**Problem 12-33 Replacement Decision Analysis [LO12-4] New**Hercules Exercise Equipment Co. purchased a computerized measuring device two years ago for $78,000. The equipment falls into the five-year category for MACRS depreciation and can currently be sold for $34,800. A new piece of equipment will cost $230,000. It also falls into the five-year category for MACRS depreciation. Assume the new equipment would provide the following stream of added cost savings for the next six years. Use Table 12–12. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.| Year | Cash Savings ||------|--------------|| 1 | $61,000 || 2 | $51,000 || 3 | $49,000 || 4 | $47,000 || 5 | $44,000 || 6 | $33,000 |The firm's tax rate is 25 percent and the cost of capital is 10 percent. **J-2. Compute the Present Value of the Total Annual Benefits.**To calculate the present value of the total annual benefits, follow these steps:- Do not round intermediate calculations.- Round your final answer to the nearest whole dollar.**Present Value**: [Input Box]---**K-1. Compare the Present Value of Incremental Benefits (j) to the Net Cost of New Equipment (e).**- Do not round intermediate calculations.- Indicate any negative amount with a minus sign.- Round your final answer to the nearest whole dollar.**Net Present Value**: [Input Box]

Answered: Image /qna-images/answer/7e44a305-4de2-4295-9894-cef7df86d8d2.jpg

Problem 12-33 Replacement decision analysis (LO12-4] new Hercules Exercise Equipment Co. purchased a computerized measuring device two years ago for $78,000. The equipment falls into the five-year category for MACRS depreciation and can currently be sold for $34,80o0. A new piece of equipment will cost $230,000. It also falls into the five-year category for MACRS depreciation. Assume the new equipment would provide the following stream of added cost savings for the next six years. Use Table 12–12. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. Cash Year Savings $ 61,000 2 51,000 49,000 47,000 44,000 33,000 The firm's tax rate is 25 percent and the cost of capital is 10 percent.

Problem 12-33 Replacement decision analysis (LO12-4] new Hercules Exercise Equipment Co. purchased a computerized measuring device two years ago for $78,000. The equipment falls into the five-year category for MACRS depreciation and can currently be sold for $34,80o0. A new piece of equipment will cost $230,000. It also falls into the five-year category for MACRS depreciation. Assume the new equipment would provide the following stream of added cost savings for the next six years. Use Table 12–12. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. Cash Year Savings $ 61,000 2 51,000 49,000 47,000 44,000 33,000 The firm's tax rate is 25 percent and the cost of capital is 10 percent.

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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Required information Exercise 12-8 (Algo) Payback Period and Simple Rate of Return [LO12-1, LO12-6] [The following information applies to the questions displayed below.] Nick’s Novelties, Incorporated, is considering the purchase of new electronic games to place in its amusement houses. The games would cost a total of $392,000, have a fifteen-year useful life, and have a total salvage value of $39,200. The company estimates that annual revenues and expenses associated with the games would be as follows: Revenues $ 300,000 Less operating expenses: Commissions to amusement houses $ 90,000 Insurance 72,000 Depreciation 23,520 Maintenance 40,000 225,520 Net operating income $ 74,480 Exercise 12-8 Part 1 (Algo) Required: 1a. Compute the payback period associated with the new electronic games. Payback period (answer in years) 1b. Assume that Nick’s Novelties, Incorporated, will not purchase new games unless they provide a payback period of…
Chapter 10, Question 6
ex2. Differential Analysis for Machine Replacement Proposal Flint Tooling Company is considering replacing a machine that has been used in its factory for two years. Relevant data associated with the operations of the old machine and the new machine, neither of which has any estimated residual value, are as follows: Old Machine Cost of machine, eight-year life $38,000 Annual depreciation (straight-line) 4,750 Annual manufacturing costs, excluding depreciation 12,400 Annual nonmanufacturing operating expenses 2,700 Annual revenue 32,400 Current estimated selling price of the machine 12,900 New Machine Cost of machine, six-year life $57,000 Annual depreciation (straight-line) 9,500 Estimated annual manufacturing costs, exclusive of depreciation 3,400 Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine. Required: 1. Prepare a differential analysis as of November 8 comparing…
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Problem 9 A contractor is considering the following three alternatives: a. Purchase a new microcomputer system for $15,000. The system is expected to last 6 years with salvage value of $1,000. b. Lease a new microcomputer system for $3,000 per year, payable in advance. The system should last 6 years. c. Purchase a used microcomputer system for $8,200. It is expected to last 3 with no salvage value. Use a common-multiple-of-lives approach. If MARR of 8% is used, which alternative should be selected using a discounted present worth analysis? If the MARR is 12%, which alternate should be selected? years
Question 2 Two possible routes for a power line are under study. Data on the routes are as shown in the following table: Option Information Length First Cost Maintenance cost Useful Life (years) Salvage Value Yearly power loss Annual Taxes Around the Lake Under the Lake 15 km 5 km $25,000 /km $400/km/yr $5000 / km $200/km/yr 15 20 $3000/km S5000/km S500/km |2% of the first cost 2% of the first cost S500/km If MARR = 10%, which alternative should you select? Justify your answer. (
9

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