Annual cost savings: Annual cost savings can be defined as the cost saving earned during the year, if an old equipment or machinery is replaced by another. This is calculated to know whether the replacement is beneficial or not. Net present value : The net present value is calculated as under − N e t p r e s e n t v a l u e = T o t a l p r e s e n t v a l u e o f c a s h i n f l o w s − I n i t i a l I n v e s t m e n t Initial investment can be defined as the cash outlay incurred at the beginning of the product and total present value of cash inflows is computed as under (in case of even cash inflows) − T o t a l p r e s e n t v a l u e o f c a s h i n f l o w s = A n n u a l n e t c a s h i n f l o w s X P r e s e n t v a l u e o f A n n u i t y ( P V A F ) a t a g i v e n r a t e f o r a g i v e n n u m b e r o f y e a r s This is how we calculate net present value of an investment. Requirement 1: To compute: The net present value of cash flows associated with the purchase of cars.

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Answer 1

Question

Chapter 14, Problem 25P

To determine

Concept Introduction:

Annual cost savings:

Annual cost savings can be defined as the cost saving earned during the year, if an old equipment or machinery is replaced by another. This is calculated to know whether the replacement is beneficial or not.

Net present value: The net present value is calculated as under −

Net present value =Total present value of cash inflows−Initial Investment

Initial investment can be defined as the cash outlay incurred at the beginning of the product and total present value of cash inflows is computed as under (in case of even cash inflows) −

Total present value of cash inflows=Annual net cash inflows X Present value of Annuity (PVAF) at a given rate for a given number of years

This is how we calculate net present value of an investment.

Requirement 1:

To compute:

The net present value of cash flows associated with the purchase of cars.

To determine

Requirement 2:

To compute:

The net present value of cash flows associated with the lease alternative.

To determine

Requirement 3:

The alternative should the company accept − purchase of cars or lease alternative.

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Answer 2

Question

Chapter 14, Problem 25P

To determine

Concept Introduction:

Annual cost savings:

Annual cost savings can be defined as the cost saving earned during the year, if an old equipment or machinery is replaced by another. This is calculated to know whether the replacement is beneficial or not.

Net present value: The net present value is calculated as under −

Net present value =Total present value of cash inflows−Initial Investment

Initial investment can be defined as the cash outlay incurred at the beginning of the product and total present value of cash inflows is computed as under (in case of even cash inflows) −

Total present value of cash inflows=Annual net cash inflows X Present value of Annuity (PVAF) at a given rate for a given number of years

This is how we calculate net present value of an investment.

Requirement 1:

To compute:

The net present value of cash flows associated with the purchase of cars.

To determine

Requirement 2:

To compute:

The net present value of cash flows associated with the lease alternative.

To determine

Requirement 3:

The alternative should the company accept − purchase of cars or lease alternative.

Expert Solution & Answer

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See solution

Answer 3

Question

Chapter 14, Problem 25P

To determine

Concept Introduction:

Annual cost savings:

Annual cost savings can be defined as the cost saving earned during the year, if an old equipment or machinery is replaced by another. This is calculated to know whether the replacement is beneficial or not.

Net present value: The net present value is calculated as under −

Net present value =Total present value of cash inflows−Initial Investment

Initial investment can be defined as the cash outlay incurred at the beginning of the product and total present value of cash inflows is computed as under (in case of even cash inflows) −

Total present value of cash inflows=Annual net cash inflows X Present value of Annuity (PVAF) at a given rate for a given number of years

This is how we calculate net present value of an investment.

Requirement 1:

To compute:

The net present value of cash flows associated with the purchase of cars.

To determine

Requirement 2:

To compute:

The net present value of cash flows associated with the lease alternative.

To determine

Requirement 3:

The alternative should the company accept − purchase of cars or lease alternative.

Expert Solution & Answer

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Answer 4

Question

Chapter 14, Problem 25P

To determine

Concept Introduction:

Annual cost savings:

Annual cost savings can be defined as the cost saving earned during the year, if an old equipment or machinery is replaced by another. This is calculated to know whether the replacement is beneficial or not.

Net present value: The net present value is calculated as under −

Net present value =Total present value of cash inflows−Initial Investment

Initial investment can be defined as the cash outlay incurred at the beginning of the product and total present value of cash inflows is computed as under (in case of even cash inflows) −

Total present value of cash inflows=Annual net cash inflows X Present value of Annuity (PVAF) at a given rate for a given number of years

This is how we calculate net present value of an investment.

Requirement 1:

To compute:

The net present value of cash flows associated with the purchase of cars.

To determine

Requirement 2:

To compute:

The net present value of cash flows associated with the lease alternative.

To determine

Requirement 3:

The alternative should the company accept − purchase of cars or lease alternative.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 5

Chapter 14, Problem 25P

To determine

Concept Introduction:

Annual cost savings:

Annual cost savings can be defined as the cost saving earned during the year, if an old equipment or machinery is replaced by another. This is calculated to know whether the replacement is beneficial or not.

Net present value: The net present value is calculated as under −

Net present value =Total present value of cash inflows−Initial Investment

Initial investment can be defined as the cash outlay incurred at the beginning of the product and total present value of cash inflows is computed as under (in case of even cash inflows) −

Total present value of cash inflows=Annual net cash inflows X Present value of Annuity (PVAF) at a given rate for a given number of years

This is how we calculate net present value of an investment.

Requirement 1:

To compute:

The net present value of cash flows associated with the purchase of cars.

To determine

Requirement 2:

To compute:

The net present value of cash flows associated with the lease alternative.

To determine

Requirement 3:

The alternative should the company accept − purchase of cars or lease alternative.

Answer 6

Chapter 14, Problem 25P

To determine

Concept Introduction:

Annual cost savings:

Annual cost savings can be defined as the cost saving earned during the year, if an old equipment or machinery is replaced by another. This is calculated to know whether the replacement is beneficial or not.

Net present value: The net present value is calculated as under −

Net present value =Total present value of cash inflows−Initial Investment

Initial investment can be defined as the cash outlay incurred at the beginning of the product and total present value of cash inflows is computed as under (in case of even cash inflows) −

Total present value of cash inflows=Annual net cash inflows X Present value of Annuity (PVAF) at a given rate for a given number of years

This is how we calculate net present value of an investment.

Requirement 1:

To compute:

The net present value of cash flows associated with the purchase of cars.

Answer 7

Chapter 14, Problem 25P

To determine

Concept Introduction:

Annual cost savings:

Annual cost savings can be defined as the cost saving earned during the year, if an old equipment or machinery is replaced by another. This is calculated to know whether the replacement is beneficial or not.

Net present value: The net present value is calculated as under −

Net present value =Total present value of cash inflows−Initial Investment

Initial investment can be defined as the cash outlay incurred at the beginning of the product and total present value of cash inflows is computed as under (in case of even cash inflows) −

Total present value of cash inflows=Annual net cash inflows X Present value of Annuity (PVAF) at a given rate for a given number of years

This is how we calculate net present value of an investment.

Requirement 1:

To compute:

The net present value of cash flows associated with the purchase of cars.

Answer 8

To determine

Requirement 2:

To compute:

The net present value of cash flows associated with the lease alternative.

Answer 9

To determine

Requirement 2:

To compute:

The net present value of cash flows associated with the lease alternative.

Answer 10

To determine

Requirement 3:

The alternative should the company accept − purchase of cars or lease alternative.

Answer 11

To determine

Requirement 3:

The alternative should the company accept − purchase of cars or lease alternative.

Answer 12

Expert Solution & Answer

Answer 13

Expert Solution & Answer

Answer 14

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Answer 15

Ch. 14.A - Prob. 1E Ch. 14.A - Prob. 2E Ch. 14.A - Prob. 3E Ch. 14.A - Prob. 4E Ch. 14.A - Exercises 13A-5 Basic Present Value Concepts...Ch. 14.A - Prob. 6E Ch. 14.C - Prob. 1E Ch. 14.C - Prob. 2E Ch. 14.C - PROBLEM 13C-3 Income Taxes and Net Present Value...Ch. 14.C - Prob. 4P

Requirement 2: To compute: The net present value of cash flows associated with the lease alternative.

Requirement 3: The alternative should the company accept − purchase of cars or lease alternative.

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Chapter 14 Solutions

Requirement 2:

To compute:

The net present value of cash flows associated with the lease alternative.

Requirement 3:

The alternative should the company accept − purchase of cars or lease alternative.