A Funiture Factory is considering buying anew automated planing machine for a cost of$80,250. This price includes a completeguarantee of the maintenance costs for thefirst two years, and it covers a goodproportion of the maintenance costs for years3 and 4. The company's portion of themaintenance cost is estimated to be $1,000 inyear 3 and $3,000 in year 4. Depreciation onthe capital cost would be 7% per year.Determine the Economic Life and EAC* of thenew machine assuming the MARR is 6.5% andthat there will be an installation cost of$2,800.PLEASE PLEASE SHOW FULL DETAILEDSTEPS! THANK YOU!

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new machine assuming the MARR is 6.5% ar that there will be an installation cost of $2 800.

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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4. Your company is considering the introduction of a new product line. The initial investment required for this project is $500,000, and annual maintenance costs are anticipated to be $35,000. Annual operating costs will be directly proportional to the level of production at $7.50 per unit, and each unit of product can be sold for $50. If the MARR is 15% and the project has a life of 5 years, what is the minimum annual production level for which the project is economically viable?
A large induced-draft fan is needed for an upgraded industrial process. The motor to drive this fan is rated at 100 horsepower, and the motor will operate at full load for 8,760 hours per year. The motor’s efficiency is 92%. Because the motor is fairly large, a demand charge of $92 per kilowatt per year will beincurred in addition to an energy charge of $0.08 per kilowatt-hour. If the installed cost of the motor is $4,000, what is the present worth of the motor over a 10-year period when the MARR is 15% per year?
breKeven sale is 700000, fixed cost is 320000 for the next period. what need to do to achieve 50000 profit next year
Aria Acoustics, Incorporated (AAI), projects unit sales for a new 7-octave voice emulation implant as follows: Year Unit Sales 1 2 74,700 80,100 2345 5 85,800 83,000 69,900 Production of the implants will require $1,490,000 in net working capital to start and additional net working capital investments each year equal to 20 percent of the projected sales increase for the following year. Total fixed costs are $3,850,000 per year, variable production costs are $144 per unit, and the units are priced at $326 each. The equipment needed to begin production has an installed cost of $18,600,000. Because the implants are intended for professional singers, this equipment is considered industrial machinery and thus qualifies as 7-year MACRS property. In five years, this equipment can be sold for about 25 percent of its acquisition cost. The tax rate is 24 percent and the required return is 18 percent. (MACRS schedule) a. What is the NPV of the project? (Do not round intermediate calculations and…
What is the returnon an investment that costs $1,000 and is soldafter 1 year for $1,060?
Aria Acoustics, Incorporated (AAI), projects unit sales for a new 7-octave voice emulation implant as follows: Year Unit Sales 1 2345 2 3 5 72,300 77,700 82,600 80,600 66,700 Production of the implants will require $1,410,000 in net working capital to start and additional net working capital investments each year equal to 10 percent of the projected sales increase for the following year. Total fixed costs are $3,450,000 per year, variable production costs are $136 per unit, and the units are priced at $318 each. The equipment needed to begin production has an installed cost of $17,800,000. Because the implants are intended for professional singers, this equipment is considered industrial machinery and thus qualifies as 7-year MACRS property. In five years, this equipment can be sold for about 15 percent of its acquisition cost. The tax rate is 21 percent and the required return is 15 percent. (MACRS schedule) a. What is the NPV of the project? (Do not round intermediate calculations…
Company XYZ is evaluating a project that generates revenue of $200,000 per year for 10 years. The variable costs are 60% of the revenue. Fixed costs are $15,000. The equipment cost is $150,000. There net working capital will increase by $10.000 which will be reset at the end of the project. The equipment will be depreciated under straight-line method. The equipment can be sold for $25,000 at the end of the project. The risk of the project is above the average risk. The company pays tax at 38%. The assets of the company financed by equity only. The company expected to pay $2.00 of dividend per share which grows at the rate of 4% per year forever. The current price of the stock is $28. The company makes below adjustments to adjust the risk of the projects: Rate of 2.5% more is required by the high risky projects. Low risky project should be evaluated at the rate less than the cost of capital. The required rate of return for such projects will be reduced by 1.5%. What is the profitability…
A process for making a laboratory-grade sodium phosphate will have a first cost of $320,000 with annual costs of $40,000 and revenue of $98,000 per year. At a return requirement of 20% per year, the payback period is closest to:a. 3 yearsb. 5 yearsc. 7 yearsd. ∞; it will never pay off
The estimated cost of a completely installed andready-to-operate 40-kilowatt generator is $32,000. Itsannual maintenance costs are estimated at $800. Theenergy that can be generated annually at full load isestimated to be 100,000 kilowatt-hours. If the valueof the energy generated is $0.09 per kilowatt-hour,how long will it take before this machine becomesprofitable? Take the MARR to be 10% and the salvage value of the machine to be $2,000 at the end ofits estimated life of 15 years.
A project requires an initial investment in equipment of $96,600 and then requires an initial investment in working capital of $14,400 (at t= 0). You expect the project to produce sales revenue of $131,000 per year for three years. You estimate manufacturing costs at 60 percent of revenues. (Assume all revenues and costs occur at year-end [i.e., t= 1, t= 2, and t=3]). The equipment depreciates using straight-line depreciation over three years. At the end of the project, the firm can sell the equipment for $12,420 and recover the investment in net working capital. The corporate tax rate is 21 percent and the cost of capital is 15 percent. Calculate the NPV of the project. Multiple Choice O O O $4,679 -$3,574 $13,573
Aria Acoustics, Incorporated (AAI), projects unit sales for a new 7-octave voice emulation implant as follows: Year Unit Sales 1 74,400 2345 79,800 85,400 82,700 69,500 Production of the implants will require $1,480,000 in net working capital to start and additional net working capital investments each year equal to 15 percent of the projected sales increase for the following year. Total fixed costs are $3,800,000 per year, variable production costs are $143 per unit, and the units are priced at $325 each. The equipment needed to begin production has an installed cost of $18,500,000. Because the implants are intended for professional singers, this equipment is considered industrial machinery and thus qualifies as 7-year MACRS property. In five years, this equipment can be sold for about 20 percent of its acquisition cost. The tax rate is 23 percent and the required return is 17 percent. (MACRS schedule) a. What is the NPV of the project? (Do not round intermediate calculations and…
Excluding maintenance, all other costs from operating the equipment will be $270 per year. Maintenance costs will be $100 in the first year of operation. As the equipment gets older, some parts will need to be replaced and the replacement will cost an additional $30 each year from year 2 to year 5 what is maintenance costs each year (from year 1 to year 5). ...

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