Corporate Finance
3rd Edition
ISBN: 9780132992473
Author: Jonathan Berk, Peter DeMarzo
Publisher: Prentice Hall
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 4, Problem 17P
How would your answer to Problem 16 change if the machine takes one year to build?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
You are considering whether you should replace all of the copiers in your building or out-source your copying needs. You estimate that it will cost $ 25 million to replace all the copiers and that your annual maintenance costs will be $ 1.5 million. The copiers will have an expected life of 6 years and zero salvage value. If you outsource your copying, you expect the costs to be $ 7.5 million a year forever.
Which alternative will you prefer assuming a cost of capital of 10% and no taxes or depreciation).
Question: There are Two paybacks 1) Payback period X = 6 years and 2) Payback period Y =5 years Please tell Me why machine X is financially viable?
For items 3-4
Check at the table to answer the questions.
ENDING
STARTING
BALANCE
INTEREST
MONTH
BALANCE
EARNED
1
P1 000.00
2.5
P 1 002.5
2
P1 002.5
2.51
P1 005.01
P1 005.01
2.51
P 1 007.52
4
P 1 007.52
2.52
P1010.04
P 1 010.04
2.53
P1 012.57
P1 012.57
2.53
P1 015.10
7
P 1 015.10
2.54
P 1017.64
8
P1017.64
2.54
P1 020.18
P 1 020.18
2.55
P 1 022.73
10
P 1 022.73
2.56
P 1 025.29
11
P1 025.29
2.56
P 1 027.85
12
P 1 027.85
2.57
P1 030.42
3. Determine the annual interest rate, compounded monthly. Show the complete
solution.
Chapter 4 Solutions
Corporate Finance
Ch. 4.1 - Prob. 1CCCh. 4.1 - Prob. 2CCCh. 4.2 - Prob. 1CCCh. 4.2 - Prob. 2CCCh. 4.2 - Prob. 3CCCh. 4.3 - Prob. 1CCCh. 4.3 - Prob. 2CCCh. 4.4 - Prob. 1CCCh. 4.4 - What benefit does a firm receive when it accepts a...Ch. 4.5 - How do you calculate the present value of a a....
Ch. 4.5 - How are the formulas for the present value of a...Ch. 4.6 - Prob. 1CCCh. 4.6 - Prob. 2CCCh. 4.7 - Prob. 1CCCh. 4.7 - Prob. 2CCCh. 4.8 - Prob. 1CCCh. 4.8 - Prob. 2CCCh. 4.9 - Prob. 1CCCh. 4.9 - Prob. 2CCCh. 4.A - Your grandmother bought an annuity from Rock Solid...Ch. 4.A - Prob. A.2PCh. 4 - You have just taken out a five-year loan from a...Ch. 4 - Prob. 2PCh. 4 - Calculate the future value of 2000 in a. Five...Ch. 4 - Prob. 4PCh. 4 - Your brother has offered to give you either 5000...Ch. 4 - Prob. 6PCh. 4 - Prob. 7PCh. 4 - Your daughters currently eight years old. You...Ch. 4 - Prob. 9PCh. 4 - Prob. 10PCh. 4 - Suppose you receive 100 at the end of each year...Ch. 4 - You have just received a windfall from an...Ch. 4 - Prob. 13PCh. 4 - You have been offered a unique investment...Ch. 4 - Prob. 15PCh. 4 - Prob. 16PCh. 4 - How would your answer to Problem 16 change if the...Ch. 4 - The British government has a consol bond...Ch. 4 - What is the present value of 1000 paid at the end...Ch. 4 - You are head of the Schwartz Family Endowment for...Ch. 4 - When you purchased your house, you took out a...Ch. 4 - Prob. 22PCh. 4 - Your grandmother has been putting 1000 into a...Ch. 4 - A rich relative has bequeathed you a growing...Ch. 4 - Prob. 25PCh. 4 - You work for a pharmaceutical company that has...Ch. 4 - Your oldest daughter is about to start...Ch. 4 - A rich aunt has promised you 5000 one year from...Ch. 4 - You are running a hot Internet company. Analysts...Ch. 4 - Prob. 31PCh. 4 - Prob. 32PCh. 4 - Prob. 33PCh. 4 - Prob. 34PCh. 4 - Prob. 35PCh. 4 - Prob. 36PCh. 4 - Prob. 37PCh. 4 - Prob. 38PCh. 4 - Prob. 39PCh. 4 - Prob. 40PCh. 4 - Prob. 41PCh. 4 - Prob. 42PCh. 4 - Prob. 43PCh. 4 - Prob. 44PCh. 4 - Prob. 45PCh. 4 - Prob. 46PCh. 4 - Prob. 47PCh. 4 - Prob. 48PCh. 4 - Prob. 49PCh. 4 - Prob. 50PCh. 4 - Prob. 51P
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- The Siler Construction Company is about to bid on a new industrial construction project. To formulate their bid, the company needs to estimate the time required for the project. Based on past experience, management expects that the project will require at least 24 months, and could take as long as 48 months if there are complications. The most likely scenario is that the project will require 30 months. a. Assume that the actual time for the project can be approximated using a triangular probability distribution. What is the probability that the project will take less than 30 months? b. What is the probability that the project will take between 28 and 32 months? c. To submit a competitive bid, the company believes that if the project takes more than 36 months, then the company will lose money on the project. Management does not want to bid on the project if there is greater than a 25% chance that they will lose money on this project. Should the company bid on this project?arrow_forwardSuppose that Project A has a life of 6 years and Project B has a life of 4 years. How many times (after the initial project life) would each project need to be repeated in order to conduct an analysis with the replacement change approach? O a. Project A would need to be repeated 5 times and Project B would need to be repeated 3 times b. Project A would need to be repeated 3 times and Project B would need to be repeated 5 times. c. Project A would need to be repeated twice and Project B would need to be repeated twice. O d. Project A would need to be repeated once and Project B would need to be repeated twice. e. Project A would need to be repeated once and Project B would need to be repeated once. O 1.arrow_forwardSuppose you work for a data processing company who needs a new supercomputer now. Your company can either buy the supercomputer for $400,000 or lease it from a computer leasing company through an operating lease. The maintenance will be provided by the leasing company. Your company will not incur any other costs except the lease payment. But the annual maintenance cost will cost the leasing company$25,000 per year for four years. The lease terms require your company to make four annual payments at the beginning of each year. The computer could be depreciated for tax purposes straight-line over four years and it will have no residual value at the end of year 4. The interest rate is 12%. Suppose the tax rate paid by your company is 21% but the leasing company pays only 15% tax due to carried over losses from their previous operation. What is the pre-tax lease payment amount that will help the leasing company break even within 4 years if it requires 8% return. What is the NPV of the…arrow_forward
- Suppose we are thinking about replacing an old computer with a new one. The old one cost us $1,240,000; the new one will cost $1,500,000. The new machine will be depreciated straight-line to zero over its five-year life. It will probably be worth about $240,000 after five years. The old computer is being depreciated at a rate of $248,000 per year. It will be completely written off in three years. If we don’t replace it now, we will have to replace it in two years. We can sell it now for $360,000; in two years, it will probably be worth $114,000. The new machine will save us $284,000 per year in operating costs. The tax rate is 21 percent and the discount rate is 11 percent. a. Calculate the EAC for the old computer and the new computer. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b. What is the NPV of the decision to replace the computer now?…arrow_forwardZandri Industries is evaluating whether to invest in solar panels to provide some of the electrical needs of its main office building in Buffalo, New York. The solar panel project would cost $475,000 and would provide cost savings in its utility bills of $45,000 per year. It is anticipated that the solar panels would have a life of 15 years and would have no residual value. (Click the icon to view the present value factor table.) (Click the icon to view the present value annuity factor table.). (Click the icon to view the future value factor table.) (Click the icon to view the future value annuity factor Read the requirements. table.) Requirement 1. Calculate the payback period in years of the solar panel project. Determine the formula, then calcuste the payback period. (Round your answer to two decimal places.) Initial investment Expected annual net cash inflow Payback period %3D %24 475,000 $4 45,000 10.56 years Requirement 2. If the company uses a discount rate of 10%, what is the…arrow_forwardThe Payback period as per calculation is 6 Years . Pre determined payback period is 5.5 Years What is your recommendation as per the Payback Period Technique. More Information is needed to take the decision Reject the Project Accept the Project Project can be Accepted or Rejectedarrow_forward
- In the use of unmanned aerial vehicles (UAVS) that will shape the future of UAV applications, an online shopping company wants to purchase a group of UAVS. As cargo drones are a proven technology for the logistics industry to obtain faster, more environmentally friendly service. The installation cost is 16000 TL and will reduce current expenses by 2400 TL per year for eight years. If the MARR Is 10% per year: a) Find the minimum salvage value after elght years that makes the UAVS worth purchasing? b) Find the UAV's IRR If the salvage value is negligible? Use PW for linear interpolation.arrow_forwardShonda & Shonda is a company that does land surveys and engineering consulting. They have an opportunity to purchase new computer equipment that will allow them to render their drawings and surveys much more quickly. The new equipment will cost them an additional $1.200 per month, but they will be able to increase their sales by 10% per year. Their current annual cost and break-even figures are as follows: A. What will be the impact on the break-even point if Shonda & Shonda purchases the new computer? B. What will be the impact on net operating income if Shonda & Shonda purchases the new computer? C. What would be your recommendation to Shonda & Shonda regarding this purchase?arrow_forwardA security that costs $89.90 will provide a return of 6.5 percent per year. If you want to keep the investment until it grows to a value of $143.8, how long will you have to keep it? (Hint: use log() function to solve for the number of years you have to keep it, and round the answer to the nearest whole number.)arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Excel Applications for Accounting PrinciplesAccountingISBN:9781111581565Author:Gaylord N. SmithPublisher:Cengage Learning
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning- Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Essentials of Business Analytics (MindTap Course ...StatisticsISBN:9781305627734Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. AndersonPublisher:Cengage Learning
Excel Applications for Accounting Principles
Accounting
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Cengage Learning
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Essentials of Business Analytics (MindTap Course ...
Statistics
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Cengage Learning
Relevant Costing Explained; Author: Kaplan UK;https://www.youtube.com/watch?v=hnsh3hlJAkI;License: Standard Youtube License