please check the answer before submit and add explanation to every steps Concord Growth Farms, a farming cooperative, is considering purchasing a tractor for $568,580. The machine has a 10-year life andan estimated salvage value of $54,000. Delivery costs and set-up charges will be $13,900 and $440, respectively. Concord Growthuses straight-line depreciation and has a required rate of return of 9%.Concord Growth estimates that the tractor will be used five times a week with the average charge to the individual farmers of $440.Fuel is $60 for each use of the tractor. The present value of an annuity of 1 for 10 years at 9% is 6.41766.Click here to view PV tables.For the new tractor, compute the:(a)(b)Your answer is correct.Cash payback period. (Round answer to 1 decimal places, e.g. 15.2.)Cash payback period5.9 yearseTextbook and MediaAttempts: 1 of 2 used* Your answer is incorrect.Net present value. (Round factor values to 5 decimal places, e.g. 15.11212. Round Intermediate calculations and final answer to Odecimal places, e.g. 5,275.)Net present value$eTextbook and Media50320

Step 1:Computation of the cost of initial investment :Cost of tractor$568,580Add: Delivery…

Answered: Concord Growth Farms, a farming…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 4P

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The Scampini Supplies Company recently purchased a new delivery truck. The new truck cost $22,500, and it is expected to generate net after-tax operating cash flows, including depreciation, of $6,250 per year. The truck has a 5-year expected life. The expected salvage values after tax adjustments for the truck are given here. The company’s cost of capital is 10%. Should the firm operate the truck until the end of its 5-year physical life? If not, then what is its optimal economic life? Would the introduction of salvage values, in addition to operating cash flows, ever reduce the expected NPV and/or IRR of a project?
Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6 years, and an estimated salvage value of 800. The replacement machine is eligible for 100% bonus depreciation at the time of purchase- The replacement machine would permit an output expansion, so sales would rise by 1,000 per year; even so, the new machines much greater efficiency would cause operating expenses to decline by 1,500 per year The new machine would require that inventories be increased by 2,000, but accounts payable would simultaneously increase by 500. Dautens marginal federal-plus-state tax rate is 25%, and its WACC is 11%. Should it replace the old machine?
Grouper Growth Farms, a farming cooperative, is considering purchasing a tractor for $559,050. The machine has a 10-year life and an estimated salvage value of $43,000. Delivery costs and set-up charges will be $12,800 and $410, respectively. Grouper Growth uses straight-line depreciation and has a required rate of return of 9%. Grouper Growth estimates that the tractor will be used five times a week with the average charge to the individual farmers of $410. Fuel is $55 for each use of the tractor. The present value of an annuity of 1 for 10 years at 9% is 6.41766. Click here to view PV tables. For the new tractor, compute the: (a) Your answer has been saved. See score details after the due date. Cash payback period. (Round answer to 1 decimal places, e.g. 15.2.) Cash payback period (b) Net present value Net present value. (Round factor values to 5 decimal places, e.g. 15.11212. Round Intermediate calculations and final answer to O decimal places, e.g. 5,275.) Save for Later 6.2 $…
Grouper Growth Farms, a farming cooperative, is considering purchasing a tractor for $559,050. The machine has a 10-year life and an estimated salvage value of $43,000. Delivery costs and set-up charges will be $12,800 and $410, respectively. Grouper Growth uses straight-line depreciation and has a required rate of return of 9%. Grouper Growth estimates that the tractor will be used five times a week with the average charge to the individual farmers of $410. Fuel is $55 for each use of the tractor. The present value of an annuity of 1 for 10 years at 9% is 6.41766. Click here to view PV tables. For the new tractor, compute the: (a) Your answer has been saved. See score details after the due date. Cash payback period. (Round answer to 1 decimal places, e.g. 15.2.) Cash payback period (b) 6.2 Your answer has been saved. See score details after the due date. Net present value $ Net present value. (Round factor values to 5 decimal places, e.g. 15.11212. Round Intermediate calculations and…
RealTurf is considering purchasing an automatic sprinkler system for its sod farm by borrowing the entire $30,000 purchase price. The loan would be repaid with four equal annual payments at an interest rate of 12%/year. It is anticipated that the sprinkler system would be used for 9 years and then sold for a salvage value of $2,000. Annual operating and maintenance expenses for the system over the 9-year life are estimated to be $9,000 per year. If the new system is purchased, cost savings of $15,000 per year will be realized over the present manual watering system. RealTurf uses a MARR of 15%/year for economic decision making. Based on a present worth analysis, is the purchase of the new sprinkler system economically attractive?
Cullumber Lumber, is considering purchasing a new wood saw that costs $40,000. The saw will generate revenues of $100,000 per year for five yearsThe cost of materials and labor needed to generate these revenues will total $60,000 per yearand other cash expenses will be $10,000 per year. The machine is expected to sell for $2.000 at the end of its fiveyear life and will be depreciated on a straight-line basis over five years to zeroCullumber's tax rate is 26 percentand its opportunity cost of capital is 14.20 percent. What is the project's NPV(Do not round intermediate calculationsRound final answer to decimal places, e.g. 5,275)
A toy manufacturer is considering the installation of a new process machine for the toy manufacturing facility. The machine costs $350,000 installed. wi ll generate additional revenues of $120,000 per year and will save $50,000 per year in labor and material costs. The machine will be financed by a $250,000 bank loan repayable in three equal annual principal installments plus 9% interest on the outstanding balance. The machine will be depreciated by seven-year MACRS. The useful life of this processing machine is 10 years at which time it will be soldfor $20,000. The combined marginal tax rate is 40%.(a) Find the year-by-year after-tax cash flow for the project.(b) Compute the IRR for this investment.(c) At MARR= 18%, is this project economically justifiable?
An automobile-manufacturing company is considering purchasing an industrial robot to do spot welding, which is currently done by skilled labor. The initial cost of the robot is $180,000, and the annual labor savings are projected to be $103,753. If purchased, the robot will be depreciated under MACRS as a five-year recovery property. The robot will be used for seven years, at the end of which time, the firm expects to sell it for $58,000. The company's marginal tax rate is 25% over the project period. Assume MARR = 18%. Click the icon to view the MACRS depreciation schedules. ..... Determine the net after-tax cash flows for each period over the project life. Fill in the table below. (Round to the nearest dollar.) Period Net After-Tax Cash Flow 1 $
Ivanhoe Lumber, Inc., is considering purchasing a new wood saw that costs $45,000. The saw will generate revenues of $100,000 per year for five years. The cost of materials and labor needed to generate these revenues will total $60,000 per year, and other cash expenses will be $10,000 per year. The machine is expected to sell for $1,000 at the end of its five-year life and will be depreciated on a straight-line basis over five years to zero. Ivanhoe's tax rate is 26 percent, and its opportunity cost of capital is 13.70 percent. What is the project's NPV? (Do not round intermediate calculations. Round final answer to 0 decimal places, e.g. 5,275.) NPV $ Should the company purchase the saw? The company the saw.
Crane Lumber, Inc., is considering purchasing a new wood saw that costs $40,000. The saw will generate revenues of $100,000 per year for five years. The cost of materials and labor needed to generate these revenues will total $60,000 per year, and other cash expenses will be $10,000 per year. The machine is expected to sell for $3,900 at the end of its five-year life and will be depreciated on a straight-line basis over five years to zero. Crane’s tax rate is 26 percent, and its opportunity cost of capital is 14.20 percent. What is the project's NPV? (Do not round intermediate calculations. Round final answer to the nearest whole dollar, e.g. 5,275.)
Bridgewell Industries is evaluating the option of purchasing a fork-lift truck costing $60,000. If purchased, the truck will replace 4 workers, each with an average annual salary of $15,000. However, an experienced fork-lift operator will have to be hired at a salary of $20,000 per year. Fuel and maintenance expense is expected to be $10,000 per year. At the end of its 5-year life, the truck will have a market value of $10,000. Bridgewell uses straight-line depreciation and depreciates the asset to $0, assigns a 10% required rate of return for this type of investment, and has a marginal tax rate of 40%. Should the fork-lift truck be purchased? Please show all of your work
Geller Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $400,000 is estimated to result in $155,000 in annual pretax cost savings. The press falls in the MACRS five-year class, and it will have a salvage value at the end of the project of $68,000. The press also requires an initial investment in spare parts inventory of $13,000, along with an additional $1,800 in inventory for each succeeding year of the project. The shop’s tax rate is 22 percent and the project's required return is 10 percent. Refer to Table 8.3. what is the NPV of this project?

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