Show Attempt History Current Attempt in Progress Metlock Inc. wants to replace its current equipment with new high-tech equipment. The existing equipment was purchased 5 years ago at a cost of $121,000. At that time, the equipment had an expected life of 10 years, with no expected salvage value. The equipment is being depreciated on a straight-line basis. Currently, the market value of the old equipment is $43,500. The new equipment can be bought for $173,440, including installation. Over its 10-year life, it will reduce operating expenses from $190,600 to $148,700 for the first six years, and from $202,600 to $191,800 for the last four years. Net working capital requirements will also increase by $20,900 at the time of replacement. It is estimated that the company can sell the new equipment for $24,100 at the end of its life. Since the new equipment's cash flows are relatively certain, the project's cost of capital is set at 10%, compared with 15% for an average-risk project. The firm's maximum acceptable payback period is 5 years. Click here to view the factor table. Your answer is correct. Calculate the initial investment amount. Initial investment $ 150840 ✔ Your answer is correct. Calculate the project's cash payback period. (Round answer to 2 decimal places, e.g. 15.25.) Cash payback period eTextbook and Media (c) 3.60 years Attempts: 1 of 4 used Calculate the project's net present value. (If the net present value is negative, use either a negative sign preceding the number eg. -45 or parentheses e.g. (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided, e.g. 1.25124 and final answer to O decimal places, e.g. 5,275.) Net present value $
Show Attempt History Current Attempt in Progress Metlock Inc. wants to replace its current equipment with new high-tech equipment. The existing equipment was purchased 5 years ago at a cost of $121,000. At that time, the equipment had an expected life of 10 years, with no expected salvage value. The equipment is being depreciated on a straight-line basis. Currently, the market value of the old equipment is $43,500. The new equipment can be bought for $173,440, including installation. Over its 10-year life, it will reduce operating expenses from $190,600 to $148,700 for the first six years, and from $202,600 to $191,800 for the last four years. Net working capital requirements will also increase by $20,900 at the time of replacement. It is estimated that the company can sell the new equipment for $24,100 at the end of its life. Since the new equipment's cash flows are relatively certain, the project's cost of capital is set at 10%, compared with 15% for an average-risk project. The firm's maximum acceptable payback period is 5 years. Click here to view the factor table. Your answer is correct. Calculate the initial investment amount. Initial investment $ 150840 ✔ Your answer is correct. Calculate the project's cash payback period. (Round answer to 2 decimal places, e.g. 15.25.) Cash payback period eTextbook and Media (c) 3.60 years Attempts: 1 of 4 used Calculate the project's net present value. (If the net present value is negative, use either a negative sign preceding the number eg. -45 or parentheses e.g. (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided, e.g. 1.25124 and final answer to O decimal places, e.g. 5,275.) Net present value $
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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Transcribed Image Text:Show Attempt History
Current Attempt in Progress
Metlock Inc. wants to replace its current equipment with new high-tech equipment. The existing equipment was purchased 5 years
ago at a cost of $121,000. At that time, the equipment had an expected life of 10 years, with no expected salvage value. The equipment
is being depreciated on a straight-line basis. Currently, the market value of the old equipment is $43,500.
The new equipment can be bought for $173,440, including installation. Over its 10-year life, it will reduce operating expenses from
$190,600 to $148,700 for the first six years, and from $202,600 to $191,800 for the last four years. Net working capital requirements
will also increase by $20,900 at the time of replacement.
It is estimated that the company can sell the new equipment for $24,100 at the end of its life. Since the new equipment's cash flows
are relatively certain, the project's cost of capital is set at 10%, compared with 15% for an average-risk project. The firm's maximum
acceptable payback period is 5 years.
Click here to view the factor table.
Your answer is correct.
Calculate the initial investment amount.
Initial investment
$
150840
✔ Your answer is correct.
Calculate the project's cash payback period. (Round answer to 2 decimal places, e.g. 15.25.)
Cash payback period
eTextbook and Media
(c)
3.60
years
Attempts: 1 of 4 used
Calculate the project's net present value. (If the net present value is negative, use either a negative sign preceding the number eg. -45 or
parentheses e.g. (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided, e.g. 1.25124 and final answer
to O decimal places, e.g. 5,275.)
Net present value
$
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