1,320,000 for manufacturing equipment, which will be depreciated over six years (straight line) and will be sold at the end of five years for $380,000. The cost of capital is 12%. What is the annual operating cash flow of the new GPS system? $ (Round to the nearest dollar.)

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