Maps News-mework itaInterstate Manufacturing is considering either overhauling an old machine or replacing it with a new machine. Information about thetwo alternatives follows. Management requires a 8% rate of return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1)(Use appropriate factor(s) from the tables provided.)Alternative 1: Keep the old machine and have it overhauled. This requires an initial investment of $146,000 and results in $40,000 ofnet cash flows in each of the next five years. After five years, it can be sold for a $23,000 salvage value.Alternative 2: Sell the old machine for $40,000 and buy a new one. The new machine requires an initial investment of $295,000 andcan be sold for a $11,000 salvage value in five years. It would yield cost savings and higher sales, resulting in net cash flows of$49,000 in each of the next five years.Required:1. Determine the net present value of alternative 1.2. Determine the net present value of alternative 2.3. Which alternative should management select based on net present value?Required 1AComplete this question by entering your answers in the tabs below.Van 15Translate M SmartBook 2.0M SmartBook 2.0 M SmartBook 2.0F1@Determine the net present value of alternative 1. (Do not round intermediate calculations. Round your present value factor to4 decimals and final answers to the nearest whole dollar.)2WSRequired 230²F2Net CashFlows3Required 3#con&external_browser=0&launchUrl=https%253A%252F%252Felearning.kctcs.edu%252Fultra%2E80F3Present ValueFactors at 8%APR11$4RaF4FPresent Value ofCash Flows%5< PrevSaved0F5TGm tv68 of 8 # Next >F6Y&7H←F7U8IZAⓇFB(DD9F9K)F10OOO.IP

The value of an investment taken into account across its whole expected lifespan and then discounted…

Answered: Interstate Manufacturing is considering…

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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Hook Industries is considering the replacement of one of its old metal stamping machines. Three alternative replacement machines are under consideration. The cash flows associated with each are shown in the following table attached: . The firm's cost of capital is 10%. a. Calculate the net present value (NPV) of each press. b. Using NPV, evaluate the acceptability of each press. c. Rank the presses from best to worst using NPV.
The management of Kunkel Company is considering the purchase of a $34,000 machine that would reduce operating costs by $9,000 per year. At the end of the machine's five-year useful life, it will have zero scrap value. The company's required rate of return is 12%. Use Excel or a financial calculator to solve. Required: 1. Determine the net present value of the investment in the machine. (Any cash outflows should be indicated by a minus sign. Round answers to the nearest dollar.) Net present value 2. What is the difference between the total, undiscounted cash inflows and cash outflows over the entire life of the machine? (Any cash outflows should be indicated by a minus sign.) Total Cash Item Cash Flow Years Flows Annual cost savings Initial investment 1 Net cash flow %24 24
Interstate Manufacturing is considering either overhauling an old machine or replacing it with a new machine. Information about the two alternatives follows. Management requires a 10% rate of return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Alternative 1: Keep the old machine and have it overhauled. This requires an initial investment of $150,000 and results in $60,000 of net cash flows in each of the next five years. After five years, it can be sold for a $20,000 salvage value. Alternative 2: Sell the old machine for $50,000 and buy a new one. The new machine requires an initial investment of $300,000 and can be sold for a $20,000 salvage value in five years. It would yield cost savings and higher sales, resulting in net cash flows of $60,000 in each of the next five years. Required: 1. Determine the net present value of alternative 1. 2. Determine the net present value of alternative 2. 3. Which…
Evans Industries wishes to select the best of three possible machines, each of which is expected to satisfy the firm's ongoing need for additional aluminum-extrusion capacity. The three machines—A, B, and C—are equally risky. The firm plans to use a cost of capital of 11.7% to evaluate each of them. The initial investment and annual cash inflows over the life of each machine are shown in the following table. Machine A MachineB Machine C Initial investment 91,900 64,700 100,200 Year Cash inflows 1 11,000 10,200 30,500 2 11,000 19,900 30,500 3 11,000 30,200 30,500 4 11,000 39,500 30,500 5…
Amphenol manufactures motor power connectors and is considering upgrading the production equipment to reduce costs over a 6-year planning horizon. The company can invest $80,000 now (year 0), 1 year from now, or 2 years from now. Depending on when the investment is made, the savings will vary. The savings estimates are $25,000, $26,000, and $29,000 per year for investing now, year 1, and year 2, respectively. If the company’s MARR is 20% per year, use an FW analysis to determine if the timing of the investment will return at least 20% per year.
The CFO of The Fun Factory is investigating the possibility of investing in a three-dimensional printer that would cost $16,500. The printer would eliminate the need to have prototypes of new toys be produced by a third party. The cost of having the prototypes manufactured by the third party is about $7,161 per year. The printer would have a useful life of five years with no salvage value with expected annual operating costs of $3,300 per year. Required: Compute the simple rate of return on the printer. (Round your answer to 1 decimal place.) Simple rate of return %
Interstate Manufacturing is considering either overhauling an old machine or replacing it with a new machine. Information about the two alternatives follows. Management requires a 10% rate of return on its investments. (PV of $1, FV of $1. PVA of $1. and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Alternative 1: Keep the old machine and have it overhauled. This requires an initial investment of $154,000 and results in $52,000 of net cash flows in each of the next five years. After five years, it can be sold for a $20,000 salvage value. Alternative 2: Sell the old machine for $41,000 and buy a new one. The new machine requires an initial investment of $291,000 and can be sold for a $12,000 salvage value in five years. It would yield cost savings and higher sales, resulting in net cash flows of $43,000 in each of the next five years. Required: 1. Determine the net present value of alternative 1. 2. Determine the net present value of alternative 2. 3. Which…
United Pigpen is considering a proposal to manufacture high-protein hog feed. The project would require use of an existing warehouse, which is currently rented out to a neighboring firm. The next year's rental charge on the warehouse is $120,000, and thereafter, the rent is expected to grow in line with inflation at 4% a year. In addition to using the warehouse, the proposal envisages an investment in plant and equipment of $1.32 million. This could be depreciated for tax purposes straight-line over 10 years. However, Pigpen expects to terminate the project at the end of 8 years and to resell the plant and equipment in year 8 for $440,000. Finally, the project requires an immediate investment in working capital of $370,000. Thereafter, working capital is forecasted to be 10% of sales in each of years 1 through 7. Working capital will be run down to zero in year 8 when the project shuts down. Year 1 sales of hog feed are expected to be $4.60 million, and thereafter, sales are forecasted…
A computer call center is going to replace all of its incandescent lamps with more energy efficient fluorescent lighting fixtures. The total energy savings are estimated to be $2,084 per year, and the cost of purchasing and installing the fluorescent fixtures is $4,500. The study period is four years, and terminal market values for the fixtures are negligible. a. What is the IRR of this investment? b. What is the simple payback period of the investment? c. Is there a conflict in the answers to Parts (a) and (b)? List your assumptions. d. The simple payback "rate of return" is 1/0. a. The IRR of the investment is%. (Round to one decimal place.) b. The simple payback period of the investment is years. (Round up to the next whole number.) c. Select all the correct assumptions below. A. The value of 0 may indicate a poor project in terms of liquidity. B. The value of 0 may indicate the best project in terms of liquidity. C. The IRR will signal an acceptable (profitable) project if the MARR…
OptiLux is considering Investing in an automated manufacturing system. The system requires an initial Investment of $6.0 million, has a 20-year life, and will have zero salvage value. If the system is Implemented, the company will save $740,000 per year in direct labor costs. The company requires a 10% return from Its Investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) a. Compute the proposed Investment's net present value. b. Using the answer from part a, is the investment's Internal rate of return higher or lower than 10%? Hint: It is not necessary to compute IRR to answer this question. Complete this question by entering your answers in the tabs below. Required A Required B Compute the proposed investment's net present value. Net present value
Pablo Company is considering buying a machine that will yield Income of $3,400 and net cash flow of $16,500 per year for three years. The machine costs $45,600 and has an estimated $6,300 salvage value. Pablo requires a 15% return on Its Investments. Compute the net present value of this Investment. (PV of $1, FV of $1. PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Negative amounts should be indicated by a minus sign. Round your present value factor to 4 decimals.) Years 1-3 Year 3 salvage Totals Initial investment Net present value Net Cash Flows x PV Factor = = = = Present Value of Net Cash Flows $ 0 0
A polyurethane company is decided to purchase a motorized feature for pulling parts from an injection moulding machine. The use of the new feature is anticipated to cause a decrease in the production costs by RM 200,000 per year in the first 2 years and by RM 300,000 per year in the next 3 years. By drawing a cash flow diagram, evaluate the present worth of the cost saving if the interest rate on the investment is 15% per year.

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