Two processes can be used for producing a polymer that reduces friction loss in engines. Process T will have a first cost of$640,000, an operating cost of $66,000 per year, and a salvage value of $80,000 after its 2-year life. Process W will have afirst cost of $1,140,000, an operating cost of $25,000 per year, and a $120,000 salvage value after its 4-year life. Process Wwill also require updating at the end of year 2 at a cost of $90,000. Which process should be selected on the basis of apresent worth analysis at a MARR of 12% per year?The present worth of process T is $-and the present worth of process W is $-[223662The process selected on the basis of the present worth analysis is process

Data given: Process T: First cost=$640,000 Operating cost =$66,000 Salvage value= $ 80,000 n=2 year…

Answered: Two processes can be used for producing…

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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Esquire Company needs to acquire a molding machine to be used in its manufacturing process. Two types of machines that would be appropriate are presently on the market. The company has determined the following: Machine A could be purchased for $22,000. It will last 10 years with annual maintenance costs of $800 per year. After 10 years the machine can be sold for $2,310. Machine B could be purchased for $20,000. It also will last 10 years and will require maintenance costs of $3,200 in year three, $4,000 in year six, and $4,800 in year eight. After 10 years, the machine will have no salvage value. Required: Assume an interest rate of 8% properly reflects the time value of money in this situation and that maintenance costs are paid at the end of each year. Ignore income tax considerations. Calculate the present value of Machine A & Machine B. Which machine Esquire should purchase? Note: Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round…
One of two methods will produce solar panels for electric power generation. Method 1 will have an initial cost of $550,000, an annual operating cost of $160,000 per year, and a $125,000 salvage value after its three-year life. Method 2 will cost $830,000 with an annual operating cost of $120,000, and a $240,000 salvage value after its five-year life. The company has asked you to determine which method is economically better, but it wants the analysis done over a three-year planning period. The salvage value of Method 2 will be 35% higher after 3 years than it is after 5 years. If the company’s MARR is 10% per year, which method should the company select?
You are considering two different methods of constructing a new warehouse. The first method uses prefabricated building segments, would have an initial cost of $4.8 million, would have annual maintenance costs of $100,000 and would last for 25 years. The second alternative would employ a new carbon fibre panel technology, would have an initial cost of $6 million would have maintenance costs of $525,000 every ten years and is expected to last 40 years. Both buildings are in CCA class 1 (CCA rate of 4%). The salvage value for each would be 25% of initial cost. The firm uses a 15% cost of capital and it has a 38% tax rate. Calculate the NPV for each machine using the six step approach (nearest dollar without dollar sign ($) or comma eg 15000) Negative cash flow is -15000): What is the NPV for Alternative A? What is the NPV for Alternative B? What is the EAC for Alternative A? What is the EAC for Alternative B?
Purple Haze Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $526,528 is estimated to result in some amount of annual pretax cost savings. The press will have an aftertax salvage value at the end of the project of $86,879. The OCFS of the project during the 4 years are $170,654, $199,481, $175,232 and $169,873, respectively. The press also requires an initial investment in spare parts inventory of $23, 482, along with an additional $1,631 in inventory for each succeeding year of the project. The shop's discount rate is 6 percent. What is the NPV for this project?
Alliance Manufacturing Company is considering the purchase of a new automated drill press to replace an older one. The machine now in operation has a book value of zero and a salvage value of zero. However, it is in good working condition with an expected life of 10 additional years. The new drill press is more efficient than the existing one and, if installed, will provide an estimated cost savings (in labor, materials, and maintenance) of $6,000 per year. The new machine costs $25,000 delivered and installed. It has an estimated useful life of 10 years and a salvage value of $1,000 at the end of this period. The firm’s cost of capital is 14 percent, and its marginal income tax rate is 40 percent. The firm uses the straight-line depreciation method.a. What is the net cash flow in year 0 (i.e., initial outlay)?b. What are the net cash flows after taxes in each of the next 10 years?c. What is the NPV of the investment?d. Should Alliance replace its existing drill press?
A piece of new equipment has been proposed by engineers to increase the productivity of a certain manual welding operation. The investment cost is $25,000, and the equipment will have a market value of $5,000 at the end of a study period of five years. Increased productivity attributable to the equipment will amount to $8,000 per year after extra operating costs have been subtracted from the revenue generated by the additional production. Evaluate the IRR of the proposed equipment. Is the investment a good one? Recall that the MARR is 20% per year.
Owe
You are evaluating two different silicon wafer milling machines. The Techron I costs $267,000, has a three-year life, and has pretax operating costs of $72,000 per year. The Techron II costs $465,000, has a five-year life, and has pretax operating costs of $45,000 per year. For both milling machines, use straight-line depreciation to zero over the project’s life and assume a salvage value of $49,000. If your tax rate is 23 percent and your discount rate is 13 percent, compute the EAC for both machines
Equipment needed at a Valero Corporation refinery for the conversion of corn stock to ethanol, a cleaner burning gasoline additive, will cost $50,00 to be used for 4 years, with an annual operating cost (AOC) of $10,000, and a salvage value of $35,000 after 4 years. Determine the AW values for one and two life cycles at 15 % per year.
You are evaluating two different silicon wafer milling machines. The Techron I costs $270,000, has a three - year life, and has pretax operating costs of $73, 000 per year. The Techron II costs $470,000, has a five-year life, and has pretax operating costs of $46, 000 per year. For both milling machines, use straight - line depreciation to zero over the project's life and assume a salvage value of $50,000. If your tax rate is 25 percent and your discount rate is 9 percent, compute the EAC for both machines.
The Mowbot plant must replace an existing HVAC unit (doing nothing is not an option). You are evaluating two pieces of equipment. Each unit offers a saving in annual energy cost over the existing equipment. Alternative Unit A Unit B Unit C Up front cost $44,000 $65,000 $84,000 Operating cost/year $1.900 $1.400 $900 Energy savings / year $14,000 $16,500 $17,500 Salvage Value $2,000 $4,000 $5,000 Economic life, years 7. 7. Mowbot's MARR is 12%. Based on annual worth analysis (not incremental), which unit should you recommend? HTML Editora BI 工E三 E三xi x ミ = ECE 12pt Paragraph
please show work i need to learn this. Cameron Industries is purchasing a new chemical vapor depositor in order to make silicon chips. It will cost $7,000,000 to buy the machine and $10,000 to have it delivered and installed. Building a clean room in the plant for the machine will cost an additional $3 million. The machine is expected to raise revenues by $3,000,000 per year, starting at the end of the first year, with associated costs (other than depreciation) of $1 million for each of those years. The machine is expected to have a working life of six years and will be depreciated over those six years. The marginal tax rate is 20%. What are the incremental free cash flows associated with the new machine in year 2? O $1,168,333 $831,667 $1,833,667 $1,165,000 O $665,334

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