The same Company as in Question 2 has just invested in a new Machining Center that cost $250,000. The company believes that it will be able to use this new piece of equipment for the next 10 years. At the end of this 10 year period, the company thinks that they can sell this equipment for $50,000. The company's MARR value is 10% ycy. 0.3855 0.06275 15.9374 0.16275 6.1446 Assume: The Annual Capital Recovery & Return Value (CR) for this new equipment = $-37,550 The Annual Labor Costs = $50,000 The Annual Material Costs = $17,000 The Annual Overhead Costs = $25,000 Annual Sales Revenue resulting from the purchase of the new machine $200,000 Question: Now the same company wants to know how many complete years (integer value) will it take for the company to pay back its initial investment of $250,000 assuming a 0% time value of money

The same Company as in Question 2 has just invested in a new Machining Center that cost $250,000. The company believes that it will be able to use this new piece of equipment for the next 10 years. At the end of this 10 year period, the company thinks that they can sell this equipment for $50,000. The company's MARR value is 10% ycy. 0.3855 0.06275 15.9374 0.16275 6.1446 Assume: The Annual Capital Recovery & Return Value (CR) for this new equipment = $-37,550 The Annual Labor Costs = $50,000 The Annual Material Costs = $17,000 The Annual Overhead Costs = $25,000 Annual Sales Revenue resulting from the purchase of the new machine $200,000 Question: Now the same company wants to know how many complete years (integer value) will it take for the company to pay back its initial investment of $250,000 assuming a 0% time value of money

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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10. Triple Crown is considering installing a new cooler (equipment) in order to increase the volume and variety of beverages they can offer. The new cooler will cost $26,000. It is expected to last 7 years but only if the cooler is overhauled (REPAIRED) at a cost of $4,000 at the end of year 4. The new cooler is expected to have a $2,000 salvage value at the end of 7 years. The new cooler is expected to generate additional revenues of $15,000 per year with an increase in expenses of $9,000 per year. Triple Crown's discount rate is 12%. What is the net present value of this investment opportunity? Should they invest in the cooler? Hint: determine the PV of each item. Be careful if the item is an annuity (anmual) or one time only event. PV of an annuity of S1 PV of S1 Time 10% 12% 14% Time 10% 12% 14% period 1 period 0.909 0.893 0.877 1 0.909 0.893 0.877 1.736 1.690 1.647 2 0.826 0.797 0.769 3 2.487 2.402 2.322 3 0.751 0.712 0.675 4 3.170 3.037 2.914 4 0.683 0.636 0.592 5 3.791 3.605…
One year ago, your company purchased a machine used in manufacturing for $120,000. You have learned that a new machine is available that offers many advantages and that you can purchase it for $160,000 today. The CCA rate applicable to both machines is 40%; neither machine will have any long-term salvage value. You expect that the new machine will produce earnings before interest, taxes, depreciation, and amortization (EBITDA) of $40,000 per year for the next ten years. The current machine is expected to produce EBITDA of $23,000 per year. All other expenses of the two machines are identical. The market value today of the current machine is $50,000. Your company's tax rate is 45%, and the opportunity cost of capital for this type of equipment is 12%. Should your company replace its year-old machine? What is the NPV of replacement?
15. A company purchases a piece of equipment for $15,000. After nine years, the salvage value is $900. The annual insurance cost is 5% of the purchase price, the electricity cost is $600/yr, and the maintenance and replacement parts cost is $120/yr. The effective annual interest rate is 10%. Neglecting taxes, what is most nearly the present worth of the equipment if it is expected to save the company $4500 per year? (A) $2300 (B) $2800 (C) $3200 (D) $3500
A company invested P100,000 to purchase a new equipment that wil We used to increase the profit but it is expected to be realized after two years from the year of purchase. The said profit was P50,000 per year for four years. Three years later, the company purchased an add-on to the machine worth P75,000. Due to that add on, the profit increased to P85,000 and lasted for five more years. If the company decided to sell that equipment for P8,000 and MARR is 15% per year
One year ago, your company purchased a machine used in manufacturing for $105,000. You have learned that a new machine is available that offers many advantages and that you can purchase it for $150,000 today. The CCA rate applicable to both machines is 40%; neither machine will have any long-term salvage value. You expect that the new machine will produce earnings before interest, taxes, depreciation, and amortization (EBITDA) of $40,000 per year for the next 10 years. The current machine is expected to produce EBITDA of $20,000 per year. All other expenses of the two machines are identical. The market value today of the current machine is $50,000. Your company's tax rate is 40%, and the opportunity cost of capital for this type of equipment is 11%. Should your company replace its year-old machine? What is the NPV of replacement? The NPV of replacement is $ (Round to the nearest dollar.)
Please provide correct answer
Lowell Inc. is thinking about replacing an old computer with a new one. The new one will cost $1,000,000 and will have a life of FOUR years. The new computer qualifies as 5-year MACRS property. Years 1 2 3 4 Depreciation rate 20% 32% 19% 12% It will probably be worth about $330,000 after FOUR years. The old computer is being depreciated at a rate of $100,000 per year. It will be completely written off in FOUR years, at that time it will have zero resale value. We can sell it now for $410,000 after taxes. The new machine will save us $200,000 per year in operating costs. The tax rate (federal plus state) is 25 percent and WACC is 8 percent. What is the TOTAL FREE CASH FLOW FOR YEAR 4? Free cash flow = Total Initial Investment + Total annual project CF + Total Salvage Value 480,000 467,500 445,000 422,500
* 00 The management of Ballard MicroBrew is considering the purchase of an automated bottling machine for $67000. The machine would replace an old piece of equipment that costs $18,000 per year to operate. The new machine would cost $8.000 per year to operate. The old machine currently in use could be sold now for a salvage value of $29,000. The new machine would have a useful life of 10 years with no salvage value. 1 What is the annual depreciation expense associated with the new bottling machine? 2 What is the annual incremental net operating income provided by the new bottling machine? 3. What is the amount of the initial investment associated with this project that should be used for calculating the simple rate of return? 4. What is the simple rate of return on the new bottling machine? (Round your enswer to 1 declmal place L.e. 0.123 should be considered as 12.3%.) Depreciation expense 2. Incremental net operating income Initial investment, 4. Simple rate of return < Prev 2 of 2…

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