Barron Chemical uses a thermoplastic polymer to enhance the appearance of certain RV panels. The initial cost of one process was $122,000 with annual costs of $45,000. Revenues are $79,000 in year 1, increasing by $1000 per year. A salvage value of $21,000 was realized when the process was discontinued after 8 years. What rate of return did the company make on the process? The rate of return made by the company is _

Barron Chemical uses a thermoplastic polymer to enhance the appearance of certain RV panels. The initial cost of one process was $122,000 with annual costs of $45,000. Revenues are $79,000 in year 1, increasing by $1000 per year. A salvage value of $21,000 was realized when the process was discontinued after 8 years. What rate of return did the company make on the process? The rate of return made by the company is _

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 3P

See similar textbooks

Similar questions

Barron Chemical used a thermoplastic polymer to enhance the appearance of certain RV panels. The initial cost of one process was $130,000 with annualcosts of $49,000. Revenues were $78,000 in year 1, increasing by $1000 per year. A salvage value of $23,000 was realized when the process was discontinued after 8 years. What rate of return did the company make on the process?
B2B Co. is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment is expected to cost $380,800 with a 10-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 152,320 units of the equipment's product each year. The expected annual income related to this equipment follows. Sales $ 238,000 Costs Materials, labor, and overhead (except depreciation on new equipment) Depreciation on new equipment Selling and administrative expenses Total costs and expenses 83,000 38,080 23,800 144,880 93,120 37,248 Pretax income Income taxes (40%) Net income $ 55,872 If at least an 9% return on this investment must be earned, compute the net present value of this investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Chart Values are Based on: n = 10 i = 9|% Select Chart Amount PV Factor Present Value Present Value of an Annuity of 1…
B2B Co. is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment is expected to cost $384,000 with a 10-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 153,600 units of the equipment’s product each year. The expected annual income related to this equipment follows. Sales $ 240,000 Costs Materials, labor, and overhead (except depreciation on new equipment) 84,000 Depreciation on new equipment 38,400 Selling and administrative expenses 24,000 Total costs and expenses 146,400 Pretax income 93,600 Income taxes (40%) 37,440 Net income $ 56,160 If at least an 9% return on this investment must be earned, compute the net present value of this investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
B2B Co. is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment is expected to cost $376,000 with a 8-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 150,400 units of the equipment's product each year. The expected annual income related to this equipment follows. Sales Costs Materials, labor, and overhead (except depreciation on new equipment) Depreciation on new equipment Selling and administrative expenses Total costs and expenses Pretax income Income taxes (30%) Net income If at least an 9% return on this investment must be earned, compute the net present value of this investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Chart Values are Based on: Select Chart Net present value n = j= Amount % X PV Factor = Present Value $ $ 235,000 82,000 47,000 23,500 152,500 82,500 24,750 $ 57,750 0
A company is currently producing chemical compounds by a process installed 10 years ago at a cost of $100,000. It was assumed that the process would have a 20-year life with a zero salvage value. The current market value of the equipment, however, is $60,000, and the initial estimate of its economic life is still good. The annual operating costs associated with this process are $18,000. A sales representative from U.S. Instrument Company is trying to sell a new chemicalcompound- making process to the company. This new process will cost $200,000 have a service life of IO years with a salvage value of $20,000, and reduce annual operating costs to $4,000. Assuming the company desires a return of 12% on all investments, should it invest in the new process?
Maui Fabricators Inc. is considering an investment in equipment that will replace direct labor. The equipment has a cost of $121,000 with a $10,000 residual value and a 10-year life. The equipment will replace one employee who has an average wage of $20,255 per year. In addition, the equipment will have operating and energy costs of $5,880 per year. Determine the average rate of return on the equipment, giving effect to straight-line depreciation on the investment. If required, round to the nearest whole percent.fill in the blank 1 of 1 %
Haresh
Please help me
Medavoy Company is considering a new project that complements its existing business. The machine required for the project costs $4.5 million. The marketing department predicts that sales related to the project will be $2.67 million per year for the next four years, after which the market will cease to exist. The machine will be depreciated to zero over its 4-year economic life using the straight-line method. Cost of goods sold and operating expenses related to the project are predicted to be 30 percent of sales. The company also needs to add net working capital of $190,000 immediately. The additional net working capital will be recovered in full at the end of the project’s life. The corporate tax rate is 23 percent and the required return for the project is 13 percent. What is the value of the NPV for this project? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.)
Medavoy Company is considering a new project that complements its existing business. The machine required for the project costs $4.15 million. The marketing department predicts that sales related to the project will be $2.39 million per year for the next four years, after which the market will cease to exist. The machine will be depreciated to zero over its 4-year economic life using the straight-line method. Cost of goods sold and operating expenses related to the project are predicted to be 25 percent of sales. The company also needs to add net working capital of $155,000 immediately. The additional net working capital will be recovered in full at the end of the project’s life. The corporate tax rate is 21 percent and the required return for the project is 10 percent. What is the value of the NPV for this project?
Medavoy Company is considering a new project that complements its existing business. The machine required for the project costs $4.7 million. The marketing department predicts that sales related to the project will be $2.83 million per year for the next four years, after which the market will cease to exist. The machine will be depreciated to zero over its 4-year economic life using the straight-line method. Cost of goods sold and operating expenses related to the project are predicted to be 30 percent of sales. The company also needs to add net working capital of $210,000 immediately. The additional net working capital will be recovered in full at the end of the project's life. The corporate tax rate is 22 percent and the required return for the project is 13 percent. What is the value of the NPV for this project? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) NPV Should the company…
A company has decided to replace its inspection machine with an advanced one. The advanced machine costs $15,000 and will have operating costs of $3,600 in the first year, increasing by $2,000 per year thereafter. The expected salvage value of the new machine is $6,000 at the end of the first year and will decline by 10% of the preceding S.V. each year. Find the missing values in the following table and determine the economic life of the new machine. Total Cost (8%) CR (8%) OC (8%) 3,600 1 10,200 13,800 2 ? ? ... .... .. 3 4332.36 5,495.82 ? 4 ? 6,406.46 ? .......... . 3086.31 7,293.42 10,379.73 OPTIMAL n = A+ta ch Cilo