Sunland Inc. wants to replace its current equipment with new high-tech equipment. The existing equipment was purchased 5 years ago at a cost of $122,000. 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 $40,100. The new equipment can be bought for $175,880, including installation. Over its 10-year life, it will reduce operating expenses from $193,900 to $145,000 for the first six years, and from $204,800 to $191,300 for the last four years. Net working capital requirements will also increase by $20,700 at the time of replacement. It is estimated that the company can sell the new equipment for $24,900 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 9%, 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 $ eTextbook and Media Attempts: 1 of 4 used Your Answer Correct Answer Your answer is correct. Calculate the project's cash payback period. (Round answer to 2 decimal places, e.g. 15.25.) Cash payback period years eTextbook and Media Solution Assistance Used Attempts: 3 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 e.g. - 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 0 decimal places, e.g. 5,275.) Net present value
Sunland Inc. wants to replace its current equipment with new high-tech equipment. The existing equipment was purchased 5 years ago at a cost of $122,000. 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 $40,100. The new equipment can be bought for $175,880, including installation. Over its 10-year life, it will reduce operating expenses from $193,900 to $145,000 for the first six years, and from $204,800 to $191,300 for the last four years. Net working capital requirements will also increase by $20,700 at the time of replacement. It is estimated that the company can sell the new equipment for $24,900 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 9%, 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 $ eTextbook and Media Attempts: 1 of 4 used Your Answer Correct Answer Your answer is correct. Calculate the project's cash payback period. (Round answer to 2 decimal places, e.g. 15.25.) Cash payback period years eTextbook and Media Solution Assistance Used Attempts: 3 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 e.g. - 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 0 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:Sunland Inc. wants to replace its current equipment with new high-tech equipment. The existing equipment was
purchased 5 years ago at a cost of $122,000. 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 $40,100. The new equipment can be bought for $175,880, including installation.
Over its 10-year life, it will reduce operating expenses from $193,900 to $145,000 for the first six years, and
from $204,800 to $191,300 for the last four years. Net working capital requirements will also increase by $20,700
at the time of replacement. It is estimated that the company can sell the new equipment for $24,900 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 9 %,
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 $
eTextbook and Media Attempts: 1 of 4 used Your Answer Correct Answer Your answer is correct. Calculate the
project's cash payback period. (Round answer to 2 decimal places, e.g. 15.25.) Cash payback period years
eTextbook and Media Solution Assistance Used Attempts: 3 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 e.g. -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 0 decimal places, e.g. 5,275.) Net present value
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