Answered: rate is 21%. If you sell the machine…

rate is 21%. If you sell the machine today (after three years of depreciation) for $794,000, what is your incremental cash flow from selling the machine?

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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Similar questions

5. Southwestern Moving and Storage wants to have enough money to purchase a new tractor-trailer in 3 years. If the unit will costs approximately $450,000 three years from now, how much should the company set aside each year if the account earns 4% per year? Show your cash flow diagram.
ROR Using Present Worth, Future Worth or Annual Worth: An investment of $20000 in a certain machine will generate income of $7000 per year for 3 years, at which time the machine can be sold for $8000. If the company's MARR is 15% per year, should it buy the machine?
Calculate the present value of the cash savings: Samson Inc. is contemplating the purchase of a machine that will provide it with the net after-tax cash savings of $100,000 per year for eight years. Interest is 10%. Assume the cash savings occur at the end of each year.
1. A mechanical device will cost $30,000 when purchased. Maintenance will cost $2,000 each year. The device will generate revenues of $5,000 each year for five years. At the end of the fifth year, the salvage value of the device is $6,500. Draw and simplify the cash flow diagram. Calculate: (a) the present value and (b) the equivalent annual cost of the cash flows using a discount rate of 12%.
NOVA Company is considering a long-term investment project called STUDY. STUDY will require an investment of $125,190. It will have a useful life of 4 years and no salvage value. Annual cash inflows would increase by $79,000, and annual cash outflows would increase by $40,000. Compute the cash payback period. O 3.21 years O 1.23 years O 1.58 years O 4 years
Bunnings Ltd is considering to invest in one of the two following projects to buy a new equipment. Each equipment will last 5 years and have no salvage value at the end. The company’s required rate of return for all investment projects is 8%. The cash flows of the projects are provided below. Equipment 1 Equipment 2 Cost $186000 $195000 Future Cash Flow Year 1 86000 97000 Year 2 93000 84000 Year 3 83000 86000 Year 4 75000 75000 Year 5 55000 63000 Required:a) Identify which option of equipment should the company accept based on Profitability Index? b) Identify which option of equipment should the company accept based on discounted pay back method if the payback criterion is maximum 2 years?
Margaret has a project with a $30560 first cost that returns $4320 per year over its 10-year life. It has a salvage value of $3000 at the end of 10 years. If the MARR is 5 percent, what is the payback period of this project if cash flow is continuous?
JT Engineering wants to buy a machine that costs $158,000, has a 20-year life, and a $12,000 salvage value. Annual cash inflows are $66,000 and annual cash outflows are $41,000. JT requires a 14% return, which has an annuity present value factor of 6.6231 and a single future amount present value factor of 0.0728. What is the NPV of this purchase to the nearest dollar? Select answer from the options below
Stevie’s Sporting Goods is considering investing $33,000 in a new machine. The machine is expected to last five years and have a salvage value of $8,000. Annual after-tax net cash inflow from the machine is expected to be $7,000. Calculate the accounting rate of return (aka the unadjusted rate of return). (Enter your answer as a percentage rounded to one decimal place, but do NOT include the percentage sign. For example: 5 divided by 35 is 0.142857, which you would enter as “14.3”)
Jack Sprat Inc. wants to know if they invest 11,548 in new exercise equipment, plus $2.000 for installation. how long before they will receive their initial invest back from future cash flows? What is the payback period for the initial costs? Projected Cash flows Year 1: 5,000 Year 2: 7,000 Year 3: 4,000 Year 4: 1,000 Post your answer as number of years with 2 decimal places, for example 5.55
A firm buys a new piece of equipment for $28,808, and will receive a cash flow of $3,700 per year for fourteen years. What is the IRR? (Use a Financial calculator to arrive at the answers. Round the final answer to the nearest whole percent.) IRR %
You have purchased a property for $950,000 and expect its value to grow at 3 percent compounded annually for 10 years. You plan to sell it at that time hoping to capture your value estimate. In addition, the property is expected to provide a monthly cash flow of $4,000. You expect the monthly cash flow to remain constant over time. What is the expected annual rate of return on this investment given your expectations about its future cash flows?

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