The AW values for retaining a presently owned machine for additional years are shown in the table. Note that the values represent the AW amount for each of the n years that the asset is kept, i.e., if it is kept 5 more years, the annual worth is $-95,000 for each of the 5 years. Assume that future costs remain as estimated for the replacement study and that used machines like the one presently owned will always be available. (a) What is the ESL and associated AW of the defender at a MARR of 12% per year? (b) A challenger with an ESL of 7 years and an AWC = $-82,0000 per year has been identified. Which AW will be less for the respective ESL periods? Retention Period, Years AW Value, $ per Year -81,000 -94,000 -83,000 -93,000 -95,000 1 3 a) The ESL of the defender is year(s) with the lowest AW of $ b) The (Click to select) has the lower AW at $ for n equal to

The AW values for retaining a presently owned machine for additional years are shown in the table. Note that the values represent the AW amount for each of the n years that the asset is kept, i.e., if it is kept 5 more years, the annual worth is $-95,000 for each of the 5 years. Assume that future costs remain as estimated for the replacement study and that used machines like the one presently owned will always be available. (a) What is the ESL and associated AW of the defender at a MARR of 12% per year? (b) A challenger with an ESL of 7 years and an AWC = $-82,0000 per year has been identified. Which AW will be less for the respective ESL periods? Retention Period, Years AW Value, $ per Year -81,000 -94,000 -83,000 -93,000 -95,000 1 3 a) The ESL of the defender is year(s) with the lowest AW of $ b) The (Click to select) has the lower AW at $ for n equal to

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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Please answer net present value and profitability index:
Required Information [The following information applies to the questions displayed below.] Project A requires a $365,000 initial investment for new machinery with a five-year life and a salvage value of $42,000. The company uses straight-line depreciation. Project A is expected to yield annual net income of $25,300 per year for the next five years. Compute Project A's accounting rate of return. Choose Numerator: Accounting Rate of Return I Choose Denominator: = Accounting Rate of Return Accounting rate of return
Keeper Inc. is considering the purchase of new equipment that will automate production and thus reduce labor costs. Keeper made the following estimates related to the new machinery: (Click the icon to view the information.) Present Value of $1 table Present Value of Annuity of $1 table Future Value of $1 table Future Value of Annuity of $1 table Read the requirements. Requirement 1. Calculate (a) net present value, (b) payback period, (c) discounted payback period, and (d) internal rate of return. a. Net present value. (Round intermediary calculations to the nearest whole dollar. Use factors to three decimal places, X.XXX, and use a minus sign or parentheses for a negative net present value. Enter the net present value of the investment rounded to the nearest whole dollar.) The net present value is $ 40,275 b. Payback period. (Round your answer to two decimal places.) The payback period in years is 4.79 c. Discounted payback period. (Round interim calculations to the nearest whole…
The following cost and benefit information has been estimated for a pump that has a 10-year useful life. Purchase Cost = $2,400 Annual Operating Cost = $1,200 Annual Maintenance Cost = $300 Annual Benefits = $2,000 Salvage Value = $200 Using the interest rate of 9%, find the capital recovery cost for this pump.
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An engineer with Haliburton calculated the AW values shown for retaining a presently owned machine additional years. A challenger has an economic service life of 7 years with AW = $-86,000 per year. Assuming all future costsremain as estimated for the analysis, (a) when should the company replace the defender and with what machine, and (b) when should the companypurchase the challenger? The MARR is 12% per year. Assume used machines like the one presently owned will always be available.
New Economy Transport (B) There is no question that the Vital Spark needs an overhaul soon. However, Mr. Handy feels it unwise to proceed without also considering the purchase of a new vessel. Cohn and Doyle Inc., a Wisconsin shipyard, has approached NETCO with a design incorporating a Kort nozzle, extensively automated navigation and power control systems, and much more comfortable accommodations for the crew. Estimated annual operating costs of the new vessel are: Fuel Labor and benefits. Maintenance Other $380,000 330,000 70,000 105,000 $885,000 Page 183 The crew would require additional training to handle the new vessel's more complex and sophisticated equipment. Training would. probably cost $50,000 next year. The estimated operating costs for the new vessel assume that it would be operated in the same way as the Vital Spark. However, the new vessel should be able to handle a larger load on some routes, which could generate additional revenues, net of additional out- of-pocket…
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onsider the following financial informationabout a retooling project at a computer manufacturing company:• The project costs $2.5 million and has a five-yearservice life.• The retooling project can be classified as sevenyear property under the MACRS rule.• At the end of the fifth year, any assets held for theproject will be sold. The expected salvage valuewill be about 10% of the initial project cost.• The firm will finance 40% of the project moneyfrom an outside financial institution at an interestrate of 10%. The firm is required to repay the loanwith five equal annual payments.• The firm’s incremental (marginal) tax rate on theinvestment is 35%.• The firm’s MARR is 18%.With the preceding financial information,(a) Determine the after-tax cash flows.(b) Compute the annual equivalent worth for thisproject.
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