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- REPLACEMENT CHAIN The Lesseig Company has an opportunity to invest in one of two mutually exclusive machines that will produce a product the company will need for the next 8 years. Machine A costs 8.9 million but will provide after-tax inflows of 4.5 million per year for 4 years. If Machine A were replaced, its cost would be 9.8 million due to inflation and its cash inflows would increase to 4.7 million due to production efficiencies. Machine B costs 13.9 million and will provide after-tax inflows of 4.3 million per year for 8 years. If the WACC is 9%, which machine should be acquired? Explain.TransITRI is a transportation company with a recent need of a new construction equipment at a first cost of $78,000 (Equation (1)), zero salvage value, and a cash flow before taxes (CFBT) per year t that follows Equation (2). CFBT = $30,000 – 3,000t (for t = 1, 2, … T) (1) CFBT = - $78,000 (for t =0) (2) Calculate the PW if the economic life of similar machinery is 7 years, while the MARR is 16%If a machine is bought at a price of P94,783.00 that would have an economic life of 14 years, at what year t will the book value be P34,660.00? Use DDBM.( Double Declining Balance Method
- Kittymae Co. wants to purchase a machine for P400,000, but needs to earn an 8% return. The expected year-end net cash flows are P120,000 in each of the first three years, and P160,000 in the fourth year. What is the machine's net present value? Group of answer choices P(90,750). P520,000. P426,850. P26,850. P(282,400).4.-DO IT IN EXCEL, AND SHOW THE FORMULASIf the company purchases the machine, its cost of $276,000 will be financed with a loan at 14.8% interest for three years requiring equal annual payments including principal and interest. The machine will be depreciated at 20% per year. The company will pay $8,000 per year for maintenance services. The company plans to keep the machine even after its payback period. What is the total amount paid? A) $236,337.96 B) $304,972.67 C) None of the above D) $361,442.714.-DO IT IN EXCEL, AND SHOW THE FORMULASIf the company purchases the machine, its cost of $276,000 will be financed with a loan at 14.8% interest for three years requiring equal annual payments including principal and interest. The machine will be depreciated at 20% per year. The company will pay $8,000 per year for maintenance services. The company plans to keep the machine even after its payback period. What is the total amount paid? A) $236,337.96 B) $304,972.67 C) None of the above D) $361,442.71 (Choose one option)
- Which equipment is preferred if the firm’s interest rate is 15%? In PW terms how great is the difference? Alternative A B First cost $45,000 $35,000 Annual O&M 3,900 4,200 Salvage value 0 5,000 Overhaul (Year 6) 10,000 Not required Life, in years 10 5XYZ company has A piece of new equipment will cost $70,000. The equipment will provide a cost savings of $15,000 per year for ten years, after which it will have a $3,000 salvage value. If the required rate of return is 14%, the equipment's net present value is: a. (8240) b. None of answers are correct c. 9050 d. 23888The following present value factors are provided for use in this problem. Periods Present Valueof $1 at 11% Present Value of anAnnuity of $1 at 11% 1 0.9009 0.9009 2 0.8116 1.7125 3 0.7312 2.4437 4 0.6587 3.1024 Cliff Co. wants to purchase a machine for $62,000, but needs to earn a return of 11%. The expected year-end net cash flows are $24,000 in each of the first three years, and $28,000 in the fourth year. What is the machine's net present value? Multiple Choice $(3,351). $15,093. $77,093. $(43,556). $100,000.
- 6. A machine could be purchased for £800,000; it would be used for 3 years and then sold for £580,000. It would qualify for capital allowances at 18% reducing balance basis with a balancing allowance or charge on disposal. The company pays tax at 20% and has a cost of capital of 10%. What is the present value of the tax cashflow at time 1, to the nearest £100? A £14,700 B £26,200 C £28,800 D £144,000A special-purpose machine toolset would cost $30.000. 1l1e entire capitalexpenditure ($30.000) is 10 be borrowed with the stipulation that it be repaid by two equal end-of-year payments at 12% compounded annually. 11rn tool is expected to provide annual savings (in the material) of $45,000 for two years and is to be depreciated by the MACRS Three-year recovery period.111is special machine tool will require annual O&M costs in the amount of $12,000.111e salvage value at the end of two years is expected 10 be $9,000. Assuming a marginal tax rate of 40% and MARR of 15%. what is the net present worth of this project?A special-purpose machine toolset would cost $30.000. 1l1e entire capitalexpenditure ($30.000) is 10 be borrowed with the stipulation that it be repaid by two equal end-of-year payments at 12% compounded annually. 11rn tool is expected to provide annual savings (in the material) of $45,000 for two years and is to be depreciated by the MACRS Three-year recovery period. This is a special machine tool will require annual O&M costs in the amount of $12,000.111e salvage value at the end of two years is expected 10 be $9,000. Assuming a marginal tax rate of 40% and MARR of 15%. what is the net present worth of this project?