Provide correct answer with accounting E &T Excavation Company is planning an investment of$414,400 for a bulldozer. The bulldozer is expected to operatefor 2,000 hours per year for 10 years. Customers will becharged $125 per hour for bulldozer work. The bulldozeroperator costs $31 per hour in wages and benefits. Thebulldozer is expected to require annual maintenance costing$20,000. The bulldozer uses fuel that is expected to cost $41per hour of bulldozer operation.Required:Determine the equal annual net cash flows from operating thebulldozer.

Step 1: Define Net Cash FlowNet cash flow is the difference between cash inflow and cash outflow. If…

Answered: E &T Excavation Company is planning an…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 14P

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After discovering a new gold vein in the Colorado mountains, CTC Mining Corporation must decide whether to go ahead and develop the deposit. The most cost-effective method of mining gold is sulfuric acid extraction, a process that could result in environmental damage. Before proceeding with the extraction, CTC must spend 900,000 for new mining equipment and pay 165,000 for its installation. The mined gold will net the firm an estimated 350,000 each year for the 5-year life of the vein. CTCs cost of capital is 14%. For the purposes of this problem, assume that the cash inflows occur at the end of the year. a. What are the projects NPV and IRR? b. Should this project be undertaken if environmental impacts were not a consideration? c. How should environmental effects be considered when evaluating this or any other project? How might these concepts affect the decision in part b?
Friedman Company is considering installing a new IT system. The cost of the new system is estimated to be 2,250,000, but it would produce after-tax savings of 450,000 per year in labor costs. The estimated life of the new system is 10 years, with no salvage value expected. Intrigued by the possibility of saving 450,000 per year and having a more reliable information system, the president of Friedman has asked for an analysis of the projects economic viability. All capital projects are required to earn at least the firms cost of capital, which is 12 percent. Required: 1. Calculate the projects internal rate of return. Should the company acquire the new IT system? 2. Suppose that savings are less than claimed. Calculate the minimum annual cash savings that must be realized for the project to earn a rate equal to the firms cost of capital. Comment on the safety margin that exists, if any. 3. Suppose that the life of the IT system is overestimated by two years. Repeat Requirements 1 and 2 under this assumption. Comment on the usefulness of this information.
Briggs Excavation Company is planning an investment of $132,000 for a bulldozer. The bulldozer is expected to operate for 1,500 hours per year for five years. Customers will be charged $110 per hour for bulldozer work. The bulldozer operator costs $28 per hour in wages and benefits. The bulldozer is expected to require annual maintenance costing $8,000. The bulldozer uses fuel that is expected to cost $46 per hour of bulldozer operation. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.352 2.991 6 4.917 4.355 4.111 3.784 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 a. Determine the equal annual net cash flows from operating the bulldozer. Briggs Excavation Company Equal Annual Net…
Jones Excavation Company is planning an investment of $125,000 for a bulldozer. The bulldozer is expected to operate for 1,000 hours per year for five years. Customers will be charged $90 per hour for bulldozer work. The bulldozer operator costs $30 per hour in wages and benefits. The bulldozer is expected to require annual maintenance costing $7,500. The bulldozer uses fuel that is expected to cost $15 per hour of bulldozer operation. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 a. Determine the equal annual net cash flows from operating the bulldozer. Jones Excavation Company Equal Annual Net…
Jones Excavation Company is planning an investment of $233,500 for a bulldozer. The bulldozer is expected to operate for 2,000 hours per year for eight years. Customers will be charged $120 per hour for bulldozer work. The bulldozer operator costs $37 per hour in wages and benefits. The bulldozer is expected to require annual maintenance costing $20,000. The bulldozer uses fuel that is expected to cost $48 per hour of bulldozer operation. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192
Jones Excavation Company is planning an investment of $348,200 for a bulldozer. The bulldozer is expected to operate for 2,000 hours per year for 5 years. Customers will be charged $125 per hour for bulldozer work. The bulldozer operator costs $30 per hour in wages and benefits. The bulldozer is expected to require annual maintenance costing $20,000. The bulldozer uses fuel that is expected to cost $39 per hour of bulldozer operation. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 2 3 4 AA 5 6 7 8 9 10 0.943 1.833 2.673 3.465 4.212 4.917 5.582 6.210 6.802 7.360 Cash inflows: Hours of operation Revenue per hour Revenue per year Cash outflows: Hours of operation 0.909 1.736 2.487 Fuel cost per hour Labor cost per hour 3.170 3.791 4.355 4.868 5.335 5.759 6.145 Line Item Description 0.893 1.690 2.402 3.037 3.605 4.111 4.564 4.968 5.328 5.650 0.870 1.626 Total fuel and labor costs per hour Fuel and labor costs per year 2.283 2.855 3.353 3.785 4.160 4.487…
Briggs Excavation Company is planning an investment of $688,600 for a bulldozer. The bulldozer is expected to operate for 2,000 hours per year for eight years. Customers will be charged $150 per hour for bulldozer work. The bulldozer operator costs $32 per hour in wages and benefits. The bulldozer is expected to require annual maintenance costing $20,000. The bulldozer uses fuel that is expected to cost $42 per hour of bulldozer operation. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.352 2.991 6 4.917 4.355 4.111 3.784 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 a. Determine the equal annual net cash flows from operating the bulldozer. Use a minus sign to indicate cash outflows. Briggs Excavation Equal Annual Net Cash…
Briggs Excavation Company is planning an investment of $108,600 for a bulldozer. The bulldozer is expected to operate for 2,000 hours per year for six years. Customers will be charged $105 per hour for bulldozer work. The bulldozer operator costs $34 per hour in wages and benefits. The bulldozer is expected to require annual maintenance costing $20,000. The bulldozer uses fuel that is expected to cost $45 per hour of bulldozer operation. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 Question Content Area a. Determine the equal annual net cash flows from operating the bulldozer. Use a minus sign to…
Briggs Excavation Company is planning an investment of $932,100 for a bulldozer. The bulldozer is expected to operate for 3,000 hours per year for eight years. Customers will be charged $140 per hour for bulldozer work. The bulldozer operator costs $32 per hour in wages and benefits. The bulldozer is expected to require annual maintenance costing $30,000. The bulldozer uses fuel that is expected to cost $42 per hour of bulldozer operation. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.352 2.991 6 4.917 4.355 4.111 3.784 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 a. Determine the equal annual net cash flows from operating the bulldozer. Use a minus sign to indicate cash outflows.…
Please help solve.
Peachtree Construction Company, a highway contractor, is considering the purchase of a new trench excavator that costs $300,000 and can dig a 3-foot-wide trench at the rate of 16 feet per hour. The contractor gets paid according to the usage of the equipment. $100 per hour. The expected average annual usage is 500 hours, and maintenance and operating costs will be $10 per hour. The contractor will depreciate the equipment by using a five-year MACRS, units-of-production method. At the end of five years, the excavator will be sold for $100,000.(a) Assuming that the contractor's marginal tax rate is 35% per year, determine the annual after-tax cash flow.(b) Is this a good investment if the contractor requires 15% return on investment?
An environmental consultant is considering the installation of a water storage tank for a client. The tank is estimated to have an initial cost of $426,000, and annual maintenance costs are estimated to be $6,400 per year. As an alternative, a holding pond can be provided a short distance away at an initial cost of $180,000 for the pond plus $90,000 for pumps and piping. Annual operating and maintenance costs for the pumps and holding pond are estimated to be $17,000. The planning horizon is 20 years, and at that time, neither alternative has any salvage value. Determine the preferred alternative based on a present worth analysis with a MARR of 20%/year.

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