Keeper Inc. is considering the purchase of new equipment that will automate production and thus reduce labor costs. Keeper made the following estimates related to the new machinery: (Click the icon to view the information.) Present Value of $1 table Present Value of Annuity of $1 table Future Value of $1 table Future Value of Annuity of $1 table Read the requirements. Requirement 1. Calculate (a) net present value, (b) payback period, (c) discounted payback period, and (d) internal rate of return. a. Net present value. (Round intermediary calculations to the nearest whole dollar. Use factors to three decimal places, X.XXX, and use a minus sign or parentheses for a negative net present value. Enter the net present value of the investment rounded to the nearest whole dollar.) The net present value is $ 40,275 b. Payback period. (Round your answer to two decimal places.) The payback period in years is 4.79 c. Discounted payback period. (Round interim calculations to the nearest whole dollar. Round the rate to two decimal places, X.XX%.) The discount payback period in years is 11.496 Data table Cost of the equipment Reduced annual labor costs Estimated life of equipment Terminal disposal value After-tax cost of capital $143,000 $35,000 10 years $0 10% 25% Tax rate Assume depreciation is calculated on a straight-line basis for tax purposes. Assume all cash flows occur at year-end except for initial investment amounts. Print Done Requirements 1. Calculate (a) net present value, (b) payback period, (c) discounted payback period, and (d) internal rate of return. 2. Compare and contrast the capital budgeting methods in requirement 1. Print Done -
Keeper Inc. is considering the purchase of new equipment that will automate production and thus reduce labor costs. Keeper made the following estimates related to the new machinery: (Click the icon to view the information.) Present Value of $1 table Present Value of Annuity of $1 table Future Value of $1 table Future Value of Annuity of $1 table Read the requirements. Requirement 1. Calculate (a) net present value, (b) payback period, (c) discounted payback period, and (d) internal rate of return. a. Net present value. (Round intermediary calculations to the nearest whole dollar. Use factors to three decimal places, X.XXX, and use a minus sign or parentheses for a negative net present value. Enter the net present value of the investment rounded to the nearest whole dollar.) The net present value is $ 40,275 b. Payback period. (Round your answer to two decimal places.) The payback period in years is 4.79 c. Discounted payback period. (Round interim calculations to the nearest whole dollar. Round the rate to two decimal places, X.XX%.) The discount payback period in years is 11.496 Data table Cost of the equipment Reduced annual labor costs Estimated life of equipment Terminal disposal value After-tax cost of capital $143,000 $35,000 10 years $0 10% 25% Tax rate Assume depreciation is calculated on a straight-line basis for tax purposes. Assume all cash flows occur at year-end except for initial investment amounts. Print Done Requirements 1. Calculate (a) net present value, (b) payback period, (c) discounted payback period, and (d) internal rate of return. 2. Compare and contrast the capital budgeting methods in requirement 1. Print Done -
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Keeper Inc. is considering the purchase of new equipment that will automate production and thus reduce labor costs. Keeper made the following estimates related to the new machinery:
(Click the icon to view the information.)
Present Value of $1 table Present Value of Annuity of $1 table Future Value of $1 table Future Value of Annuity of $1 table
Read the requirements.
Requirement 1. Calculate (a) net present value, (b) payback period, (c) discounted payback period, and (d) internal rate of return.
a. Net present value. (Round intermediary calculations to the nearest whole dollar. Use factors to three decimal places, X.XXX, and use a minus sign or parentheses for a negative net present value. Enter the
net present value of the investment rounded to the nearest whole dollar.)
The net present value is $ 40,275
b. Payback period. (Round your answer to two decimal places.)
The payback period in years is
4.79
c. Discounted payback period. (Round interim calculations to the nearest whole dollar. Round the rate to two decimal places, X.XX%.)
The discount payback period in years is
11.496
Data table
Cost of the equipment
Reduced annual labor costs
Estimated life of equipment
Terminal disposal value
After-tax cost of capital
$143,000
$35,000
10 years
$0
10%
25%
Tax rate
Assume depreciation is calculated on a straight-line basis
for tax purposes. Assume all cash flows occur at year-end
except for initial investment amounts.
Print
Done
Requirements
1. Calculate (a) net present value, (b) payback period, (c) discounted
payback period, and (d) internal rate of return.
2. Compare and contrast the capital budgeting methods in requirement 1.
Print
Done
-
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