Joy Co. is considering 2 projects, Alternative A and Alternative B, that it anticipates would increase the energy efficiency of the facility where it produces its rainbow-colored party supplies. Note that it may also choose to forgo any upgrades. Joy Co. plans to be in its current facility for another 5 years, at which point it will sell its remaining assets. • Alternative A costs $7,500 to install and will produce an estimated annual savings of $2,976. It does not have any salvage value. • Alternative B costs $22,000 to install and will save $5,700 annually. It has a salvage value of $9,500 at the end of its useful life. Compute the FW of each alternative, assuming a MARR of 14%. Click here to access the TVM Factor Table calculator. FW Alternative A $4 Alternative B %24 Carry all interim calculations to 5 decimal places and then round your final answers to a whole number. The tolerance is±10. Which of the alternatives should Joy Co. pursue? Neither Alternative B Media Alternative A

Joy Co. is considering 2 projects, Alternative A and Alternative B, that it anticipates would increase the energy efficiency of the facility where it produces its rainbow-colored party supplies. Note that it may also choose to forgo any upgrades. Joy Co. plans to be in its current facility for another 5 years, at which point it will sell its remaining assets. • Alternative A costs $7,500 to install and will produce an estimated annual savings of $2,976. It does not have any salvage value. • Alternative B costs $22,000 to install and will save $5,700 annually. It has a salvage value of $9,500 at the end of its useful life. Compute the FW of each alternative, assuming a MARR of 14%. Click here to access the TVM Factor Table calculator. FW Alternative A $4 Alternative B %24 Carry all interim calculations to 5 decimal places and then round your final answers to a whole number. The tolerance is±10. Which of the alternatives should Joy Co. pursue? Neither Alternative B Media Alternative A

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Tanaka Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $401,000 is estimated to result in $147,000 in annual pretax cost savings. The press qualifies for 100 percent bonus depreciation and it will have a salvage value at the end of the project of $48,000. The press also requires an initial investment in spare parts inventory of $15,300, along with an additional $2,300 in inventory for each succeeding year of the project. The shop's tax rate is 23 percent and its discount rate is 10 percent. Calculate the project's NPV. Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. NPV S 69,414.39
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ABC Corporation is evaluating a project which involves producing a new drug. The project requires an investment in a new plant. ABC can either borrow the money to buy the plant or lease the plant from its manufacturer. The details of each alternative are shown as follows: Purchase: The purchase price of the plant is $800,000 and is expected to have a salvage value of $50,000 at the end of its 4-year life. The plant qualifies for 25% reducing balance depreciation if owned. Lease: The lease involves four annual payments in arrears of $150,000 payable at the end of each year, and a residual payment of $30,000 payable at the end of the lease term, i.e., at the end of year 4. The company tax rate is 30%. The borrowing rate is 8% per annum. Calculate the NPV of leasing and advise the company as to whether it should purchase or lease the plant.
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Give me correct answer and explanation.jit

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