e plant manager of Shenzhen Electronics Company is considering the purchase of new automated assembly equipment. The new equipment will cost $188,000. The anager believes that the new investment will result in direct labor savings of $47,000 per year for 10 years. Present Value of an Annuity of $1 at Compound Interest

e plant manager of Shenzhen Electronics Company is considering the purchase of new automated assembly equipment. The new equipment will cost $188,000. The anager believes that the new investment will result in direct labor savings of $47,000 per year for 10 years. Present Value of an Annuity of $1 at Compound Interest

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The manufacture of equipment costs $73,000 per year. An engineer finds that by spending $16,000 now to reconfigure the production line, the cost of manufacturing will decrease to $58,000 next year and $52,000 in years 2 through 5. Using an interest rate of 10% per year, which of the following Excel functions that is used to determine the savings (present worth) due to the reconfiguration? (Hint: Include the reconfiguration cost.) Click the answer you think is right. PV(0.1,5,-73000)-((PV(0.1,4,-1)&PV(0.1,2,-1)&52000)PV(0.1,1,-58000)16000)) PV(0.1,5,-73000)-((PV(0.1,4,-1)&PV(0.1,1,-2)&52000)PV(0.1,1,-5800O)PV(0.1,1,-16000))) PV(0.1,5,-73000)-((PV(0.1,4,-1)&PV(0.1,1,-1)&52000)PV(0.1,1,-580000)16000)) NPV(0.1,5,-73000)-(((PV(0.1,4,-1)&PV(0.1,2,-1)&52000)PV(0.1,1,-58000)16000))
The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment: Year Operating Income Net CashFlow 1 $18,750 $93,750 2 18,750 93,750 3 18,750 93,750 4 18,750 93,750 5 18,750 93,750 The net present value for this investment is a. $19,875 b. $118,145 c. $(19,875) d. $(118,145)
IronZee Industries is adding a new product line that will require an investment of $1,268,000. It is estimated this investment will have a 10-year life and will generate net cash inflows of $296,000 the first year, $266,000 during the second year, and $235,000 each year thereafter for 8 years. The project will have $0.00 residual value. Compute the ARR for the investment. (Round your answers to two decimal places when needed and use rounded answers for all future calculations). IronZee Industries Total net cash inflows during operation life of expansion Less: Total depreciation during operating life of expansion Total operating income during operating life Divide by: expansions operating life in years Average annual operating income from expansion (Amount Invested + Residual Value) / 2 / 2 = = / Average amount Invested Average annual operating income / Average amount invested = = ARR (%)
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Athena Books Company is contemplating the installation of a wastewater recycling system. The amount to be invested in this system is $400,000. The system is expected to last 8 years and has no salvage value. Which of the following situations supports the installation of the recycling system? Assume the present value factor for an annuity of $1 at 10% for 8 periods is 5.3349 and the present value factor for $1 at 10% for 8 periods is 0.4665. The total cash flow savings expected from the recycling system is $700,000. The annual maintenance cost for the system is $40,000. The annual maintenance cost for the system is equal to the cost of the existing water system. The recycling system will yield a savings of $78,000 per year.
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Malone Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in cash flow of $24330. The equipment will have an initial cost of $154350 and have a 5-year life. The salvage value of the equipment is estimated to be $21260 Factors to use for n-5.1-8% (DO NOT USE ANY OTHER FACTORS OR EQUATIONS) Future Value of an Annuity of $1 5.8666 Future Value of $1 1,4693 3.9927 0.6806 Present Value of an Annuity of $1 Present Value of $1 If the hurdle rate is 8%, what is the approximate not present value? Ignore income taxes