QID 320. Due to brisk demand for urchase of a new cassette-making production line. The production line has an estimated se fe of 10 years, with negligible salvage value. The annual maintenance cost for the line will be 16,193. The company expects to generate extra annual revenue of $198,709 per year, driver rimarily by demand for the C20.47 formulation. At an interest rate of 12% per year, what is th on the production line?

QID 320. Due to brisk demand for urchase of a new cassette-making production line. The production line has an estimated se fe of 10 years, with negligible salvage value. The annual maintenance cost for the line will be 16,193. The company expects to generate extra annual revenue of $198,709 per year, driver rimarily by demand for the C20.47 formulation. At an interest rate of 12% per year, what is th on the production line?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 10P

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7. Hemisphere Electric may purchase equipment to manufacture a new line of wireless devices for home appliance control. The first cost will be $80,000, and the life is estimated at 6 years with a salvage value of $10,000. Different people in marketing have provided revenue estimates that the devices will generate. The estimates range from a low of S10,000 to a high of $20,000, with an average of $16,000 per year. If the MARR is 8% per year, use PW to determine if these different estimates will change the decision to purchase the equipment.
Friedman Company is considering installing a new IT system. The cost of the new system is estimated to be 2,250,000, but it would produce after-tax savings of 450,000 per year in labor costs. The estimated life of the new system is 10 years, with no salvage value expected. Intrigued by the possibility of saving 450,000 per year and having a more reliable information system, the president of Friedman has asked for an analysis of the projects economic viability. All capital projects are required to earn at least the firms cost of capital, which is 12 percent. Required: 1. Calculate the projects internal rate of return. Should the company acquire the new IT system? 2. Suppose that savings are less than claimed. Calculate the minimum annual cash savings that must be realized for the project to earn a rate equal to the firms cost of capital. Comment on the safety margin that exists, if any. 3. Suppose that the life of the IT system is overestimated by two years. Repeat Requirements 1 and 2 under this assumption. Comment on the usefulness of this information.
Halcrow, Inc., expects to replace adowntime tracking system currently installedon CNC machines. The challenger systemhas a first cost of $70,000, an estimatedannual operating cost of $20,000, a maximumuseful life of 5 years, and a $10,000 salvagevalue anytime it is replaced. At an interest rateof 10% per year, determine its economicservice life and corresponding AW value.Work this problem using a hand calculator.
(Related to Checkpoint 13.4) (Break-even analysis) The Marvel Mfg. Company is considering whether or not to construct a new robotic production facility. The cost of this new facility is $624,000 and it is expected to have a six-year life with annual depreciation expense of $104,000 and no salvage value. Annual sales from the new facility are expected to be 2,010 units with price of $1,000 per unit. Variable production costs are $610 per unit, and fixed cash expenses are $76,000 per year. a. Find the accounting and the cash break-even units of production. b. Will the plant make a profit based on its current expected level of operations? c. Will the plant contribute cash flow to the firm at the expected level of operations?
6. A large automobile manufacturer is considering the installation of a high-tech material handling system for $200,000. This system will save $100,000 per year in manual labor, and it will incur $64,000 in annual operating and maintenance expenditures. The salvage value at the end of the system's 10-year life is negligible. If the company's hurdle rate (MARR) is 10% per year, should the system be recommended for implementation?
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 $14.00 million fully installed and will be fully depreciated over a 16.00 year life, then removed for no cost. The RGM-7000 will result in additional revenues of $2.71 million per year and increased operating costs of $775,814.00 per year. Caspian Sea Drinks' marginal tax rate is 20.00%. The incremental cash flows for produced by the RGM-7000 are _____.
Your company has been approached to bid on a contract to sell 19,000 voice recognition (VR) computer keyboards per year for four years. Due to technological improvements, beyond that time they will be outdated and no sales will be possible. The equipment necessary for the production will cost $4,000,000 and will be depreciated on a straight- line basis to a zero salvage value. Production will require an investment in net working capital of $140,000 to be returned at the end of the project, and the equipment can be sold for $260,000 at the end of production. Fixed costs are $795,000 per year and variable costs are $43 per unit. In addition to the contract, you feel your company can sell 4,600, 12,200, 14,200, and 7,500 additional units to companies in other countries over the next four years, respectively, at a price of $140. This price is fixed. The tax rate is 23 percent, and the required return is 12 percent. Additionally, the president of the company will undertake the project only…
Your company has been approached to bid on a contract to sell 5,000 voice recognition (VR) computer keyboards per year for four years. Due to technological improvements, beyond that time they will be outdated and no sales will be possible. The equipment necessary for the production will cost $3.4 million and will be depreciated on a straight- line basis to a zero salvage value. Production will require an investment in net working capital of $395,000 to be returned at the end of the project, and the equipment can be sold for $325,000 at the end of production. Fixed costs are $595,000 per year, and variable costs are $85 per unit. In addition to the contract, you feel your company can sell 12,300, 14,600, 19,200, and 11,600 additional units to companies in other countries over the next four years, respectively, at a price of $180. This price is fixed. The tax rate is 23 percent, and the required return is 10 percent. Additionally, the president of the company will undertake the project…
F129.
The management of Ballard MicroBrew is considering the purchase of an automated bottling machine for $59,000. The machine would replace an old plece of equipment that costs $15,000 per year to operate. The new machine would cost S7,000 per year to operate. The old machine currently In use could be sold now for a salvage value of $25,000. The new machine would have a useful life of 10 years with no salvage value. Requlred: 1. What Is the annual depreclation expense associated with the new bottling machine? 2. What Is the annual Incremental net operating Income provided by the new bottling machine? 3. What is the amount of the Initial investment associated with this project that should be used for calculating the simple rate of return? 4. What is the simple rate of return on the new bottling machine? (Round your answer to 1 decimal place I.e. 0.123 should be consldered as 12.3%.) 1. Depreciation expense 2. Incremental net operating income Initial investment 4. Simple rate of return %
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 $13.00 million fully installed and will be fully depreciated over a 19.00 year life, then removed for no cost. The RGM-7000 will result in additional revenues of $2.79 million per year and increased operating costs of $772,000.00 per year. Caspian Sea Drinks' marginal tax rate is 28.00%. The incremental cash flows for produced by the RGM-7000 are _____. (ROUND TO 4 DECIMAL PLACES)