None Assume that a company is considering buying a new piece of equipment for $250,000 that would have a useful life of five years and a salvage value of $32,000. The equipment would generate the followingestimated annual revenues and expenses:RevenuesLess operating expenses:CommissionsInsuranceDepreciationMaintenanceNet operating income$ 120,000$ 15,0005,00043,60030,00093,600$ 26,400Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided.Assuming a discount rate of 17%, what is the net present value of this investment?Multiple ChoiceOO$(11,478)$(150,954)$(128,966)$40,578

First, determine the net annual CASH flow generated by the investment during its useful life. Net…

Answered: Assume that a company is considering…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section9.A: Depreciation

Problem 1P

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Assume that a company is considering buying a new piece of equipment for $250,000 that would have a useful life of five years and a salvage value of $27,000. The equipment would generate the following estimated annual revenues and expenses: Revenues $ 120,000 Less operating expenses: Commissions $ 15,000 Insurance 5,000 Depreciation 44, 600 Maintenance 30, 000 94, 600 Net operating income $ 25, 400 Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using the tables provided. Assuming a discount rate of 17%, what is the net present value of this investment? Multiple Choice $(13,758) $(156, 433) S(131, 246) $42, 858
Assume that a company is considering buying a new piece of equipment for $250,000 that would have a useful life of five years and a salvage value of $33,000. The equipment would generate the following estimated annual revenues and expenses: Revenues Less operating expenses: Commissions Insurance Depreciation Maintenance $ 15,000 $(156,429) $(124,925) $36,537 5,000 43,400 $ 120,000 30,000 93,400 Net operating income $ 26,600 Assuming a discount rate of 14%, what is the net present value of this investment? Multiple Choice $7,437
A company is considering two alternatives with regards to equipment which it needs. The alternatives are as follows: Alternative A: Purchase Cost of Equipment 703,668700,000 Salvage Value 100,454100,000 Daily operating cost 501500 Economic life, years 10 Alternative B: Rental at 1,5751,500 per day. At 18% interest, how many days per year must the equipment be in use if Alternative A is to be chosen.
Required Information [The following information applies to the questions displayed below.] Project A requires a $365,000 initial investment for new machinery with a five-year life and a salvage value of $42,000. The company uses straight-line depreciation. Project A is expected to yield annual net income of $25,300 per year for the next five years. Compute Project A's payback period. Choose Numerator: Payback Period 7 Choose Denominator: = Payback Period Payback period =
Consider the following information: Initial cost of equipment $108,000 Sales tax and delivery costs $7,000 Estimated life 7 years Salvage value $11,000 Annual cash inflows $31,000 Estimated cost of capital 10% Without considering the effect of income taxes, the net present value of the equipment is: O $48,566. $41,566. $39,921. $42,921.
1. Green Rose Inc. is considering these following investments for year 2022: Machine A Machine B Machine C Initial amount 450,000 375,000 425,000 Salvage Value 75,000 67,000 58,000 Cost savings 66,730 73,425 63,950 The following cost are associated to each of the machines: • Inspection cost 3,000 • Installation cost 3.500 • Warranties 2,700 • Testing cost 4,300 • Training 4,500 a) Determine the Net investment of each Machine. b) Determine the accounting rate of return. c) Which of these investments would Green Rose Inc. purse if the required rate of return is 18%?
You are given opportunity to purchase product for $42, 000. The product will have annual operating expenses of $4,000, and a salvage value of $20,000 at the end of its useful life of 6 years. Assuming a discount rate of 9.0%, what is the minimum acceptable revenue to justify taking this project? A 1.01% B $333 C $2704 D $767 E $10704
Reference: Case Study S Dunn Manufacturing is considering the following two alternatives. The cost information for the two proposals for replacing an equipment are provided are in table below. Initial cost Benefits/year Machine X $120,000 $20,000 for the first 10 years and $9,000 for the next 10 years Life Salvage value $40,000 MARR 5.2. The NPW of machine X is A) $35,158 B) $48,192 C) $50,752 Machine Y $96,000 $12,000 per year for 20 years. 20 years 8% $20,000
you are given the following information about a proposed project : Investment costs $15,000 Annual expenses $3,500 Annual Revenue $7500 Salvage Value $2000 Economic life 5 years M.A.R.R 10 % The net present worth of the project is closest to a.$1400 b.$1300 c.$1800 d.$1600
onsider the following financial informationabout a retooling project at a computer manufacturing company:• The project costs $2.5 million and has a five-yearservice life.• The retooling project can be classified as sevenyear property under the MACRS rule.• At the end of the fifth year, any assets held for theproject will be sold. The expected salvage valuewill be about 10% of the initial project cost.• The firm will finance 40% of the project moneyfrom an outside financial institution at an interestrate of 10%. The firm is required to repay the loanwith five equal annual payments.• The firm’s incremental (marginal) tax rate on theinvestment is 35%.• The firm’s MARR is 18%.With the preceding financial information,(a) Determine the after-tax cash flows.(b) Compute the annual equivalent worth for thisproject.
Required information Use the following information for the Quick Study below. [The following information applies to the questions displayed below.] Project A requires a $380,000 initial investment for new machinery with a five-year life and a salvage value of $39,000. The company uses straight-line depreciation. Project A is expected to yield annual net income of $23,000 per year for the next five years. QS 25-6 Accounting rate of return LO P2 Compute Project A's accounting rate of return. Accounting Rate of Return Choose Numerator: Choose Denominator: = Accounting Rate of Return Accounting rate of return
Perit Industries has $155,000 to invest in one of the following two projects: Cost of equipment required Working capital investment required Annual cash inflows Salvage value of equipment in six years Life of the project Project A $ 155,000 $ 25,000 $ 8,600 6 1. Net present value project A 2. Net present value project B 3. Which investment alternative (if either) would you recommend that the company accept? X Answer is complete but not entirely correct. Project B $0 $ 155,000 $ 40,000 years The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries' discount rate is 14%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net present value of Project A. Note: Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount. 2. Compute the net present value of Project B. $(53,971) 70,527 X Project B $0…

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