Waterways puts much emphasis on cash flow when it plans for capital investments. The company chose its discount rate of 8% basedon the rate of return it must pay its owners and creditors. Using that rate, Waterways then uses different methods to determine thebest decisions for making capital outlays.This year Waterways is considering buying five new backhoes to replace the backhoes it now has. The new backhoes are faster, costless to run, provide for more accurate trench digging, have comfort features for the operators, and have 1-year maintenanceagreements to go with them. The old backhoes are working just fine, but they do require considerable maintenance. The backhoeoperators are very familiar with the old backhoes and would need to learn some new skills to use the new backhoes.The following information is available to use in deciding whether to purchase the new backhoes.Purchase cost when newSalvage value nowInvestment in major overhaul needed in next yearSalvage value in 8 yearsRemaining lifeNet cash flow generated each yearNet Present ValueWaterways shouldClick here to view PV table.(a) Evaluate in the following ways whether to purchase the new equipment or overhaul the old equipment. (Hint: For the old machine,the initial investment is the cost of the overhaul. For the new machine, subtract the salvage value of the old machine to determine theinitial cost of the investment.)New BackhoesOld Backhoes$91,400$41,400$54,112$15,200(1) Using the net present value method for buying new or keeping the old. (For calculation purposes, use 5 decimal places as displayed inthe factor table provided. If the net present value is negative, use either a negative sign preceding the number eg-45 or parentheses eg (45).Round final answer to 0 decimal places, e.g. 5,275.)buy New Backhoes1435268 years$30,400New Backhoes$199,994equipment.$88,0008 years$44,300Old Backhoes128798 Payback PeriodWaterways should retain Old Backhoes equipment.Profitability IndexNew Backhoes3.58 years(3) Comparing the profitability index for each choice. (Round answers to 2 decimal places, eg. 1.25)IRR FactorNew BackhoesWaterways should retain Old Backhoes equipment.Waterways shouldNew Backhoes1.90.2752Old BackhoesCalculate the internal rate of return factor for the new and old blackhoes. (Round answers to 5 decimal places, e.g. 5.27647.)Old BackhoesOld Backhoesretain Old Backhoes equipment.1.78 years0.58333,38(4) Comparing the internal rate of return for each choice to the required 8% discount rate.

Net present value is determined by deducting the initial investment from the current value of cash…

Payback Period Waterways should retain Old Backhoes Profitability Index New Backhoes Waterways should IRR Factor 3.58 years (3) Comparing the profitability index for each choice. (Round answers to 2 decimal places, e.g. 1.25) New Backhoes equipment. New Backhoes. retain Old Backhoes equipment. 1.9 0.2752 Old Backhoes Calculate the internal rate of return factor for the new and old blackhoes. (Round answers to 5 decimal places, e.g. 5.27647) Old Backhoes Old Backhoes Waterways should retain Old Backhoes equipment. 1.78 years 0.5833 3.38 (4) Comparing the internal rate of return for each choice to the required 8% discount rate.

Payback Period Waterways should retain Old Backhoes Profitability Index New Backhoes Waterways should IRR Factor 3.58 years (3) Comparing the profitability index for each choice. (Round answers to 2 decimal places, e.g. 1.25) New Backhoes equipment. New Backhoes. retain Old Backhoes equipment. 1.9 0.2752 Old Backhoes Calculate the internal rate of return factor for the new and old blackhoes. (Round answers to 5 decimal places, e.g. 5.27647) Old Backhoes Old Backhoes Waterways should retain Old Backhoes equipment. 1.78 years 0.5833 3.38 (4) Comparing the internal rate of return for each choice to the required 8% discount rate.

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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In planning the establishment of MOCAF flour mill facilities there are several alternatives as follows: (x Rp million,-) Alternative I Alternative Il Alternative III Initial investment 4.000 6 200 Annual net receipts 800 1260 Final score 0 400 Economic age 10 years. 10 years If the MARR is 12% per year, look for the best alternative with the method: a. Net Present Value b. IRR 7 600 1 500 600 10 years
Can someone please solve this question using hand calculations only? PLEASE AND THANK YOU!!!
Written report with the following content: • Appendix1: Leasing Explain the calculations. Your recommendations Objective: Should FFT lease or construct their own production facility Option 1: Construct Costs to incur: Buying land, construct building and getting ready for use (FFT has these funds available in their bank account today so no mortgage is needed) $ 1,200,000 Taxes, insurance, and repairs (per year) $110,000 Intended years of use 15 Projected market value in 15 years $ 1,250,000 Option 2: Lease Intended years of use 15 Deposit required today (this deposit will be returned to FFT when the lease contract is complete is 15 years) $ 100,000 Annual lease payment $ 160,000 Property taxes (annual) to be paid by FFT $ 15,000 Insurance (annual) to be paid by FFT $ 15,000 Required rate of return 8% Methodology: The consulting team is proposing to perform a NPV analysis and determine the benefit to leasing or construction. Based on the analysis, they will recommend the preferred option…
Two sites for suspension bridges are under consideration for crossing the Allegheny River in Pittsburgh, PA. Use the B/C ratio method at a discountrate of 6% per year to determine which bridge, if either, should be built.
a Moving to another question will save this response. Question 1 of Question 1 Save Awe A company purchased a AC system for $49,855 which requires $8,755 per year maintenance fees for the first 5 years, after which the maintenance fees will increase by 12% per year for the upcoming 7 years. Determine the equivalent total present worth value of purchased system during the 12 years operation ati = 15% per year.
3. You are confronted with a decision whether to replace an old transit mixer or to purchase a new one of the same model and capacity. The following information is given, namely: Replacement (Brand New) 3,200,000 65,000 300,000 15 year Retention (Refurbished) Initial Cost, P 550,000 Operating Cost, P/year Salvage value Life, year 210,000 30,000 5 Assuming interest rate is 6% per year, would you recommend to retain (with refurbishment) or to totally replace the equipment now? What are the implications of your decision? Explain your answer.
A city is planning to invest in potential projects with the estimated cash flows below. Given that interest rate is 4.880884817% per semiannual, determine which option is preferable if options are mutually exclusive using PW analysis. show the steps: please don't use excel
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Balloons By Sunset (BBS) is considering the purchase of two new hot air balloons so that it can expand its desert sunset tours. Various information about the proposed investment follows: (Future Value of $1. Present Value of $1. Future Value Annuity of $1. Present Value Annuity of $1.) Note: Use appropriate factor(s) from the tables provided. Initial investment (for two hot air balloons) Useful life Salvage value Annual net income generated BBS's cost of capital Assume straight line depreciation method is used. Required: Help BBS evaluate this project by calculating each of the following: 1. Accounting rate of return. Note: Round your answer to 2 decimal places. 2. Payback period. $ 423,000 9 years $ 45,000 $ 38,493 98 Note: Round your answer to 2 decimal places. 3. Net present value (NPV). Note: Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round the final answer to nearest whole dollar. 4, Recalculate the NPV assuming BBS's cost of…
The AW values for retaining a presently owned machine for additional years are shown in the table. Note that the values represent the AW amount for each of the n years that the asset is kept, i.e., if it is kept 5 more years, the annual worth is $−95,000 for each of the 5 years. Assume that future costs remain as estimated for the replacement study and that used machines like the one presently owned will always be available. (a) What is the ESL and associated AW of the defender at a MARR of 12% per year? (b) A challenger with an ESL of 7 years and an AWC = $-88,000 per year has been identified. Which AW will be less for the respective ESL periods? Retention Period, Years AW Value, $ per Year 1 -87,000 2 -93,000 3 -85,000 4 -83,000 5 -95,000 a) The ESL of the defender is_____ year(s) with the lowest AW of $_________ . b) The______________ has the lower AW at _________$ for n equal to ______ .
Balloons By Sunset (BBS) is considering the purchase of two new hot air balloons so that it can expand its desert sunset tours. Various information about the proposed investment follows: (Future Value of $1, Present Value of $1, Future Value Annulty of $1, Present Value Annuity of $1.) Note: Use appropriate factor(s) from the tables provided. Initial investment (for two hot air balloons) Useful life Salvage value Annual net income generated BBS's cost of capital Assume straight line depreciation method is used. Required: Help BBS evaluate this project by calculating each of the following: 1. Accounting rate of return. Note: Round your answer to 2 decimal places. $ 319,000 6 years $ 55,000 $ 25,839 8%

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