Exercise 14-2 (Algo) Net Present Value Analysis [LO14-2]The management of Kunkel Company is considering the purchase of a $20,000 machine that would reduce operating costs by $5,000per year. At the end of the machine's five-year useful life, it will have zero salvage value. The company's required rate of return is 13%.Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table.Required:1. Determine the net present value of the investment in the machine.2. What is the difference between the total, undiscounted cash inflows and cash outflows over the entire life of the machine?Complete this question by entering your answers in the tabs below.Required 1Required 2Determine the net present value of the investment in the machine. (Negative amounts should be indicated by a minus sign.Round your final answer to the nearest whole dollar amount. Use the appropriate table to determine the discount factor(s).)Net present valueRequired 2 >

Answered: Exercise 14-2 (Algo) Net Present Value…

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 4P

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REPLACEMENT ANALYSIS St. Johns River Shipyards is considering the replacement of an 8-year-old riveting machine with a new one that will increase earnings from 24,000 to 46,000 per year. The new machine will cost 80,000, and it will have an estimated life of 8 years and no salvage value. The new riveting machine is eligible for 100% bonus depreciation at the time of purchase. The applicable corporate tax rate is 25%, and the firms WACC is 10%. The old machine has been fully depreciated and has no salvage value. Should the old riveting machine be replaced by the new one? Explain your answer.
Net Present Value Analysis The management of Kunkel Company is considering the purchase of a $27,000 machine that would reduce operating costs by $7,000 per year. At the end of the machine’s five-year useful life, it will have zero salvage value. The company’s required rate of return is 12%. Required: 1. Determine the net present value of the investment in the machine. 2. What is the difference between the total, undiscounted cash inflows and cash outflows over the entire life of the machine?
Exercise 12-2 (Algo) Net Present Value Analysis [LO12-2] The management of Kunkel Company is considering the purchase of a $26,000 machine that would reduce operating costs by $6,500 per year. At the end of the machine's five-year useful life, it will have zero salvage value. The company's required rate of return is 16%. Click here to view Exhibit 128-1 and Exhibit 128-2, to determine the appropriate discount factor(s) using table. Required: 1. Determine the net present value of the investment in the machine. 2. What is the difference between the total, undiscounted cash inflows and cash outflows over the entire life of the machine? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Determine the net present value of the investment in the machine. (Negative amounts should be indicated by a minus sign. Round your final answer to the nearest whole dollar amount. Use the appropriate table to determine the discount factor(s).) Net present value…
Exercise 14-2 (Algo) Net Present Value Analysis [LO14-2] The management of Kunkel Company is considering the purchase of a $21,000 machine that would reduce operating costs by $5,000 per year. At the end of the machine’s five-year useful life, it will have zero salvage value. The company’s required rate of return is 12%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table. Required: 1. Determine the net present value of the investment in the machine. 2. What is the difference between the total, undiscounted cash inflows and cash outflows over the entire life of the machine?
V14 Steadman Company is considering an investment in a new machine for an independent five-year project. The machine’s cost is $837,500 with no salvage value at the end of five years. Net cash inflows from the project are expected to be $252,500 annually. Steadman would depreciate the machine using the MACRS schedule, and the machine qualifies as a 5-year asset. Steadman uses a discount rate of 8%, and its tax rate is 30%. Required: 1. Determine the after-tax net income and after-tax cash flows from the investment. Refer to Exhibit 12.4 for the 5-year MACRS deprecation schedule. 2. Determine the NPV of the project. 3. Determine the IRR of the project. 4. Determine the payback period of the project, assuming that cash flows occur evenly in each year. 5. Determine the book (accounting) rate of return using both (a) the initial investment as the denominator and (b) the average book value of the investment as the denominator.
6. 6:05 TB MC Qu. 14-55 (Algo) The management of Penfold Corporation... The management of Penfold Corporation is considering the purchase of a machine that would cost $310,000, would last for 6 years, and would have no salvage value. The machine would reduce labor and other costs by $60,000 per year. The company requires a minimum pretax return of 12% on all investment projects. © Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. The net present value of the proposed project is closest to (Ignore income taxes.): (Round your intermediate calculations and final answer to the nearest whole dollar amount.) Multiple Choice О $(63,340) $(8.349) B O $(91,225) MacBook Pro G Search or type URL
What is the future worth of the following project of acquiring customized rollers for a manufacturing firm if the MARR is set at 15%? Proposal A Investment cost $10,000 Expected life Market (salvage) value" Annual receipts Annual expenses 5 years -$1,000 $8,000 $4,000 a A negative market value means that there is a net cost to dispose of an asset. Answer: 5855.95
Q. 3 The cost of a replacement packaging machine is $95,000. The machine is anticipated to reduce the packaging costs by $20 per parcel. The_purchasing company is expected to yield an output of 25,000 parcels per year. The salvage value of the machine is anticipated to be $23,000 at the end of 10 years. What is the present worth of the machine if the after-tax MARR is 10%, the CCA rate is 20%, and the tax rate is 40%?
Required information Use the following information for the Quick Study below. [The following information applies to the questions displayed below.] Project A requires a $380,000 initial investment for new machinery with a five-year life and a salvage value of $39,000. The company uses straight-line depreciation. Project A is expected to yield annual net income of $23,000 per year for the next five years. QS 25-6 Accounting rate of return LO P2 Compute Project A's accounting rate of return. Accounting Rate of Return Choose Numerator: Choose Denominator: = Accounting Rate of Return Accounting rate of return
Exercise 14A-4 (Algo) Basic Present Value Concepts [LO14-7] Fraser Company will need a new warehouse in eighteen years. The warehouse will cost $410,000 to build. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: What lump-sum amount should the company invest now to have the $410,000 available at the end of the eighteen-year period? Assume that the company can invest money at: (Round your final answer to the nearest whole dollar amount.)
Engineering economy - ENGR 3322 A new municipal refuse-collection truck can be purchased for $84,000. Its expected useful life is six years, at which time its market value will be zero. Annual receipts less expenses will be approximately $18,000 per year over the six-year study period. At MARR of 19%, calculate the internal rate of return of the project a. 7% b. 8% c. 9% d. None of the choices
2| Randi Corp. is considering the replacement of some machinery that has zero book value and a current market value of $3,800. One possible alternative is to invest in new machinery that costs $31,000. The new equipment has a four-year service life and an estimated salvage value of $4,500, will produce annual cash operating savings of $10,400, and will require a $3,200 overhaul in year 3. The company uses straight-line depreciation. FV of $1 at 8% PV of $1 at 8% FV of an ordinary annuity at 8% 1.000 2.080 3.246 4.506 PV of an ordinary annuity at 8% 0.926 1.783 2.577 3.312 3.993 Year 1 1.080 0.926 2 3 4 1.166 1.260 0.857 0.794 1.360 1.469 1.587 0.735 0.681 0.630 5.867 7.336 4.623 Required: Prepare a net-present-value analysis of Randi's replacement decision, assuming a(n) 8% hurdle rate and no income taxes. Should the machinery be acquired? (Negative amounts should be indicated by a minus sign. Round your final answers to the nearest dollar.)

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