You are evaluating building a project on a piece of land that the company has owned for five years. Two years ago, the companyhad to clean the land due to an oil spill that costed $390,000.00.True or False: The cost of $390,000 will need to be included as a cost when evaluating the NPV of the new building.O TrueO False

NPV stands for Net Present Value. It is a financial metric used to evaluate the profitability of an…

Answered: You are evaluating building a project…

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

See similar textbooks

Similar questions

Tim Smunt has been asked to evaluate two machines. After some investigation, he determines that they have the costs shown in the following table: Machine A Machine B Original Cost $15,000 $24,000 Labor per year $2,400 $4,000 Maintenance per year $4,300 $800 Salvage value $2,000 $7,500 He is told to assume that: 1. The life of each machine is 3 years. 2. The company thinks it knows how to make 14% on investments no more risky than this one. 3. Labor and maintenance are paid at the end of the year. The NPV for Machine B= $._____enter your response here
Ten years ago J-Bar Company purchased a lathe for $250,000. It was being depreciated on a straight-line basis to an estimated $25,000 salvage value (watch video for Lesson 7 Part 2 to see how to handle this when using straight-line depreciation) over a 15-year period. The firm is considering selling the old lathe and purchasing a new one. The new lathe would cost $500,000. The firm’s marginal tax rate is 40 percent. Determine the net initial investment required to purchase the new lathe if the old lathe is sold for $100,000.
You have been hired as a consultant for Pristine Urban-Tech Zither, Inc. (PUTZ),manufacturers of fine zithers. The market for zithers is growing quickly. The company boughtsome land three years ago for $2.1 million in anticipation of using it as a toxic waste dump sitebut has recently hired another company to handle all toxic materials. Based on a recentappraisal, the company believes it could sell the land for $2.3 million on an after-tax basis. Infour years, the land could be sold for $2.4 million after taxes. The company also hired amarketing firm to analyze the zither market, at a cost of $125,000. An excerpt of the marketingreport is as follows:The zither industry will have a rapid expansion in the next four years. With the brand namerecognition that PUTZ brings to bear, we feel that the company will be able to sell 3,600,4,300, 5,200, and 3,900 units each year for the next four years, respectively. Again,capitalizing on the name recognition of PUTZ, we feel that a premium price…
2. The Kish Corporation is considering the purchase of a new commercial oven. The original cost of the company's existing oven was $250,000. The machine is now 10 years old and has a current market value of $50,000. The old oven is being depreciated over a 15-year useful life to a zero estimated salvage value on a straight-line basis. Management is contemplating the purchase of a new oven that costs $375,000 with an estimated salvage value of $25,000. Expected cash savings from the new oven are $45,000 a year (before tax), and the oven will require the company to increase working capital by $15,000. Depreciation is on a straight-line basis over a 5-year life, and the cost of capital is 9.50%. Assume a 21% tax rate. a. What is the net present value of the new machine? Should the replacement be made? b.
I have the answer and question below but I just needf to know how to work it out Solve the problem. Round unit depreciation to nearest cent when making the schedule, and round final results to the nearest cent. A construction company purchased a piece of equipment for $1,710. The expected life is 7,000 hours, after which it will have a salvage value of $280. Find the amount of depreciation for the first year if the piece of equipment was used for 1,600 hours. Use the units-of-production method of depreciation. Answer: ($320)
Builtrite is considering purchasing a new machine that would cost $60,000 and the machine would be depreciated (straight line) down to $0 over its five-year life. At the end of four years, it is believed that the machine could be sold for $30,000. The current machine being used was purchased 3 years ago at a cost of $40,000 and it is being depreciated down to zero over its 5-year life. The current machine's salvage value now is $12,000. The new machine would increase EBDT by $56,000 annuall Builtrite's marginal tax rate is 34%. What is the TCF associated with the purchase of this new machine if it is sold at the end of year 4? Ⓒ$30,000 $23,880 $20,500 $19,800
Which proposal should the company accept? Why?
Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
A mechanical engineer must recommend a new heating system to a commercial building owner. The owner intends to sell the building in 15 years. A gas fired furnace option has a design life of 5 years, an initial cost of $12,000, a replacement cost of $6,000 and annual operating costs of $3,500, but adds no value to the building when sold. A geothermal heat pump system has a design life of 10 years, an initial cost of $16,000, a replacement cost of $9,000, annual operating costs of $2,500, and increases the value of the building by $7,000, when it is sold at the end of year 15. Determine the equivalent uniform annual cost (EUAC) of costs for the option the engineer should recommend at an interest rate of 6.3%. Express your answer in $ to the nearest $10.
Vijay
ABC company is considering replacing their old manual loading machine with an automatic loading machine. The manual machine cost $300,000 three years ago, and is being depreciated over 10 years straight line depreciation, with no salvage value. If ABC replaces the manual machine, the new automatic machine will cost $400,000 and have a useful life of 10 years. This will also be depreciated on a straight line basis to zero. As a result of this new machine, there will be pretax savings of $130,000 in labour costs and $25,000 in other cash expenses annually. If the automatic machine is purchased, the old machine will immediately be sold at a price of $280,000. The company has already spent $15,000 researching the costs associated with this decision. The company's tax rate is 40% and no inflation is expected. The company's cost of capital is 7%. Calculate the net present value of this decision using a financial calulator
You have been hired as a consultant for Pristine Urban-Tech Zither, Inc. (PUTZ), manufacturers of fine zithers. The market for zithers is growing quickly. The company bought some land three years ago for $2.1 million in anticipation of using it as a toxic waste dump site but has recently hired another company to handle all toxic materials. Based on a recent appraisal, the company believes it could sell the land for $2.3 million on an after-tax basis. In four years, the land could be sold for $2.4 million after taxes. The company also hired a marketing firm to analyze the zither market, at a cost of $125,000. An excerpt of the marketing report is as follows: The zither industry will have a rapid expansion in the next four years. With the brand name recognition that PUTZ brings to bear, we feel that the company will be able to sell 3,600, 4,300, 5,200, and 3,900 units each year for the next four years, respectively. Again, capitalizing on the name recognition of PUTZ, we feel that a…

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS