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Tulsa Company is considering investing in new bottling equipment and has two options: Option A has a lower initial cost but would require a significant expenditure to rebuild the machine after four years; Option B has higher maintenance costs but also has a higher salvage value at the end of its useful life. Tulsa's cost of capital is 11 percent. The following estimates of the cash flows were developed by Tulsa's controller: Initial investment Annual cash inflows. Annual cash outflows Costs to rebuild Salvage value Estimated useful life Required 1 Required 2 Required: 1. Calculate NPV. (Future Value of $1,Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) 2. Determine which option Tulsa should select? Option A: Complete this question by entering your answers in the tabs below. Initial Investment Annual Cash Flows Cost to Rebuild Salvage Net Present Value Option B: Initial Investment Annual Cash Flows Cost to Rebuild Salvage Net Present Value Calculate NPV. (Future Value of $1,Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) Note: Use appropriate factor(s) from the tables provided. Negative amounts should be indicated by a minus sign. Round your "Present Values" to 2 decimal places. Year Option A $ 320,000 150,000 70,000 120,000 0 1-8 4 8 0 8 years Year 0 1-8 4 8 Option B $ 454,000 160,000 75,000 0 Cash Flows 24,000 8 years Cash Flows < Required 1 PV factor PV factor 11% 11% Present Value Present Value Required 2 >

Tulsa Company is considering investing in new bottling equipment and has two options: Option A has a lower initial cost but would require a significant expenditure to rebuild the machine after four years; Option B has higher maintenance costs but also has a higher salvage value at the end of its useful life. Tulsa's cost of capital is 11 percent. The following estimates of the cash flows were developed by Tulsa's controller: Initial investment Annual cash inflows. Annual cash outflows Costs to rebuild Salvage value Estimated useful life Required 1 Required 2 Required: 1. Calculate NPV. (Future Value of $1,Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) 2. Determine which option Tulsa should select? Option A: Complete this question by entering your answers in the tabs below. Initial Investment Annual Cash Flows Cost to Rebuild Salvage Net Present Value Option B: Initial Investment Annual Cash Flows Cost to Rebuild Salvage Net Present Value Calculate NPV. (Future Value of $1,Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) Note: Use appropriate factor(s) from the tables provided. Negative amounts should be indicated by a minus sign. Round your "Present Values" to 2 decimal places. Year Option A $ 320,000 150,000 70,000 120,000 0 1-8 4 8 0 8 years Year 0 1-8 4 8 Option B $ 454,000 160,000 75,000 0 Cash Flows 24,000 8 years Cash Flows < Required 1 PV factor PV factor 11% 11% Present Value Present Value Required 2 >

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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= Tulsa Company is considering investing in new bottling equipment and has two options: Option A has a lower initial cost but would require a significant expenditure to rebuild the machine after four years; Option B has higher maintenance costs but also has a higher salvage value at the end of its useful life. Tulsa's cost of capital is 11 percent. The following estimates of the cash flows were developed by Tulsa's controller: Initial investment Annual cash inflows Annual cash outflows Costs to rebuild Salvage value Estimated useful life Required 1 Required 2 Required: 1. Calculate NPV. (Future Value of $1,Present Value of $1. Future Value Annuity of $1, Present Value Annuity of $1.) 2. Determine which option Tulsa should select? Complete this question by entering your answers in the tabs below. Option A: Initial Investment Annual Cash Flows Cost to Rebuild Salvage Net Present Value Option B: Calculate NPV. (Future Value of $1,Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) Note: Use appropriate factor(s) from the tables provided. Negative amounts should be indicated by a minus sign. Round your "Present Values" to 2 decimal places. Initial Investment Annual Cash Flows Cost to Rebuild Salvage Net Present Value Year Option A $ 320,000 150,000 70,000 120,000 0 1-8 4 8 0 8 years Year 0 1-8 4 8 Option B $ 454,000 160,000 75,000 0 24,000 8 years Cash Flows Cash Flows < Required 1 PV factor PV factor 11% 11% Present Value Present Value Required 2 >
Transcribed Image Text:= Tulsa Company is considering investing in new bottling equipment and has two options: Option A has a lower initial cost but would require a significant expenditure to rebuild the machine after four years; Option B has higher maintenance costs but also has a higher salvage value at the end of its useful life. Tulsa's cost of capital is 11 percent. The following estimates of the cash flows were developed by Tulsa's controller: Initial investment Annual cash inflows Annual cash outflows Costs to rebuild Salvage value Estimated useful life Required 1 Required 2 Required: 1. Calculate NPV. (Future Value of $1,Present Value of $1. Future Value Annuity of $1, Present Value Annuity of $1.) 2. Determine which option Tulsa should select? Complete this question by entering your answers in the tabs below. Option A: Initial Investment Annual Cash Flows Cost to Rebuild Salvage Net Present Value Option B: Calculate NPV. (Future Value of $1,Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) Note: Use appropriate factor(s) from the tables provided. Negative amounts should be indicated by a minus sign. Round your "Present Values" to 2 decimal places. Initial Investment Annual Cash Flows Cost to Rebuild Salvage Net Present Value Year Option A $ 320,000 150,000 70,000 120,000 0 1-8 4 8 0 8 years Year 0 1-8 4 8 Option B $ 454,000 160,000 75,000 0 24,000 8 years Cash Flows Cash Flows < Required 1 PV factor PV factor 11% 11% Present Value Present Value Required 2 >
es Tulsa Company is considering investing in new bottling equipment and has two options: Option A has a lower initial cost but would require a significant expenditure to rebuild the machine after four years; Option B has higher maintenance costs but also has a higher salvage value at the end of its useful life. Tulsa's cost of capital is 11 percent. The following estimates of the cash flows were developed by Tulsa's controller: Initial investment Annual cash inflows Annual cash outflows Costs to rebuild Salvage value Estimated useful life Required 1 Option A $ 320,000 150,000 70,000 120,000 Required 2 0 8 years Required: 1. Calculate NPV. (Future Value of $1,Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) 2. Determine which option Tulsa should select? Determine which option Tulsa should select? Determine which option Tulsa should select? Complete this question by entering your answers in the tabs below. Option B $ 454,000 160,000 75,000 24,000 8 years < Required 1 Required 2 >
Transcribed Image Text:es Tulsa Company is considering investing in new bottling equipment and has two options: Option A has a lower initial cost but would require a significant expenditure to rebuild the machine after four years; Option B has higher maintenance costs but also has a higher salvage value at the end of its useful life. Tulsa's cost of capital is 11 percent. The following estimates of the cash flows were developed by Tulsa's controller: Initial investment Annual cash inflows Annual cash outflows Costs to rebuild Salvage value Estimated useful life Required 1 Option A $ 320,000 150,000 70,000 120,000 Required 2 0 8 years Required: 1. Calculate NPV. (Future Value of $1,Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) 2. Determine which option Tulsa should select? Determine which option Tulsa should select? Determine which option Tulsa should select? Complete this question by entering your answers in the tabs below. Option B $ 454,000 160,000 75,000 24,000 8 years < Required 1 Required 2 >
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