P1: Compute payback period and describe its use..FasTrac is considering buying a new machine:Cost..$16,000Useful life..8 yearsSalvage value.$ 0Expected production..30,000 unitsProduct selling price per unit..$ 30Calculate the payback period.

Payback period is the period at which the cumulative cash flows become equal to the cost incurred on…

Answered: P1: Compute payback period and describe…

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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1. The manager in a canned food processing plant is trying to decide between two labeling machines. Assume an interest rate of 6%. Use annual cash flow analysis to determine which machine should be chosen. First cost Maintenance and operating costs Annual benefit Salvage value Useful life, in years Machine A $15,000 1,600 8,000 3,000 6 Machine B $25,000 400 13,000 6,000 10
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You are considering the following project. What is the NPV of the project? WACC of the project: 0.10 Revenue growth rate: 0.05 Tax rate: 0.40 Revenue for year 1: 13,000 Fixed costs for year 1: 3,000 variable costs (% of revenue): 0.30 project life: 3 years Economic life of equipment: 3 years Cost of equipment: 20,000 Salvage value of equipment: 4,000 Initial investment in net working capital: 2,000
Two altemnative machines will produce the same product, but one is capable of higher-quality work, which can be expected to return greater revenue. The following are relevant data. Determine which is the better alternative, assuming repeatability and using SL depreciation, an income-tax rate of 25%, and an after-tax MARR of 10%. Capital investment Life Machine A $20,000 12 years $3,500 Calculate the AW value for the Machine A. AWA (10%) = $(Round to the nearest dollar.) Terminal BV (and MV) Annual receipts Annual expenses Click the icon to view the interest and annuity table for discrete compounding when the MARR is 10% per year. Machine B $34,000 9 years $2,000 $144,000 $142,000 $190,000 $163,000
2. A construction company must replace a piece of heavy earth-moving equipment. Cat and Volvo are the two best alternatives. Both alternatives are expected to last 8 years. If the company has a minimum attractive rate of return (MARR) of 11%, which alternative should be chosen? Use IRR analysis. Cat Volvo First cost $15,000 $22,500 Annual operating cost Salvage value 3,000 1,500 2,000 4,000

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P1: Compute payback period and describe its use.. FasTrac is considering buying a new machine: Cost.. $16,000 Useful life.. 8 years Salvage value. $ 0 Expected production.. 30,000 units Product selling price per unit.. $ 30 Calculate the payback period.