ch21 sample questions

Alternative 1: Keep the old machine and have it overhauled. If the old machine is overhauled, it will be kept for another five years and then sold for its salvage value.

a) In the first set of calculations, the staff used a discount rate of 20%, a five-year time horizon, and ignored taxes and terminal value. What is the relative attractiveness of these three alternatives?

investment that includes firm A’s stock will give the investor the same cash flow payoff in future years as

b. If only $18,000 is invested, what annual interest rate is needed to produce the needed

Central Embroidery needs to purchase a new monogram machine and is considering two options. The first machine costs $100,000 and is expected to last 5 years, and the second machine costs $160,000 and is expected to last 8 years. Assume that the opportunity cost of capital is 8 percent. Which machine should Central Embroidery purchase?

"e. What is each project's MIRR at a cost of capital of 12%? At r = 18%? (Hint: Consider Period 7 as the end of

16. Which one of the following is specifically designed to compute the rate of return on a project that has unconventional cash flows?

b. What would Mrs. Beach have to deposit if she were to use common stock and earned an average rate of return of 11%.

ML had developed a policy of selling manual machines and renting automatic machines. Manual machines did not cost much, did not require service, and could be modified to attach different fasteners inexpensively. Automatic machines were rented on an annual basis because they would have been more expensive to sell and it provided annual income to ML. However, about 700 of the rented machines were returned each year. During the time that machines were in inventory, ML would modify the machines to attach different fasteners. This was expensive with an average cost per modification of $2000. If all 700 machines were modified during a given year this would have cost $1.4 million per year. It was also industry practice to provide preventative maintenance and

When we look at 75% occupancy, the rate of return (net earnings divided by amount invested) is $298,000/$3,525,000 = 8.4%. . This return should be regarded as low; as the

1. Please assess the economic benefits of acquiring the Vulcan Mold-Maker machine. What is the initial outlay? What are the benefits over time? What is an appropriate discount rate? Does the net present value(NPV) warrant the investment in the machine?

The present value of the net incremental cash flows, totaling $5,740K, is added to the present value of the Capital Cost Allowance (CCA) tax shield, provided by the Plant and Equipment of $599K, to arrive at the project’s NPV of $6,339K. (Please refer to Exhibit 4 and 5 for assumptions and detailed NPV calculations.) This high positive NPV means that the project will add a significant amount of value to FMI. In addition, using the incremental cash flows (excluding CCA) generated by the NPV calculation, we calculated the project’s IRR to be 28%. This means that the project will generate a higher rate of return than the company’s cost of capital of 10.05%. This is also a positive indication that the company should undertake the project.

If you have recently heard about the benefits of essential oils, then you might be wondering "where to buy essential oils?" In fact, you might also be wondering whether they can be purchased at the health-food store. The truth is, you can buy them from companies, health-food stores and even online. However, before you actually purchase them, there are several things you should consider. Things to consider when buying essential oils Before you find out where to buy these oils and start looking for them, there are two things you will have to consider: What do you want to use the oil for?

I’ve learned over the years that my mother, sister, and I are all American Cherokee Indian. My “Greatest” great-grandmother, what i like to call her, followed the culture of Cherokee Indians. She believed in magic, spirits, and veneration of her ancestors, Although I didn’t get to speak to her much about her history and culture often, I tell how much she wanted my mother and her children to embrace and never forget where we come from. To be exact from my knowledge my ancestors move up to New York and continued their lives here. This is where my mother was born and raised. Unfortunately I’ve never met my grandmother, my mother’s mom but I’ve heard she was a heartwarming lively woman about who she was. My mother doesn’t follow right after my

Task 7 On 1 April 2009 a business purchased a machine costing RM 112,000. The machine can be used for a total of 20,000 hours over an estimated life of 48 months. At the end of that time the machine is expected to have a trade-in value of RM 12,000. The financial year of the business ends on 31 December each year. It is expected that the machine will be used for: 4,000 hours during the financial year ending 31 December 2009 5,000 hours during the financial year ending 31 December 2010 5,000 hours during the financial year ending 31 December 2011 5,000 hours during the financial year ending 31 December 2012 1,000 hours during the financial year ending 31 December 2013 Required: (a) Calculate the annual depreciation charges on the machine on each of the following bases for each of the financial years ending on 31 December 2009, 2010, 2011, 2012 and 2013: (i) the straight line method applied on a month for month basis, (ii) the diminishing balance method at 40% per annum applied on a full year basis, and (iii)the units of output method. (b) Suppose that during the financial year ended 31 December 2010 the machine was used for only 1,500 hours before being sold for RM 80,000 on June. Assuming that the business has chosen to apply the