(b) Following particulars are available about a new automatic machine of the surgery department in a medical college. Particulars Amount ($) Initial Cost 500000 Annual O/M cost 850 Cost at the end of 12th year for technical update 50000 Annual income from the machine 60000 Salvage value of the machine 40000 Life of the machine (years) 20 (i) Write a cash flow diagram. (ii) Find the Annual Worth amount of costs and benefits separately at the MARR of 9% set by the medical college. (iii) Write your impression about purchasing this machine.

(b) Following particulars are available about a new automatic machine of the surgery department in a medical college. Particulars Amount ($) Initial Cost 500000 Annual O/M cost 850 Cost at the end of 12th year for technical update 50000 Annual income from the machine 60000 Salvage value of the machine 40000 Life of the machine (years) 20 (i) Write a cash flow diagram. (ii) Find the Annual Worth amount of costs and benefits separately at the MARR of 9% set by the medical college. (iii) Write your impression about purchasing this machine.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 40P

See similar textbooks

Similar questions

Consolidated Aluminum is considering the purchase of a new machine that will cost $308,000 and provide the following cash flows over the next five years: $88,000, 92,000, $91,000, $72,000, and $71,000. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return in Excel, see Appendix C.
A bookstore is planning to purchase an automated inventory/remote marketing system, which includes an upgrade to a more sophisticated cash register system. The package has an initial investment cost of $360,000. It is expected to generate $144,000 of annual cash flows, reduce costs and provide incremental cash revenues of $326,000, and incur incremental cash expenses of $200,000 annually. What is the payback period and accounting rate of return (ARR)?
Your company is planning to purchase a new log splitter for is lawn and garden business. The new splitter has an initial investment of $180,000. It is expected to generate $25,000 of annual cash flows, provide incremental cash revenues of $150,000, and incur incremental cash expenses of $100,000 annually. What is the payback period and accounting rate of return (ARR)?
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?
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?
The staff of ProHealth Medical Services has established the following net cash flows for a food services operation that may open in its outpatient clinic. Year Expected Net Cash Flow 0 ($100,000) 1 40,000 2 40,000 3 40,000 4 40,000 5 40,000 5 (Salvage Value) 30,000 The time 0 cash flow is the net investment outlay, while the final amount is the terminal cash flow. The clinic is expected to move to a new building in five years. All other flows represent net operating cash flows ProHealth’s corporate cost capital is 10% What is the projects IRR? Assuming the project has average risk, what, is its NPV? Now, assume that the operating cash flows in years 1 through 5 could be as low as 30,000 or as high as $50,000. Furthermore, the salvage value cash flow at the end of year 5 could be as low as $0 or as high as $40,000. What are the worst-case and best-case IRRS? The worst-case and best-case NPVs?
The staff of ProHealth Medical Services has established the following net cash flows for a food services operation that may open in its outpatient clinic. Year Expected Net Cash Flow 0 ($100,000) 1 40,000 2 40,000 3 40,000 4 40,000 5 40,000 5 (Salvage Value) 30,000 The time 0 cash flow is the net investment outlay, while the final amount is the terminal cash flow. The clinic is expected to move to a new building in five years. All other flows represent net operating cash flows ProHealth’s corporate cost capital is 10% a. What is the projects IRR? b. Assuming the project has average risk, what, is its NPV? c. Now, assume that the operating cash flows in years 1 through 5 could be as low as 30,000 or as high as $50,000. Furthermore, the salvage value cash flow at the end of year 5 could be as low as $0 or as high as $40,000. What are the worst-case and best-case IRRS? The worst-case and best-case NPVs?
Your company is planning to purchase a new log splitter for its lawn and garden business. The new splitter has an initial investment of $312,000. It is expected to generate $40,000 of annual cash flows, provide incremental cash revenues of $165,488, and incur incremental cash expenses of $80,000 annually. What is the payback period and accounting rate of return (ARR)? Round your answers to 1 decimal place. Payback period fill in the blank 1 years ARR fill in the blank 2%
Use this information for Wyoming Corporation to answer the questions that follow. The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for five years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment: Year Income fromOperations Net CashFlow 1 $18,750 $93,750 2 18,750 93,750 3 18,750 93,750 4 18,750 93,750 5 18,750 93,750 The present value index for this investment is
URGENTLY REQUIRED HKU purchased a face mask making machine to make face mask for the students and staffs at a price of $3.15 million. The net cash flow is estimated at $500,000 per year and a salvage value of $400,000 is anticipated regardless of when it is sold. (a) Determine, the number of years the machine must be used to obtain payback at MARR values of, 0%, 8% and 15% per year. (b) Plot the payback years against MARR obtained in (i) and discuss the behavior.
Use this information for Wyoming Corporation to answer the question that follow.The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for five years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment: Year Income fromOperations Net CashFlow 1 $18,750 $93,750 2 18,750 93,750 3 18,750 93,750 4 18,750 93,750 5 18,750 93,750 The cash payback period for this investment is
A clinic is considering the possibility of two new purchases: new MRI equipment and new biopsy equipment. Each project requires an investment of $425,000. The expected life for each is five years with no expected salvage value. The net cash inflows associated with the two independent projects are as follows: Year MRI Equipment Biopsy Equipment1 $200,000 $50,0002 100,000 50,0003 150,000 100,0004 100,000 200,0005 50,000 237,500 1. Compute the payback period for each project. Assume that the manager of the clinic accepts only projects with a payback period of three years or less. Offer some reasons why this may be a rational strategy even though the NPV computed in Exercise 19-11 may indicate otherwise. 2. Compute the accounting rate of return for each project.