Answered: A heat exchanger costs $36,000, but it…

A heat exchanger costs $36,000, but it will save $5000 per year in energy costs. If the interest rate is 10%, how many years does it take to recover the capital cost?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 15EB: Project X costs $10,000 and will generate annual net cash inflows of $4,800 for five years. What is...

See similar textbooks

Related questions

Q: An investment of $75,000 in equipment that will reduce the time for machining self-locking fasteners…

A: Investment = 75,000 Savings each year = 20,000 Interest Rate = 10% per year

Q: Project L costs $40,000, its expected cash inflows are $12,000 per year for 11 years, and its WACC…

A: The payback period is the time taken by the investment to recover the cost of the investment.

Q: A machine costs $5240 and produces benefits of $1000 at the end of each year for 8 years. Assume an…

A: The Payback period is among the of the techniques of capital budgeting that do not take into…

Q: Project L costs $50,000, its expected cash inflows are $8,000 per year for 7 years, and its WACC is…

A: Project's Payback Period = Initial Investment / Expected annual cash inflows

Q: A machine is under consideration for investment. The cost of the machine is P25,000.00. Each year it…

A: The discounted payback period is a capital budgeting tool that helps to evaluate a project's…

Q: A new machine will cost $2,000, but it will result in savings of $500 per year. What is the payback…

Q: Remodeling an office will cost $25,000 and will generate savings of $3,000 the first year, $4,000the…

Q: A company just paid $10 million for a feasibility study. If the company goes ahead with the project,…

A: Initial cost = $100 million in year 0 and $20 million in year 1 CF2 = $80 million CF3 = $90 million…

Q: A new high-efficiency motor is being considered for a large compressor. The new motor will cost…

A: Payback Period is the time duration taken to reap back the amount invested in the project. The…

Q: Project L costs $40,000, its expected cash inflows are $11,000 per year for 11 years, and its WACC…

A: Project's Payback period = Initial Investment / Annual Cashflow

Q: Project L costs $40,000, its expected cash inflows are $12,000 per year for 7 years, and its WACC is…

A: Payback period is the amount of time taken by the project to recover its initial cash invested.…

Q: A new heat exchanger will cost $220,000, and it will save $50,000 annually. After 10 years it will…

A: Cost of the new heat = 220000 Savings = 50000 annually Year term = 10 Interest rate = 10% Inflation…

Q: An energy-efficient machine costs $5000 and has a life of 5 years. If the interest rate is 8%, how…

A: Interest: Interest is the amount of interest paid on the issue price of the notes by the issuer at…

Q: Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball…

A: Calculation of equivalent annual savings: Answer: Equivalent annual savings is $4,080.11

Q: If you insulate your office for $16,000, you will save $1,600 a year in heating expenses. These…

A: Net Present Value: The net present value is the Net of the present value of future cash inflow and…

Q: 1.) a heat exchanger costs ₱36,000, but it will save ₱5000 per year in energy costs. if the interest…

A: Present value refers to the current valuation for a future sum. Investors determine the present…

Q: You are buying a machine with a down payment of $200,000 and annual payments of $40,000 per year for…

A: The present value of all cost is the net cost of all cost including the down payment and all cost…

Q: An energy conservation option with a first cost of $10,000 is installed. It requires $600 per year…

A: Life cycle costing is the calculation of the total amount which an entity will spend throughout the…

Q: What is the NPV of a project that costs $188,000 today and is expected to generate monthly cash…

A: Net Present Value is the difference between the current value of cash inflow and cash outflow for a…

Q: A specialized automatic machine costs $300,000 and is expected to save $111,837.50 per year while in…

A: While choosing which investment project will be undertaken, different appraisal techniques are used.…

Q: Project L costs $65,000, its expected cash inflows are $11,000 per year for 7 years, and its WACC is…

A: Computation of the payback period:

Q: The Coca-Cola Company are looking to go for a project that will require an initial investment of $…

A: Cost will include the initial cost of project and the annual expenditure. Present equivalent cost is…

Q: Suppose you are in business and you buy a new machine for $40,000. After paying all other expenses,…

A: We need to compute the rate of return earned by the machine. Machine should be bought if rate of…

Q: What is the IRR of a project that costs $1,000 now and produces $1,000 next year?

A: Given information: Initial cash flow is $1,000 Cash flow in first year is $1,000

Q: An investment will generate $10,000 a year for 25 years. If you can earn 10percent on your funds and…

A: Calculation of net present value of the investment at 10%

Q: An electronic device is available that will reduce this year’s labor costs by $8,000. The equipment…

A: Capital budgeting indicates the evaluation of the profitability of possible investments and projects…

Q: Suppose you are considering an investment project that requires $800,000, has a six-year life, and…

A: Capital Budgeting: Capital budgeting decisions are the most important decision in corporate…

Q: How much money could a maker of super- conducting magnetic energy storage systems afford to spend…

A: Present value refers to the current valuation for a future sum. Investors determine the present…

Q: worthwhile to invest in the insulation? What is the payback period of the investment?

A: Reduction in fuel = P190000 × 20% = P38000 Less: Annual cost of taxes and insurance = 5% of P120000…

Q: New manufacturing equipment costs $225,000, salvage value is $25,000, and average annual earnings of…

A: a) Average annual rate of return = Average Annual Earning per year / Investment value

Q: If you insulate your office for $12,000, you will save $1,200 a year in heating expenses. These…

A: Net present value is the excess of the present value of cash inflows over the present value of cash…

Q: How much can a construction company afford to spend now on new equipment in lieu of spending 300,000…

A: Solution:- Amount which is to be paid today = Present value of future payments discounted at the…

Q: Some equipment is needed for a 4-year project. It can be leased for $15,000 annually, or it can be…

A: In order to find the rate of return one has to know the purchased amount and the amount for it was…

Q: A heat exchanger costs ₱36,000, but it will save ₱5000 per year in energy costs. If the interest…

A: Capital budgeting is a financial process of evaluating capital projects in terms of profitability…

Q: A company is considering expanding their production capabilities with a new machine that costs…

A: Here, Cost of Machine is $83,000 Additional Income per year is $9,000 Projet Lifespan is 10 years…

Q: Project L costs $45,000, its expected cash inflows are $15,000 per year for 11 years, and its WACC…

A: The payback period refers to the time required by an investment to cover its initial investment.…

Q: If you insulate your office for $18,000, you will save $1,800 a year in heating expenses. These…

A: Formula: NPV = Present values of cash inflows - Present values of cash outflows. Deduction of…

Q: A robot’s first cost is $40,000, and its market value declines by 20% annually. The operating and…

A: Equivalent Uniform Annual Cost (EUAC) refers to the annual cash flows generated in the form of…

Q: An equipment is estimated to cost $300,000 four years from now and an additional $100,000 five years…

A: Introduction: Present value refers to the current valuation for a future sum. Investors determine…

Q: A project, that consists of just readjusting some parts to adapt them to assemble to electric cars,…

A: Annual savings =200000 which is expected to grow at 1% per year Year Revneue A B=Revenue of PY…

Q: Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball…

A: Equivalent annual savings is the annual savings made by operating and maintaining the assets over…

Q: Machine X will produce cost savings of $6,000 per year for four years; machine Y will produce cost…

A: Calculate the present value for both machines as follows:

Q: A community project costs GH¢800, 000. You reckon that it will produce an inflow after operating…

A: Frist we need to calculate Present value(PV) of all inflows by using this equation PV =CF1-1(1+i)ni…

Q: Project L costs $65,000, its expected cash inflows are $8,000 per year for 9 years, and its WACC is…

A: IRR is the rate at which NPV is Zero

Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

A heat exchanger costs $36,000, but it will save $5000 per year in energy costs. If the interest rate is 10%, how many years does it take to recover the capital cost?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

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

Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated revenue producing life of 4 years. Falkland has a cost of capital of 8%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?
Mason, Inc., is considering the purchase of a patent that has a cost of $85000 and an estimated revenue producing lite of 4 years. Mason has a required rate of return that is 12% and a cost of capital of 11%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?
How much must be invested now to receive $30,000 for 10 years if the first $30.000 is received one year from now and the rate is 8%?
If a copy center is considering the purchase of a new copy machine with an initial investment cost of $150,000 and the center expects an annual net cash flow of $20,000 per year, what is the payback period?
Bouvier Restaurant is considering an investment in a grill that costs $140,000, and will produce annual net cash flows of $21,950 for 8 years. The required rate of return is 6%. Compute the net present value of this investment to determine whether Bouvier should invest in the grill.
Caduceus Company is considering the purchase of a new piece of factory equipment that will cost $565,000 and will generate $135,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return In Excel, see Appendix C.
Gardner Denver Company is considering the purchase of a new piece of factory equipment that will cost $420,000 and will generate $95,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further Instructions on internal rate of return in Excel, see Appendix C.
A grocery store is considering the purchase of a new refrigeration unit with an Initial Investment of $412,000, and the store expects a return of $100,000 in year one, $72000 in years two and three, $65,000 in years four and five, and $38,000 in year six and beyond, what is the payback period?
Project X costs $10,000 and will generate annual net cash inflows of $4,800 for five years. What is the NPV using 8% as the discount rate?
A restaurant is considering the purchase of new tables and chairs for their dining room with an initial investment cost of $515,000, and the restaurant expects an annual net cash flow of $103,000 per year. What is the payback period?
A mini-mart needs a new freezer and the initial Investment will cost $300,000. Incremental revenues, including cost savings, are $200,000, and incremental expenses, including depreciation, are $125,000. There is no salvage value. What is the accounting rate of return (ARR)?
Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided manufacturing system. The annual net cash benefits and savings associated with the system are described as follows: The system will cost 9,000,000 and last 10 years. The companys cost of capital is 12 percent. Required: 1. Calculate the payback period for the system. Assume that the company has a policy of only accepting projects with a payback of five years or less. Would the system be acquired? 2. Calculate the NPV and IRR for the project. Should the system be purchasedeven if it does not meet the payback criterion? 3. The project manager reviewed the projected cash flows and pointed out that two items had been missed. First, the system would have a salvage value, net of any tax effects, of 1,000,000 at the end of 10 years. Second, the increased quality and delivery performance would allow the company to increase its market share by 20 percent. This would produce an additional annual net benefit of 300,000. Recalculate the payback period, NPV, and IRR given this new information. (For the IRR computation, initially ignore salvage value.) Does the decision change? Suppose that the salvage value is only half what is projected. Does this make a difference in the outcome? Does salvage value have any real bearing on the companys decision?