Blooper Industries is considering to replace its magnesium purification system. The company uses straight-line depreciation to a zero book value over the useful life of its equipment system. Whichever machine is purchased will be replaced at the end of its useful life, and have no salvage value at the end of its useful life. - Machine A costs $1,127,000, has annual operating costs of $19,500, and has a 5-year life. - Machine B has a cost of $892,000, annual operating costs of $26,300, and a 4-year life. If the discount rate is 15% and the firm tax rate is 35%, Blooper Industries should purchase Machine because it lowers the firm's annual cost by approximately machine. as compared to the other

Blooper Industries is considering to replace its magnesium purification system. The company uses straight-line depreciation to a zero book value over the useful life of its equipment system. Whichever machine is purchased will be replaced at the end of its useful life, and have no salvage value at the end of its useful life. - Machine A costs $1,127,000, has annual operating costs of $19,500, and has a 5-year life. - Machine B has a cost of $892,000, annual operating costs of $26,300, and a 4-year life. If the discount rate is 15% and the firm tax rate is 35%, Blooper Industries should purchase Machine because it lowers the firm's annual cost by approximately machine. as compared to the other

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

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St. Johns River Shipyards' welding machine is 15 years old, fully depreciated, and has no salvage value. However, even though it is old, it is still functional as originally designed and can be used for quite a while longer. A new welder will cost $180,000 and have an estimated life of 8 years with no salvage value. The new welder will be much more efficient, however, and this enhanced efficiency will increase earnings before depreciation from $27,000 to $81,000 per year. The new machine will be depreciated over its 5-year MACRS recovery period, so the applicable depreciation rates are 20.00%, 32.00 %, 19.20 %, 11.52%, 11.52%, and 5.76%. The applicable corporate tax rate is 25%, and the project cost of capital is 10%. What is the NPV if the firm replaces the old welder with the new one? Do not round intermediate calculations. Round your answer to the nearest dollar. Negative value, if any, should be indicated by a minus sign. $
Peyton Manufacturing is trying to decide between two different conveyor belt systems. System A costs $260,000, has a four-year life, and requires $80,000 in pretax annual operating costs. System B costs $366,000, has a six-year life, and requires $74,000 in pretax annual operating costs. Both systems are to be depreciated straight-line to zero over their lives and will have zero salvage value. Whichever system is chosen, it will not be replaced when it wears out. The tax rate is 25 percent and the discount rate is 9 percent. Calculate the NPV for both conveyor belt systems. (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.) System A System B Which conveyor belt system should the firm choose? O System A O System B 4
Sheep Ranch Golf Academy is evaluating new golf practice equipment. The "Dimple- Max" equipment costs $137,000, has a 4-year life, and costs $10,600 per year to operate. The relevant discount rate is 9 percent. Assume that the straight-line depreciation method is used and that the equipment is fully depreciated to zero. Furthermore, assume the equipment has a salvage value of $10,100 at the end of the project's life, The relevant tax rate is 23 percent. All cash flows occur at the end of the year. What is the equivalent annual cost (EAC) of this equipment? (A negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Answer is complete but not entirely correct. $ 40,871.52 X EAC
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Rust Industrial Systems is trying to decide between two different conveyor belt systems. System A costs $276,000, has a four-year life, and requires $84,000 in pretax annual operating costs. System B costs $390,000, has a six-year life, and requires $78,000 in pretax annual operating costs. Both systems are to be depreciated straight-line to zero over their lives and will have zero salvage value. Suppose the company always needs a conveyor belt system; when one wears out, it must be replaced. Assume the tax rate is 24 percent and the discount rate is 8 percent. Calculate the EAC for both conveyor belt systems. Note: Your answers should be negative values and indicated by minus signs. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. System A System B Which conveyor belt system should the firm choose? System A System B
There is old machinery with a value of $95,565, with an expected life of 20 years. There is a sale of old equipment with a book value of $30,000 and a market value of $66,000.It is intended to replace that machine with a new one worth $145,000 with a useful life of 10 years. It will ultimately be sold at market value for $90,000, to generate salvage value.Old operating costs are $95,565 and new costs are $56,984. There is an initial working capital of $35,000, with movements of 15% of the initial working capital untilyear 6. From year 7 and 8 they are 20% of the initial working capital and in the ninth year 14% of the initial working capital.The WACC required for this project is 17% with a tax rate of 38.5%. The following table shows the depreciation of the new equipment.Depreciation1 20%2 15%3 15%4 10%5 10%6 10%7 7%8 5%9 5%10 3%Calculate your PV, NPV, IRR, TIRM, PAYBACK, IR and ROIPlease if you can send me the excel to: 0229275@up.edu.mxor tell me the steps to follow and if you can…
A chemical mixer was purchased 8 years ago for $100,000. If retained, it will require an investment of $50,000 to upgrade it; if upgraded, it will cost $35,000/year to operate and maintain (O&M) and will have a negligible salvage value after 5 years. A new mixer can be purchased for $120,000; it will have an annual O&M cost of $15,000 and a salvage value of $40,000 after 5 years. Alternatively, a mixer can be leased with 5 beginning-of-year lease payments of $20,000; O&M costs will be $18,000/year. If the mixer is replaced, the old mixer can be sold on the used equipment market for $15,000. Using an insider’s approach, what are (a) the EUAC of keeping the current mixer, (b) the EUAC of replacing with a new mixer, and (c) the EUAC of replacing with a leased mixer? The MARR is 10%.
H Corp is considering the replacement of some machinery that has zero book value and a current market value of P2,800. One possible alternative is to invest in new machinery that costs P30,000. The new equipment has a four-year service life and an estimated salvage of P3,500, will produce annual cash operating savings of P9,400, and will require a P2,200 overhaul in year 3. The company uses straight-line depreciation. The net-present-value of H's investment, assuming an 8% cost of capital (ignoring income taxes) will amount to
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A new high-efficiency digital-controlled flange-lipper can be purchased for $130,000, including installation costs. During its 5-year life, it will reduce cash operating expenses by $45,000 per year, although it will not affect sales. At the end of its useful life, the high-efficiency machine is estimated to be worthless. MACRS depreciation will be used, and the machine will be depreciated over its 3-year class life rather than its 5-year economic life, so the applicable depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%. The old machine can be sold today for $50,000. The firm's tax rate is 35%, and the appropriate cost of capital is 14%. If the new flange-lipper is purchased, what is the amount of the initial cash flow at Year 0? Round your answer to the nearest whole dollar.$ What are the incremental net cash flows that will occur at the end of Years 1 through 5? Do not round intermediate calculations. Round your answers to the nearest whole dollar. CF1 $ CF2 $…
A critical machine in BHP Billiton's copper refining operation was purchased 7 years ago for $160,000. Last year a replacement study was performed with the decision to retain it for 3 more years. The situation has changed. The equipment is estimated to have a value of $8000 if "scavenged" for parts now or anytime in the future. If kept in service, it can be minimally upgraded at a cost of $43,000 to make it usable for up to 2 more years. Its operating cost is estimated at $22,000 in the first year and $29,000 in the second year. Alternatively, the company can purchase a new system, the challenger, that will have an AWC of $-51,000 over its ESL. Use a MARR of 10% per year and annual worth analysis to determine when the company should replace the machine. The AW value of the challenger is $- ◻ ◻ and the AW value of the defender at the end of year 2 is $- 82,834.71 ◻ The company should replace the machine ◻ after two years A critical machine in BHP Billiton's copper refining operation was…

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