Question 7A factory is considering partially automating one of its production processes, details can be found in thesummary table below (all dollars are constant and have the value of today):Description/DataS 1,500,0006 yearsS 500,000ItemInvestmentProject lifeSalvage valueCCA rateAnnual savings30%S 1,000,000$ 200,000 per yearS 125,000 per yearS 75,000 per yearLabourAnnual expensesMaterialOverheadMarginal tax rateReal interest rate40%16%AJ Ignoring for now any effect of inflation, what's the after-tax NPW ?B] If the general inflation rate during the next 6 year is expected be 4% annually, sales and operatingcosts are to be increased accordingly. What would be the NPW due to inflation?C] How did the NPW change? Why?

Question 7 A factory is considering partially automating one of its production processes, details can be found in the summary table below (all dollars are constant and have the value of today): Description/Data S1,500,000 6 years S 500,000 30% S 1,000,000 Labour Material Overhead Item Investment Project life Salvage value CCA rate Annual savings $ 200,000 per year S 125,000 per year S 75,000 per year Annual expenses Marginal tax rate Real interest rate 40% 16% A] Ignoring for now any effect of inflation, what's the after-tax NPW ? B] If the general inflation rate during the next 6 year is expected be 4% annually, sales and operating costs are to be increased accordingly. What would be the NPW due to inflation? CJ How did the NPW change? Why?

Question 7 A factory is considering partially automating one of its production processes, details can be found in the summary table below (all dollars are constant and have the value of today): Description/Data S1,500,000 6 years S 500,000 30% S 1,000,000 Labour Material Overhead Item Investment Project life Salvage value CCA rate Annual savings $ 200,000 per year S 125,000 per year S 75,000 per year Annual expenses Marginal tax rate Real interest rate 40% 16% A] Ignoring for now any effect of inflation, what's the after-tax NPW ? B] If the general inflation rate during the next 6 year is expected be 4% annually, sales and operating costs are to be increased accordingly. What would be the NPW due to inflation? CJ How did the NPW change? Why?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

answer and discuss pls
Problem 2 Consider the following sets of investment projects n(years) A($) B($) C($) D($) 0 -3,500 -5,800 -5,200 -40,000 1 600 3,000 2,000 12,000 2 600 2,000 4,000 14,000 3 1,000 1,000 2,000 18,000 4 1,000 500 4,000 18,000 5 1,000 500 2,000 14,000 Compute the equivalent annual worth of each project at i-10% and determine the acceptability of each project.
1. A company intends to replace equipment that is no longer able to meet its needs. The two best alternatives are to purchase a manual tool (A1) or an automatic tool (A2). The estimated economic consequences of the two alternatives are: A1 A2 Initial investment ($) 28.000 65.000 Annual withdrawal ($) 14.000 9.000 Additional withdrawal every 5 years ($) 14.000 9.000 Lifespan (years) 10 20 Residual value ($) 8.000 13.000 Based on the present worth analysis, with an interest rate of 15% per year, an analysis period of 20 years, and the assumption of recurrence, determine the best alternative that must be chosen using future worth analysis.
Only typed answer
New ans
A company is considering the purchase of either machine A or machine B. And the interest rate is 10%. The following table shows the cash flows of both machines. Machine Initial investment ($) Other costs ($) Service life (years) Salvage value ($) Cash flow diagram for Machine A: A $80,000 $10,000 for the first 10 years, increasing at a rate of 5% from year 11 onwards 20 20,000 PW of machine A: B $100,000 $15,000 for the first 15 years and $20,000 for the remaining years a) Which alternative should the company choose if it adopts an interest rate of 10%? Use present worth (PW) method to evaluate the two machines and show your calculations in the space given below. 20 25,000