You are trying to pick the least-expensive car for your new delivery service. You have two choices: the Scion XA, which will cost $18,500 to purchase and which will have OCF of -$2,100 annually throughout the vehicle's expected life of three years as a delivery vehicle; and the Toyota Prius, which will cost $28,000 to purchase and which will have OCF of -$1,100 annually throughout that vehicle's expected 4-year life. Both cars will be worthless at the end of their life. You intend to replace whichever type of car you choose with the same thing when its life runs out, again and again out into the foreseeable future. If the business has a cost of capital of 12 percent, calculate the EAC. (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.) Answer is complete but not entirely correct. Scion's EAC Toyota's EAC $ (9,809.94)✔ $ (10,337.16) X

You are trying to pick the least-expensive car for your new delivery service. You have two choices: the Scion XA, which will cost $18,500 to purchase and which will have OCF of -$2,100 annually throughout the vehicle's expected life of three years as a delivery vehicle; and the Toyota Prius, which will cost $28,000 to purchase and which will have OCF of -$1,100 annually throughout that vehicle's expected 4-year life. Both cars will be worthless at the end of their life. You intend to replace whichever type of car you choose with the same thing when its life runs out, again and again out into the foreseeable future. If the business has a cost of capital of 12 percent, calculate the EAC. (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.) Answer is complete but not entirely correct. Scion's EAC Toyota's EAC $ (9,809.94)✔ $ (10,337.16) X

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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You are trying to pick the least-expensive equipment for your manufacturing operations. You have two choices: the Hi-Quality, which will cost $18,000 to purchase and which will have OCF of -$1,000 annually throughout the equipment’s expected life of 5 years; and Lo-Budget, which will cost $10,000 to purchase and which will have OCF of -$1,300 annually throughout that vehicles expected three-year life. Both pieces of equipment will be worthless at the end of their life. If you intend to replace whichever type of equipment you choose with the same thing when its life runs out, again and again out into the foreseeable future. Your business has a cost of capital of 10 percent. One iteration of each delivery equipment will consist of the following cash flows: Year 0 1 2 3 4 5 Hi-Quality CFs -$18,000 -$1,000 -$1,000 -$1,000 -$1,000 -$1,000 Lo-Budget CFs -$10,000 -$1,300 -$1,300 -$1,300 Calculate the equivalent…
You are trying to pick the least-expensive equipment for your manufacturing operations. You have two choices: the Hi-Quality, which will cost $40,000 to purchase and which will have OCF of -$2,000 annually throughout the equipment’s expected life of 5 years; and Lo-Budget, which will cost $20,000 to purchase and which will have OCF of -$5,000 annually throughout that vehicles expected three-year life. Both pieces of equipment will be worthless at the end of their life. If you intend to replace whichever type of equipment you choose with the same thing when its life runs out, again and again out into the foreseeable future. Your business has a cost of capital of 10 percent. One iteration of each delivery equipment will consist of the following cash flows:
You are evaluating a new project for Globex Corporation as the company is planning to launch a new and very efficient mobile device named Meta-5050. The new product is expected to run for 5 years. To produce this new product, Globex needs to purchase new equipment that will cost $750,000. The company needs to spend another $10,000 for shipping and installation. You estimate the sales price of Meta-5050 to be $650 per unit and sales volume to be 800 units in year 1; 1,400 units in years 2-4; and 500 units in year 5. The cost of the contents, packaging and shipping are expected to be $225 per unit and the annual fixed costs for this project are $150,000 per year. The equipment will be depreciated straight-line to zero over the 5-year project life. The actual market value (salvage value) of these assets at the end of year 5 is expected to be $35,000. If this project is taken up, inventory will increase by $72,000, accounts receivable will increase by $36,850, and accounts payable will…
Please use a financial calculator to solve. Be sure to list your steps. You are evaluating two different silicon wafer milling machines. The Techron I costs $237,000, has a three - year life, and has pretax operating costs of $62, 000 per year. The Techron II costs $415, 000, has a five - year life, and has pretax operating costs of $35, 000 per year. For both milling machines, use straight - line depreciation to zero over the project's life and assume a salvage value of $ 39,000. If your tax rate is 21 percent and your discount rate is 8 percent, compute the EAC for both machines. (Your answer should be a negative value and indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g ., 32.16.)
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You are trying to pick the least-expensive equipment for your manufacturing operations. You have two choices: the Hi-Quality, which will cost $40,000 to purchase and which will have OCF of -$2,000 annually throughout the equipment’s expected life of 5 years; and Lo-Budget, which will cost $20,000 to purchase and which will have OCF of -$5,000 annually throughout that vehicles expected three-year life. Both pieces of equipment will be worthless at the end of their life. If you intend to replace whichever type of equipment you choose with the same thing when its life runs out, again and again out into the foreseeable future. Your business has a cost of capital of 10 percent. One iteration of each delivery equipment will consist of the following cash flows: Year 0 1 2 3 4 5 Hi-Quality CFs -$40,000 -$2,000 -$2,000 -$2,000 -$2,000 -$2,000 Lo-Budget CFs -$20,000 -$5,000 -$5,000 -$5,000
You are trying to pick the least expensive car for your new delivery service. You have two choices: the Scion xA, which will cost $13,000 to purchase and which will
The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $970,000, and it would cost another $18,000 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $495,000. The MACRS rates for the first three years are 0.3333, 0.4445, and 0.1481. The machine would require an increase in net working capital (inventory) of $14,000. The sprayer would not change revenues, but it is expected to save the firm $366,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 25%. (Ignore the half-year convention for the straight-line method.) Cash outflows, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest dollar.1) What is the Year-0 net cash flow? A) What are the net operating cash flows in Years 1, 2, and 3? B) What is the additional Year-3 cash flow (i.e, the after-tax…
The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $1,030,000, and it would cost another $25,000 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $473,000. The MACRS rates for the first three years are 0.3333, 0.4445, and 0.1481. The machine would require an increase in net working capital (inventory) of $18,500. The sprayer would not change revenues, but it is expected to save the firm $396,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 25%. (Ignore the half-year convention for the straight-line method.) Cash outflows, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest dollar. What is the Year-0 net cash flow? $ What are the net operating cash flows in Years 1, 2, and 3? Year 1: $ Year 2: $ Year 3: $ What is the additional…
You are trying to pick the least expensive car for your new delivery service. You have two choices: the Scion xA, which will cost $13,000 to purchase and which will have OCF of -$1,200 annually throughout the vehicle's expected life of three years as a delivery vehicle; and the Toyota Prius, which will cost $23,000 to purchase and which will have OCF of -$550 annually throughout that vehicle's expected five-year life. Both cars will be worthless at the end of their life. If you intend to replace whichever type of car you choose with the same thing when its life runs out, again and again out into the foreseeable future, and if your business has a cost of capital of 12 percent, what is the difference in the EAC of the two cars? Multiple Choice $413.25 $310.38 $317.88
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