A seaI firm Trodent’s customers expects to decrease downtime by 0.3 as a result of the new seal design. If Iost production would have cost the company $110,000 per year for the next four years, how much could the company afford to spend now on the new seals, if it uses an interest rate of 0,1 2 per year?
Q: A company is considering replacing an old piece of industrial equipment to reduce operating and…
A: Note: It has been assumed that here comma has been used instead of a full stop in cost of equipment…
Q: The makers of Lifestraw, a filter designed to allow the user to drink water safely from a stream,…
A: Present value is the present worth of any sum of money to be received in the future at a specified…
Q: Altmax Ltd, a company that manufactures automobile wiring harnesses, has budgeted P = $400,000 now…
A: Time value of money means that worth of a rupee today is less than the worth of rupee in future.…
Q: A pulp and paper company is planning to set aside $150,000 now for possibly replacing its large…
A: A theory that helps to compute the present or future value of the cash flows is term as the TVM…
Q: A company plans to modernize its facilities in 8 years. They estimate saving $5,000 per month if…
A: Estimated saving Per Month = $5,000.00 Time Period(Years) = 8 Salvage Value = $29,700.00 Nominal…
Q: A new process for manufacturing lead pencils will have a first cost of $35,000 and annual costs of…
A: Given, Initial Cost = $35,000 Annual cost = $17,000 Annual extra income = 22,000
Q: A convenience store is looking into the possibility of installing a 24/7-automated refill system to…
A: Annual worth method we need to find out total annual cost of operating the equipment and compare…
Q: Determine the NPV for the following: An information system will cost $95,000 to implement over…
A: According to the information provided: Cost in Year 0 = $95000 Savings in Year 1 = $30000 Saving in…
Q: A design firm is considering investing in a software suite that costs $200,000. It estimates that…
A: solution concept : present worth is calculated as the the present value of inflow less present…
Q: A small northern California consulting firm wants to start a recapitalization pool for replacement…
A: The future value of a growing annuity is the future worth of an annuity that is growing at a…
Q: An investment company wants to study the usage of new technology for one of its clients. This…
A: Human Hour Per month = 187 Average Savings per Human hour = $450 Average savings per month =…
Q: A manufacturing firm spends $350,000 annually for a required safety inspection program. A new…
A: A theory that helps to compute the present or future value of the cash flows is term as the TVM…
Q: Straight-Line is a company that does land surveys and engineering consulting. They have an…
A: Break-even refers to the point at which the company has no profit/loss from the sale of a product or…
Q: Meggitt Systems, a company that specializes in extreme-high-temperature accelerometers, is…
A: Given: Present value= $280,000 Interest rate =12%
Q: Your firm spends $500,000 per year (end of the year payment) in regular maintenance of its…
A: Future value of uniform annual recurring cost is given below formula:F=R1+in-1iWhere,F=Future…
Q: Better Corporation can purchase a piece of equipment now for $120,000 or buy it 4 years from now for…
A:
Q: Johnson Hardware wants to construct a new building at a second location. If construction could begin…
A: Since you have posted a question with multiple sub-parts, we will solve first three subparts for…
Q: Labco Scientific sells high-purity chemicals to universities, research laboratories, and…
A:
Q: A small northern California consulting firm wants to start a recapitalization pool for replacement…
A: Time value of money (TVM) refers to the method or technique which is used to measure the amount of…
Q: A firm might purchase a computerized quality control system. The proposed system will cost $76,000,…
A: DISCOUNTED PAYBACK PERIOD FORMULA: discounted payback period=period prior to full…
Q: Your firm is contemplating the purchase of a new $410,000 computer-based order entry system. The…
A: For determining the IRR of this project we will have to compute the operating cash flows and the…
Q: A major electronics manufacturer expects to generate additional revenue from its recently won…
A: Future worth is the value of the present cash flows after certain period. Due to interest that can…
Q: Please show all equations and work as needed. Make the correct answer clear. If possible, please…
A: If C0 is the cost to purchase the machine, S is the salvage value at the end of year n and C is the…
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: Sensotech, Inc., a maker of microelectromechanical systems, believes it can reduce product recalls…
A: MARR is return that an proposal must earn to qualify for investment. Investors or Manager have…
Q: A fashion label is considering inclusive sizing which would expand its offerings to plus size and…
A: The break-even no. of pieces will be that number for which the NPV is nil. NPV is net present value.
Q: The garden supply company is also considering taking out a loan and buying a small truck to save…
A: Payback period is defined as the number of years required to recover the initial cost of the…
Q: A northern California consulting firm wants to start saving money for replacement of network…
A: The computation is done below: The amount available will be $26,751.81
Q: The International Parcel Service has installed a new radio frequency identification system to help…
A: The future worth analysis is the capital budgeting tool used to evaluate the acceptability of a…
Q: ADB systems makes high performance rotational viscometers capable of steady shear and yield stress…
A: Present Value is the current value of a cash flow that can be occurred in future. To find the…
Q: A chemical engineer believes that by modifying the structure of a certain water treatment polymer,…
A: Given:Extra income by modification of plant is $6000 per year.Interest rate per year 10%Time period…
Q: A large electronic retailer is considering the purchase of software that will minimize shipping…
A: In the given situation, Purchase of Software has to be justified for the annual expenditure incurred…
Q: Johnson Hardware wants to construct a new building at a second location. If construction could begin…
A: Inflation rate = 3% Cost of New Building = $500,000 Down Payment required = 20% Monthly Investment =…
Q: Your company is considering a purchase of a $580,000 computer-based order entry system. The system…
A: Calculating the of the depreciation expenses for the equipment. We have,Depreciation expenses =…
Q: Suppose a firm is investing in a pollution control technology to meet a regulation in three years…
A: compare cost of both the options, installing now vs installing later.
Q: A small heat pump now costs $2,500 to purchase and install. It has a projected useful life of 18…
A: Given information: Purchase and install cost of heat pump = $2,500 Useful life = 18 years Annual…
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: A maker of mechanical systems can reduce product recalls by 25% if it purchases new packaging…
A: Given information : Reduction rate = 25% Expected cost = $40,000 Time period = 4 years Minimum…
Q: You are considering buying a piece of industrial equipment to automate a part of your production…
A: GIVEN ÷ Annual saving in labour cost = $30654 No. of years = 9 years Interest cost =10%
Q: The Wildwood Widget Company needs a milling machine for its new assembly line. The machine presently…
A: Present worth analysis is an analysis in which we convert all the cash flows to present worth using…
Q: A company plans to modernize its facilities in 8 years. They estimate saving $9,518 per month if…
A: To Find: Capital Availability
Q: RVC makes a control valve regulator. How much can the company afford to spend now on new equipment…
A: Present value means the actual amount is adjusted with the interest rate so as to get the present…
Q: You are looking at purchasing a new computer for online class. Computer A costs $4000 now, and you…
A: Computer A Computer B Cost of Purchase 4000 2500 Upgrade N.A at Year 2 End Upgrade Cost…
Q: National Co.'s business is booming, and it needs to raise more capital. The company purchases…
A: Costs of discounts taken holds importance when the choice is to be made between whether to make the…
Q: 2. Beckton Steel Products, a company that specializes in crankshaft hardening, is investigating…
A: FV is the future worth of cash flows that have occurred in the past or present.
A seaI firm Trodent’s customers expects to decrease downtime by 0.3 as a result of the new seal design. If Iost production would have cost the company $110,000 per year for the next four years, how much could the company afford to spend now on the new seals, if it uses an interest rate of 0,1 2 per year?
Step by step
Solved in 2 steps with 1 images
- Shonda & 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?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?The Rodriguez Company is considering an average-risk investment in a mineral water spring project that has an initial after-tax cost of 170,000. The project will produce 1,000 cases of mineral water per year indefinitely, starting at Year 1. The Year-1 sales price will be 138 per case, and the Year-1 cost per case will be 105. The firm is taxed at a rate of 25%. Both prices and costs are expected to rise after Year 1 at a rate of 6% per year due to inflation. The firm uses only equity, and it has a cost of capital of 15%. Assume that cash flows consist only of after-tax profits because the spring has an indefinite life and will not be depreciated. a. What is the present value of future cash flows? (Hint: The project is a growing perpetuity, so you must use the constant growth formula to find its NPV.) What is the NPV? b. Suppose that the company had forgotten to include future inflation. What would they have incorrectly calculated as the projects NPV?
- 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?Shao Airlines is considering the purchase of two alternative planes. Plane A has an expected life of 5 years, will cost $100 million, and will produce net cash flows of $30 million per year. Plane B has a life of 10 years, will cost $132 million, and will produce net cash flows of $25 million per year. Shao plans to serve the route for only 10 years. Inflation in operating costs, airplane costs, and fares are expected to be zero, and the company’s cost of capital is 12%. By how much would the value of the company increase if it accepted the better project (plane)? What is the equivalent annual annuity for each plane?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.
- 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)?Flanders Manufacturing is considering purchasing a new machine that will reduce variable costs per part produced by $0.15. The machine will increase fixed costs by $18,250 per year. The information they will use to consider these changes is shown here.Now assume that it is several years later. The brothers are concerned about the firm’s current credit terms of net 30, which means that contractors buying building products from the firm are not offered a discount and are supposed to pay the full amount in 30 days. Gross sales are now running $1,000,000 a year, and 80% (by dollar volume) of the firm’s paying customers generally pay the full amount on Day 30; the other 20% pay, on average, on Day 40. Of the firm’s gross sales, 2% ends up as bad-debt losses. The brothers are now considering a change in the firm’s credit policy. The change would entail: (1) changing the credit terms to 2/10, net 20, (2) employing stricter credit standards before granting credit, and (3) enforcing collections with greater vigor than in the past. Thus, cash customers and those paying within 10 days would receive a 2% discount, but all others would have to pay the full amount after only 20 days. The brothers believe the discount would both attract additional customers and encourage some existing customers to purchase more from the firm—after all, the discount amounts to a price reduction. Of course, these customers would take the discount and hence would pay in only 10 days. The net expected result is for sales to increase to $1,100,000; for 60% of the paying customers to take the discount and pay on the 10th day; for 30% to pay the full amount on Day 20; for 10% to pay late on Day 30; and for bad-debt losses to fall from 2% to 1% of gross sales. The firm’s operating cost ratio will remain unchanged at 75%, and its cost of carrying receivables will remain unchanged at 12%. To begin the analysis, describe the four variables that make up a firm’s credit policy and explain how each of them affects sales and collections.
- Talbot Industries is considering launching a new product. The new manufacturing equipment will cost $17 million, and production and sales will require an initial $5 million investment in net operating working capital. The company’s tax rate is 25%. What is the initial investment outlay? The company spent and expensed $150,000 on research related to the new product last year. What is the initial investment outlay? Rather than build a new manufacturing facility, the company plans to install the equipment in a building it owns but is not now using. The building could be sold for $1.5 million after taxes and real estate commissions. What is the initial investment outlay?Talbot Industries is considering launching a new product. The new manufacturing equipment will cost 17 million, and production and sales will require an initial 5 million investment in net operating working capital. The companys tax rate is 40%. a. What is the initial investment outlay? b. The company spent and expensed 150,000 on research related to the new product last year. Would this change your answer? Explain. c. Rather than build a new manufacturing facility, the company plans to install the equipment in a building it owns but is not now using. The building could be sold for 1.5 million after taxes and real estate commissions. How would this affect your answer?Although the Chen Company’s milling machine is old, it is still in relatively good working order and would last for another 10 years. It is inefficient compared to modern standards, though, and so the company is considering replacing it. The new milling machine, at a cost of $110,000 delivered and installed, would also last for 10 years and would produce after-tax cash flows (labor savings and depreciation tax savings) of $19,000 per year. It would have zero salvage value at the end of its life. The project cost of capital is 10%, and its marginal tax rate is 25%. Should Chen buy the new machine?