Assume depreciation is calculated on a straight-line basis for tax purposes using the initial imvestment in the oven and its estimated terminal disposal value. Assume all cash flows occur at year-end except for initial investment amounts. E (Cick the icon to view the estimated cash flows for the oven.) Present Value of $1 table Present Value of Annuity of $1 table Euture Value of $1 table Euture Value of Annuity of $1 table Read the reguirements Data Table O Requirements A в D 1. Calculate (a) net present value. (b) payback period, and (c) internal rate of return. 2. Calculate accrual accounting rate of retum based on net initial investment. Relevant Cash Flows at End of Each Year 2 Year 0 Year 1 Year 2 Year 3 Year 4 3 Initial oven investment Annual cash flows from operations 4 (excluding the depreciation effect) 5 Cash flow from terminal disposal of oven S (62,000 Print Done S 24,000 s 24,000 s 24,000s 24,000 2.000 Print Done

Assume depreciation is calculated on a straight-line basis for tax purposes using the initial imvestment in the oven and its estimated terminal disposal value. Assume all cash flows occur at year-end except for initial investment amounts. E (Cick the icon to view the estimated cash flows for the oven.) Present Value of $1 table Present Value of Annuity of $1 table Euture Value of $1 table Euture Value of Annuity of $1 table Read the reguirements Data Table O Requirements A в D 1. Calculate (a) net present value. (b) payback period, and (c) internal rate of return. 2. Calculate accrual accounting rate of retum based on net initial investment. Relevant Cash Flows at End of Each Year 2 Year 0 Year 1 Year 2 Year 3 Year 4 3 Initial oven investment Annual cash flows from operations 4 (excluding the depreciation effect) 5 Cash flow from terminal disposal of oven S (62,000 Print Done S 24,000 s 24,000 s 24,000s 24,000 2.000 Print Done

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)

10th Edition

ISBN:9781337902571

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter12: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 10P: Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6...

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The Scampini Supplies Company recently purchased a new delivery truck. The new truck cost $22,500, and it is expected to generate net after-tax operating cash flows, including depreciation, of $6,250 per year. The truck has a 5-year expected life. The expected salvage values after tax adjustments for the truck are given here. The company’s cost of capital is 10%. Should the firm operate the truck until the end of its 5-year physical life? If not, then what is its optimal economic life? Would the introduction of salvage values, in addition to operating cash flows, ever reduce the expected NPV and/or IRR of a project?
Alfredo Company purchased a new 3-D printer for $900,000. Although this printer is expected to last for ten years, Alfredo knows the technology will become old quickly, and so they plan to replace this printer in three years. At that point, Alfredo believes it will be able to sell the printer for $15,000. Calculate yearly depreciation using the double-declining-balance method.
Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6 years, and an estimated salvage value of 800. The replacement machine is eligible for 100% bonus depreciation at the time of purchase- The replacement machine would permit an output expansion, so sales would rise by 1,000 per year; even so, the new machines much greater efficiency would cause operating expenses to decline by 1,500 per year The new machine would require that inventories be increased by 2,000, but accounts payable would simultaneously increase by 500. Dautens marginal federal-plus-state tax rate is 25%, and its WACC is 11%. Should it replace the old machine?
Kenzie purchased a new 3-D printer for $450,000. Although this printer is expected to last for ten years, Kenzie knows the technology will become old quickly and so she plans to replace this printer in three years. At that point, Kenzie believes she will be able to sell the printer for $30,000. Calculate yearly depreciation using the double-declining-balance method.
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?
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Taos Productions bought a piece of equipment for $79,860 that will last for 5 years. The equipment will generate net operating cash flows of $20,000 per year and will have no salvage value at the end of its life. What is the internal rate of return?