Tamarisk Corp. is planning to replace an old asset with new equipment that will operate more efficiently. The following amounts maybe relevant to this analysis.Cost of old assetBook value of old assetSelling price of old assetPurchase price of new replacement assetEstimated salvage value of new assetEstimated useful life of new assetEstimated annual net operating cash inflowsDiscount rateTax rate$12,000$2,000$2,000$18,800$2,2005 years$2,70011%20%/year for 5 yearsDetermine which amounts listed are relevant cash flows for Tamarisk Corp. as it considers this asset sale and replacement. Then, find the NPV of the new investment. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answer to 2decimal places e.g. 5,125.36. Enter negative amounts using either a negative sign preceding the number, e.g. -5,125.36 or parentheses, e.g.(5,125.36).)Click here to view the factor tableNPV $

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Tamarisk Corp. is planning to replace an old asset with new equipment that will operate more efficiently. The following amounts may be relevant to this analysis. Cost of old asset Book value of old asset Selling price of old asset Purchase price of new replacement asset Estimated salvage value of new asset Estimated useful life of new asset Estimated annual net operating cash inflows Discount rate Tax rate $12,000 $2,000 $2,000 $18,800 $2,200 5 $2,700 11% 20% years /year for 5 years Determine which amounts listed are relevant cash flows for Tamarisk Corp. as it considers this asset sale and replacement.

Tamarisk Corp. is planning to replace an old asset with new equipment that will operate more efficiently. The following amounts may be relevant to this analysis. Cost of old asset Book value of old asset Selling price of old asset Purchase price of new replacement asset Estimated salvage value of new asset Estimated useful life of new asset Estimated annual net operating cash inflows Discount rate Tax rate $12,000 $2,000 $2,000 $18,800 $2,200 5 $2,700 11% 20% years /year for 5 years Determine which amounts listed are relevant cash flows for Tamarisk Corp. as it considers this asset sale and replacement.

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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Crane Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided here. Machine A Machine B Original cost $76,900 $186,000 Estimated life 8 years 8 years Salvage value 0 0 Estimated annual cash inflows $19,600 $39,800 Estimated annual cash outflows $5,150 $10,080 Click here to view PV table. Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative, use either a negative sign preceding the number eg-45 or parentheses eg (45). Round answer for present value to O decimal places, e.g. 125 and profitability index to 2 decimal places, e.g. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present value Profitability index Machine A Which machine should be purchased? should be purchased. Machine B
Bradley Industries is considering replacing a machine that is presently used in its production process. Which of the following is irrelevant to the replacement decision? Replacement Machine $46,000 Original cost Remaining useful life in years Current age in years Book value. Old Machine $60,000 5 5 OA. the current disposal value of the old machine OB. the original cost of the old machine OC. the sales price of the new machine OD. the annual cash operating costs for both machines 5 0 $30,000 Current disposal value in cash $9.000 Future disposal value in cash (in 5 years) $0 Annual cash operating costs $7,000 Which of the information provided in the table is irrelevant to the replacement decision? $0 $4,500 GETTI
Shamrock Inc. is considering modernizing its production facility by investing in new equipment and selling the old equipment. The following information has been collected on this investment: Cost Old Equipment Accumulated depreciation Remaining life Current salvage value Salvage value in 8 years Annual cash operating costs $80,640 $40.600 8 years $10,400 $0 $35,100 New Equipment Cost Estimated useful life Salvage value in 8 years Annual cash operating costs $39,000 8 years $4,600 $29.900 Depreciation is $10,080 per year for the old equipment. The straight-line depreciation method would be used for the new equipment over an eight-year period with salvage value of $4,600.
Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation.
Deep Mines Ltd. of Saskatchewan is contemplating the purchase of equipment to exploit a mineral deposit located on land to which the company has mineral rights. An engineering and cost analysis has been made, and it is expected that the following cash flows would be associated with opening and operating a mine in the area: 8013403 Cost of new equipment and timbers $264,000 Morking capital required Net annual cash receipts 91,000 122,000 Cost to construct new roads in three years Salvage value of equipment in four years 46,000 50,000 "Receipts from sales of ore, less out-of-pocket costs for salaries, utilities, insurance and so forth. It is estimated that the mineral deposit would be exhausted after four years of mining. At that point, the working capital would be released for reinvestment elsewhere. The company's discount rate is 20%. Click here to view Exhibit 10-1 and Exhibit 10-2, to determine the appropriate discount factor(s) using tables. Required: 1-6. Determine the NPV of the…
Assume that a company is considering buying a new piece of equipment for $250,000 that would have a useful life of five years and a salvage value of $33,000. The equipment would generate the following estimated annual revenues and expenses: Revenues Less operating expenses: Commissions Insurance Depreciation Maintenance $ 15,000 $(156,429) $(124,925) $36,537 5,000 43,400 $ 120,000 30,000 93,400 Net operating income $ 26,600 Assuming a discount rate of 14%, what is the net present value of this investment? Multiple Choice $7,437
Vandezande Incorporated is considering the acquisition of a new machine that costs $470,000 and has a useful life of 5 years with no salvage value. The incremental net operating income and incremental net cash flows that would be produced by the machine are (ignore Income taxes.): Year 1 Year 2 Year 3 Year 4 Year 5 Incremental Net Operating Income $ 78,000 $ 84,000 $ 95,000 $ 58,000 $ 100,000 Assume cash flows occur uniformly throughout a year except for the initial investment. The payback period of this investment is closest to: (Round your answer to 1 decimal place.) Multiple Choice 4.1 years 5.0 years 2.9 years Incremental Net Cash Flows $ 156,000 $ 163,000 $ 175,000 $ 160,000 $ 162,000 21 years
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Required information [The following information applies to the questions displayed below.] Peng Company is considering an investment expected to generate an average net income after taxes of $1,950 for three years. The investment costs $45,000 and has an estimated $6,000 salvage value. Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. Choose Numerator: 1 1 Accounting Rate of Return Choose Denominator: G O
mn.3
Vaibhav Sub: accounting
Stenback, Inc. is evaluating two possible investments in depreciable plant assets. The company uses the straight-line method of depreciation. The following information is available: Initial capital investment Estimated useful life Estimated residual value Estimated annual net cash inflow for 10 years Required rate of return Compute the payback period for each investment. Show your calculations and round to one decimal place. $ Investment A Investment B 280,000 $ 210,000 7 years 13 years 12,000 25,000 45,000 85,000 14% 11% Investment A Investment B Select the formula, then enter the amounts to calculate the payback period for each investment. + = Payback (in years) = =

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