Problem 10-23 Comparing Mutually Exclusive Projects [LO1] Letang Industrial Systems Company (LISC) is trying to decide between two different conveyor belt systems. System A costs $305,000, has a four-year life, and requires $105,000 in pretax annual operating costs. System B costs $385,000, has a six-year life, and requires $99,000 in pretax annual operating costs. Both systems are to be depreciated straight-line to zero over their lives and will have zero salvage value. Whichever project is chosen, it will not be replaced when it wears out. The tax rate is 23 percent and the discount rate is 11 percent. Calculate the NPV for both conveyor belt systems. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) System A System B Which conveyor belt system should the firm choose? O System B O Ssystem A

Problem 10-23 Comparing Mutually Exclusive Projects [LO1] Letang Industrial Systems Company (LISC) is trying to decide between two different conveyor belt systems. System A costs $305,000, has a four-year life, and requires $105,000 in pretax annual operating costs. System B costs $385,000, has a six-year life, and requires $99,000 in pretax annual operating costs. Both systems are to be depreciated straight-line to zero over their lives and will have zero salvage value. Whichever project is chosen, it will not be replaced when it wears out. The tax rate is 23 percent and the discount rate is 11 percent. Calculate the NPV for both conveyor belt systems. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) System A System B Which conveyor belt system should the firm choose? O System B O Ssystem 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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Problem 11-11 (Static) [LO 11-5] Landover Corporation is looking for a larger office building to house its expanding operations. It is considering two alternatives. The first is a newly constructed building at a cost of $6 million. It would require only minor modifications to meet Landover's needs, at an estimated cost of $500,000. The second building was constructed in 1910 and is a certified historic structure. It could be purchased for $3 million but would require an additional $4 million in renovations to be suitable for Landover. Use Appendix A and Appendix B. Required: a. Calculate Landover's allowable rehabilitation credit if it chooses to purchase and renovate the certified historic structure, and the after-tax purchase price of the building. Assume Landover would claim the credit ratably over years 0 through 4. Landover uses a 4 percent discount rate to calculate present value. b. Based on your analysis, which building should Landover acquire? Complete this question by…
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#34 Caspian Sea Drinks is considering the purchase of a new water filtration system produced by Rube Goldberg Machines. This new equipment, the RGM-7000, will allow Caspian Sea Drinks to expand production. It will cost $15.00 million fully installed and will be fully depreciated over a 15 year life, then removed for no cost. The RGM-7000 will result in additional revenues of $2.96 million per year and increased operating costs of $689,148.00 per year. Caspian Sea Drinks' marginal tax rate is 28.00%. The internal rate of return for the RGM- 7000 is Submit Answer format: Percentage Round to: 4 decimal places (Example: 9.2434%, % sign required. Will accept decimal format rounded to 6 decimal places (ex: 0.092434)) unanswered not_submitted Attempts Remaining: Infinity
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None
+ 8 of 5 oped Required information [The following information applies to the questions displayed below.] Beacon Company is considering automating its production facility. The initial investment in automation would be $9.11 million, and the equipment has a useful life of 7 years with a residual value of $1,200,000. The company will use straight- line depreciation. Beacon could expect a production increase of 44,000 units per year and a reduction of 20 percent in the labor cost per unit. Proposed (automation) 115,000 units Current (no automation) 71,000 units Per Per Production and sales volume Unit Total Unit Total ook Sales revenue $ 90 $ ? $ 90 $ ? Variable costs. Direct materials $16 $ 16 Direct labor 15 int Variable manufacturing overhead 9 ? 9 Total variable manufacturing costs 40 ? Contribution margin $50 ? $ 53 ? Fixed manufacturing costs $ 1,130,000 $ 2,330,000 ences Net operating income ? ? 3. Determine the project's payback period. (Round your answer to 2 decimal places.)…
25 01:08:30 Consider a four-year project with the following information: initial fixed asset investment = $488,000; straight-line depreciation to zero over the four-year life; zero salvage value; price = $39; variable costs $30; fixed costs $208,000; quantity sold 97,000 units; tax rate=34%. How sensitive is OCF to changes in quantity sold? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) AOCF/AQ
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2:38 d ces The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project that would require a $2,955,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 18%. The project would provide net operating income in each of five years as follows: Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed. out-of-pocket costs $750,000 591,000 $ 2,865,000 1,015,000 1,850,000 Depreciation Total fixed expenses Net operating income Click here to view Exhibit 128-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table. Profitability index 1,341,000 $ 509,000 Foundational 12-5 (Algo) 5. What is the profitability index for this project? (Round your answer to 2 decimal places.)

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