A large automobile manufacturer isconsidering the installation of a high-techmaterial handling system for $30,000,000.This system will save $7,500,000 per year inmanual labor, and it will incur $2,750,000 inannual operating and maintenanceexpenditures. The salvage value at the endof the system's 10-year life is negligible. Ifthe company's hurdle rate (MARR) is 10%per year, should the system berecommended for implementation?The breakeven interest rate is%.(Round to two decimal places.)Should the system be recommended forimplementation?Choose the correct answer below.A. No, this material handling system shouldnot be recommended.B. Yes, this material handling system shouldbe recommended.

Break even rate is at which present value of future cash flow is equal to initial investment.

Answered: onsidering the installation of 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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XYZ company has A piece of new equipment will cost $70,000. The equipment will provide a cost savings of $15,000 per year for ten years, after which it will have a $3,000 salvage value. If the required rate of return is 14%, the equipment's net present value is: a. (8240) b. None of answers are correct c. 9050 d. 23888
A five-year project has an initial fixed asset investment of $355,000, an initial NWC investment of $39,000, and an annual OCF of −$38,000. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required return is 11 percent, what is this project’s equivalent annual cost, or EAC? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
A five - year project has an initial fixed asset investment of $335,000, an initial NWC investment of $35,000, and an annual OCF of -$34,000. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required return is 10 percent, what is this project's equivalent annual cost, or EAC? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.)
2
The management of Kunkel Company is considering the purchase of a $29,000 machine that would reduce operating costs by $6,500 per year. At the end of the machine's five-year useful life, it will have zero salvage value. The company's required rate of return is 16%. Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using table. Required: 1. Determine the net present value of the investment in the machine. 2. What is the difference between the total, undiscounted cash inflows and cash outflows over the entire life of the machine? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Determine the net present value of the investment in the machine. (Negative amounts should be indicated by a minus sign. Round your final answer to the nearest whole dollar amount. Use the appropriate table to determine the discount factor(s).) Net present value
$500,000 is invested in equipment having a negligible salvage value regardless of the number of years used. O&M costs equal $125,000 the first year and increase $25,000 per year. Based on a MARR of 10%, what are the optimum replacement interval and minimum EUAC?
Problem: The company is considering the acquisition of a new machine that costs $20,000. It will provide a savings of $5,000 per year over its useful life of eight years. The salvage value is expected to be zero. What is the internal rate of return, and should the machine be acquired?
A five-year project has an initial fixed asset investment of $300,000, an initial NWC investment of $28,000, and an annual OCF of – $27,000. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required return is 11%, what is this project's equivalent annual cost, or EAC? (Negative answer should be indicated by a minus sign. Do not round your intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) Equivalent annual cost %24
New windows are expected to save $950 per year in energy costs over their 30-year life for Fab Fabricating. At an initial cost of $12,000 and zero salvage value. What is the internal rate of return? Note: If Fab's MARR is 8 percent. Does the IRR provide a good deal? (No response required just think about what this means)
Barcelona Football Club is spending $2 million on a new sewage system. The expected life of the system is 40 years, and it will have no market value at the end of its life. Operating and maintenance expenses for the system are projected to average $0.1 million per year. If the team MARR is 8% per year, what is the capitalized worth of the system' detailed answaer without using excel
How long will it take to recover an investment of $245,000 in enhanced CNC controls that include axis control to 8 axes (on the milling model) if theassociated income is $92,000 per year, expenses are $38,000 per year, and the salvage value is assumed to be 15% of the first cost? Use a MARR of 15% per year.
2. A manufacturer is going to modify a material handling system. This modification will result in first year saving of 30,000 pesos, a second year saving of 40,000 pesos, third year savings of 50,000 pesos and so on. The system last for 15 years at 15% return on investment. The system has no market (salvage) value at any time. How much could be justified now for system modification.

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onsidering the installation of a high-tech aterial handling system for $30,000,000 nis system will save $7,500,000 per year anual labor, and it will incur $2,750,000 nnual operating and maintenance