Hh3. Swifty Industries is considering the purchase of new equipment costing $1.220,000 to replace existing equipment that will be sold for$183.600. The new equipment is expected to have a $220.000 salvage value at the end of its 5-year life. During the period of its use,the equipment will allow the company to produce and sell an additional 39,500 units annually at a sales price of $23 per unit. Thoseunits will have a variable cost of $12 per unit. The company will also incur an additional $91,100 in annual fixed costs.Click here to view the factor tableCalculate the present value of each cash flow assuming an 5% discount rate. (For calculation purposes, use 4 decimal places as displayed inthe factor table previded and round final answer to 0 decimal place, eg 58.971. Enter negative amounts using a negative sign preceding thenumber eg.-58.971 or parentheses eg. (58,971))Cash FlowPurchase of new equipmentSalvage of old equipmentSales revenueVariable costsAdditional fixed costsPresent Value(122000018360090850047400091100 Cash FlowPurchase of new equipmentSalvage of old equipmentSales revenueVariable costsAdditional fixed costs.Salvage of new equipmentPresent Value(122000018360090850047400091100220000

The question presents a scenario in which Swifty Industries is considering the purchase of new…

Answered: Calculate the present value of each…

Calculate the present value of each cash flow assuming an 5% discount rate. (For the factor toble provided and round final answer to decimal

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter13: Capital Budgeting: Estimating Cash Flows And Analyzing Risk

Section: Chapter Questions

Problem 1P: Talbot Industries is considering launching a new product. The new manufacturing equipment will cost...

See similar textbooks

Related questions

Q: Factory Overhead Cost Variance Report Tiger Equipment Inc., a manufacturer of construction…

A: A flexible budget is prepared by considering the outcome or quantity of actual performance but by…

Q: Which expenditure cycle department has a different function (i.e.. record keeping authorization,…

A: There are various activities or steps required in order to make the transaction successful as per…

Q: For 20Y2, McDade Company reported a decline in net income. At the end of the year, T. Burrows, the…

A: Horizontal analysis is the way to calculate the variance from the different year by year to show an…

Q: Cash Accounts receivable Short-term debt investments (available-for-sale) Inventory Prepaid rent…

A: An organization's total cash inflows from ongoing operations and outside investment sources are…

Q: On January 1, 2024, Bonita Ltd. issued bonds with a maturity value of $5.20 million for $4,999,235,…

A: A firm or group may issue bonds payable as a form of long-term debt to raise capital from investors.…

Q: Lin Corporation has a single product whose selling price is $140 per unit and whose variable expense…

A: TARGET SALES Target Sales is the Sales Required to Earn Desired Profit. The target profit is the…

Q: Required information [The following information applies to the questions displayed below.] Manuel…

A: OVERHEAD VOLUME VARIANCE Overhead Volume Variance is the Difference Between Standard Cost of…

Q: A company must decide between scrapping or reworking units that do not pass Inspection. The company…

A: Incremental income is the total amount of excess income generated by the company by choosing other…

Q: Parker Plastic, Incorporated, manufactures plastic mats to use with rolling office chairs. Its…

A: Direct Material Price Variance: It is the difference between actual price for actual quantity and…

Q: Jung Corporation operates in States A and B as indicated below. All goods are manufactured in State…

A: The term sales factor refers to the fraction which states the numerator of aggregate sales of the…

Q: Blue Corporation issues 200 “packages” of securities for $80 per package, or a total of $16,000 on…

Q: a. Has Marty made any taxable gifts this year and, if so, in what amounts? b. Assume Marty is…

A: The question involves determining the taxable gifts made by Marty, assuming that Marty gave a watch…

Q: 1. Describe 3 examples of items (transactions) that would require reconciliation of total…

A: Note: “Since you have asked multiple questions, we will solve the first question for you. If you…

Q: Mulkeen Service Company, Incorporated, was incorporated by Conor Mulkeen and five other managers.…

A: The T-accounts are prepared to post the journal entries to the specific accounts of the business.…

Q: If variable manufacturing costs are $8 per unit and total fixed manufacturing costs are $616,000,…

A: Variable costing: The variable costing method considers only variable overheads while computing the…

Q: A company's budgeted sales in units for the next three months follow. The company wants to maintain…

A: Units to be produced is calculated by adding the ending inventory in the budgeted sales units and…

Q: The Midwest Division of Grainger Company has average assets of $200,000 and income of $40,000. What…

A: Return on Investment (ROI) is perhaps one of the most well-liked measures, and when done properly,…

Q: Bed & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent…

A: Lets understand the basics Whenever organization to choose between whether to continue operation or…

Q: Cove's Cakes is a local bakery. Price and cost information follows: Price per cake Variable cost per…

A: variable Cost per unit = ingredients + Direct labor + Overhead cost = $2.25 + $1.18 + $0.14 =…

Q: An asset that costs $97,600 and has accumulated depreciation of $82,000 is sold for $18,000. What…

A: Accumulated Depreciation - The amount of depreciation that is charged on an asset from the…

Q: Ortega Company issued five-year, 5% bonds with a face value of $50,000 on January 1, 2017. Interest…

A: A firm or group may issue bonds payable as a form of long-term debt to raise capital from investors.…

Q: On November 30, Petrov Company has $127,000 of accounts receivable and uses the perpetual inventory…

A: Journal entry is an art of recording, classifying and summarising the business transaction into…

Q: Carla Vista Company's budgeted sales for April were estimated at $709,000, sales commissions at 4%…

A: Explanation: →As the name suggests, selling expenses are those expense which are incurred on…

Q: Apex Inc. reports the following for a recent year: Income from continuing operations before income…

A: Income statement is the one which is prepared by the entity for the purpose of determining the…

Q: Computing job costs and gross profit P1 P2 P3 Information on Kwon Mfg.’s activities for its first…

A: COST SHEET particulars job 201 job 202 Direct material $48,200…

Q: Cornwall Mobile Detailing (CMD) is a service that washes and details a customer's vehicle at their…

A: Income statement is a financial statement which shows profitability of a firm over a period of time…

Q: Monty Inc, a greeting card company, had the following statements prepared as of December 31, 2020…

A: The cash flow statement is prepared to record the cash flow from various activities during the…

Q: Inventory Turnover The following data (in millions) were taken from recent annual reports of Apple…

A: Inventory turnover means that a company is selling goods quickly, and there is considerable demand…

Q: Tempo Company's fixed budget (based on sales of 12,000 units) folllows. Fixed Budget Sales (12,000…

A: Answer:- Flexible budget:- The flexible budget is created for activity levels other than those…

Q: Disposal of Fixed Asset Equipment acquired on January 6 at a cost of $331,200 has an estimated…

A: Hi student Since there are multiple subparts, we will answer only first three subparts. Fixed assets…

Q: You are called by Tim Duncan of Shamrock Co. on July 16 and asked to prepare a claim for insurance…

A: A claim is when you express your right to something that belongs to you, like your medical records…

Q: Sheffield Company combines its operating expenses for budget purposes in a selling and…

A: Selling and administrative budget : It is an estimation of the selling and administrative costs for…

Q: 1. 2. 3. Tamarisk Corp. issued $18,000,000 par value 10% convertible bonds at 99. If the bonds had…

A: Answer:- Journal entry meaning:- An entry in the journal serves as a record of a transaction in the…

Q: Morganton Company makes one product and it provided the following information to help prepare the…

A: Selling and administrative expenses are those which are incurred on the day to day activities…

Q: signment i JART manufactures and sells underwater markers. Its contribution margin income statement…

A: From the above information complete the income from the special offer ,then we can know that the…

Q: Predetermined Factory Overhead Rate Exotic Engine Shop uses a job order cost system to determine the…

A: Total budgeted Overhead cost = Shop and repair equipment Depreciation + Shop supervisor salaries +…

Q: Blossom Division's operating results include: ● Controllable margin, $323,200 Sales revenue,…

A: Return on Investment is the rate which define the return on an investment in future after a time…

Q: In January 2015, Fehr Mining Corporation purchased a mineral mine for $6,061,128 with removable ore…

A: Depletion or depreciation is an account used to allocate capital expenditure on assets over the…

Q: Mosaic Tile Company is considering an investment in new equipment costing $870,000. The equipment…

A: Annual depreciation = (Cost - Residual value)/Useful life Accounting rate of return = Annual…

Q: Barnes Books allows for possible bad debts. On May 7, Barnes writes off a customer account of…

A: Allowance for Doubtful Accounts - Allowance for doubtful accounts are contra account created to make…

Q: Summary financial information for Ivanhoe Company is as follows. Current assets Plant assets Total…

A: Horizontal Analysis :— It is one of the type of analysis of financial statements that shows the…

Q: Winston Company estimates that total factory overhead for the following year will be $847,200. The…

A: Predetermined Overhead Rate :— It is the rate used to allocate manufacturing overhead cost to cost…

Q: nber's employer, Lavender, Inc., has a § 401(k) plan that permits salary deferral elections by its…

A: Tax rules can be established at the federal, state, and local levels of government, and they can…

Q: What type of analysis is indicated by the following? Increase (Decrease) Current Year…

A: Financial Statement analysis is the technique of identifying the financial strengths and weaknesses…

Q: Chip Company produces three products, Kin, Ike, and Bix. Each product uses the same direct material.…

A: The contribution margin helps in analyzing the amount left with the company after paying off its…

Q: Sherwood, Inc., the parent company of Frito-Lay snack foods and Sherwood beverages, had the…

A: Current ratio ratio and quick ratio are used to measure the short term liquidity position of a…

Q: Pelican Products plc includes a Squidget in one of its products. The Squidget takes one hour to make…

A: Lets understand the basics. When decision is required between whether to buy from outside or produce…

Q: Micah Corporation has two divisions, A and B. The following information is provided for Division A:…

A: Transfers between departments are required if one department provides a service to another…

Q: Alyeski Tours operates day tours of coastal glaciers in Alaska on its tour boat the Blue Glacier.…

A: Flexible budget is the statement which reports the variable and fixed costs to be incurred at…

Q: This year, Santhosh, a single taxpayer, estimates that his tax liability will be $112,000. Last…

A: Total tax liability for santhosh: $ 112000 Total withholding tax from tax payer = $ 39000 For a…

Question

Hh3.

Swifty Industries is considering the purchase of new equipment costing $1.220,000 to replace existing equipment that will be sold for
$183.600. The new equipment is expected to have a $220.000 salvage value at the end of its 5-year life. During the period of its use,
the equipment will allow the company to produce and sell an additional 39,500 units annually at a sales price of $23 per unit. Those
units will have a variable cost of $12 per unit. The company will also incur an additional $91,100 in annual fixed costs.
Click here to view the factor table
Calculate the present value of each cash flow assuming an 5% discount rate. (For calculation purposes, use 4 decimal places as displayed in
the factor table previded and round final answer to 0 decimal place, eg 58.971. Enter negative amounts using a negative sign preceding the
number eg.-58.971 or parentheses eg. (58,971))
Cash Flow
Purchase of new equipment
Salvage of old equipment
Sales revenue
Variable costs
Additional fixed costs
Present Value
(1220000
183600
908500
474000
91100

Cash Flow
Purchase of new equipment
Salvage of old equipment
Sales revenue
Variable costs
Additional fixed costs.
Salvage of new equipment
Present Value
(1220000
183600
908500
474000
91100
220000

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: Question Explanation

VIEW

Step 2: Answer

VIEW

Solution

VIEW

Step by step

Solved in 3 steps

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, accounting and related others by exploring similar questions and additional content below.

Similar questions

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?
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.
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?