period of three years or less? 14. Roche Brothers is considering a capacity expansion of a 5-year lease. The increase in rent for the addition is lent to 500,000 customers per year, Assume a 2 percent its supermarket. The landowner will build the addi- tion to suit in return for $200,000 upon completion and xpects a pretax payback Allernative 1: Exp $10,000 per month. The annual sales projected through install the year 5 follow. The current effective capacity is equiva- a. last 20 years, whin increase (200 - Alternative 2: Ex end of year 10. . Alternative 3: E Each alternative w gallons per year e the plant would chosen. Significa in construction would cost S$18 $30 million; ar $50 million. T tain, leading t city believes high as 16 pe Supplement on sales. pretax profit 1 Year 4 600,000 6U500 700.000 715,000 560,000 Customers Average Sales per Customer $50.00 $53.00 $60.00 $64.00 a. Compute а. If Roche expands its Capavity serve 700,000 customers per year nowiend of year 0), what are compare munici the projected annual incremental pretax cash flows b. Which of cons discou attributable to this expansion? h If Roche expands its capacity to serve 700,000 customers per year at the end of year 2, the land- owner will build the same addition for $240.000 and a 3-year lease at $12,000 per month. What are the projected annual incremental pretax cash flows attributable to this expansion alternative? с. Весau comp plan TABLE 4.3 15. MKM International is seeking to purchase a new CNC machine in order to reduce costs. Two alterna- tive machines are in consideration. Machine 1 costs $500,000 but yields a 15 percent savings over the cur- rent machine used. Machine 2 costs $900,000 but yields a 25 percent savings over the current machine used. In order to meet demand, the following forecasted cost information for the current machine is also provided. Year 1 2 3. a. Based on the NPV of the cash flows for these five years, which machine should MKM International Purchase? Assume a discount rate of 12 percent. nhine would it purchase?
period of three years or less? 14. Roche Brothers is considering a capacity expansion of a 5-year lease. The increase in rent for the addition is lent to 500,000 customers per year, Assume a 2 percent its supermarket. The landowner will build the addi- tion to suit in return for $200,000 upon completion and xpects a pretax payback Allernative 1: Exp $10,000 per month. The annual sales projected through install the year 5 follow. The current effective capacity is equiva- a. last 20 years, whin increase (200 - Alternative 2: Ex end of year 10. . Alternative 3: E Each alternative w gallons per year e the plant would chosen. Significa in construction would cost S$18 $30 million; ar $50 million. T tain, leading t city believes high as 16 pe Supplement on sales. pretax profit 1 Year 4 600,000 6U500 700.000 715,000 560,000 Customers Average Sales per Customer $50.00 $53.00 $60.00 $64.00 a. Compute а. If Roche expands its Capavity serve 700,000 customers per year nowiend of year 0), what are compare munici the projected annual incremental pretax cash flows b. Which of cons discou attributable to this expansion? h If Roche expands its capacity to serve 700,000 customers per year at the end of year 2, the land- owner will build the same addition for $240.000 and a 3-year lease at $12,000 per month. What are the projected annual incremental pretax cash flows attributable to this expansion alternative? с. Весau comp plan TABLE 4.3 15. MKM International is seeking to purchase a new CNC machine in order to reduce costs. Two alterna- tive machines are in consideration. Machine 1 costs $500,000 but yields a 15 percent savings over the cur- rent machine used. Machine 2 costs $900,000 but yields a 25 percent savings over the current machine used. In order to meet demand, the following forecasted cost information for the current machine is also provided. Year 1 2 3. a. Based on the NPV of the cash flows for these five years, which machine should MKM International Purchase? Assume a discount rate of 12 percent. nhine would it purchase?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Number 14 on image. Also I need to compute the npv for each alternative and assume the discount rate is 8%
Expert Solution
Step 1
Comment -
We’ll answer the first question since the exact one wasn’t specified. Please submit a new question specifying the one you’d like answered.
Question -14
Net Present Value -
An investment proposal's net present value can be calculated by adding up all of the cash inflows and subtracting them from all of the cash outflows that are related to the proposal. In other words, the net present value of all cash flows is equivalent to the NPV of any plan that includes cash inflows and outflows over a period of time.
Step by step
Solved in 2 steps with 2 images
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education