QID 320. Due to brisk demand for urchase of a new cassette-making production line. The production line has an estimated se fe of 10 years, with negligible salvage value. The annual maintenance cost for the line will be 16,193. The company expects to generate extra annual revenue of $198,709 per year, driver rimarily by demand for the C20.47 formulation. At an interest rate of 12% per year, what is th on the production line?

QID 320. Due to brisk demand for urchase of a new cassette-making production line. The production line has an estimated se fe of 10 years, with negligible salvage value. The annual maintenance cost for the line will be 16,193. The company expects to generate extra annual revenue of $198,709 per year, driver rimarily by demand for the C20.47 formulation. At an interest rate of 12% per year, what is th on the production line?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A firm is considering three mutually exclusive alternatives as a part of an upgrade to an existing transportation network. If the MARR is 10% per year, which alternative(if any) should be chosen using the IRR analysis procedure? Use trial & error and show your calculations. A B C Initial Cost 40000 30000 20000 Annual Revenue 10400 8560 7750 Annual Cost 4000 3000 2500 Salvage Value 3000 2500 2000 Useful Life 20 20 10
Zhang Company is considering the purchase of a new machine. Its invoice price is $200,000, freightcharges are estimated to be $4,000, and installation costs are expected to be $6,000. Salvage value ofthe new machine is expected to be zero after a useful life of 4 years. Existing equipment could beretained and used for an additional 4 years if the new machine is not purchased. At that time, thesalvage value of the equipment would be zero. If the new machine is purchased now, the existingmachine would be scrapped. Zhang’s accountant, Victor Wang, has accumulated the following dataregarding annual sales and expenses with and without the new machine.Without the new machine, Zhang can sell 10,000 units of product annually at a per unit selling price of$100. If the new unit is purchased, the number of units produced and sold would increase by 25%, andthe selling price would remain the same.The new machine is faster than the old machine, and it is more efficient in its usage of materials.…
Halcrow, Inc. hopes to replace an outdated tracking system currently installed on CNC machines. The challenger system has an initial cost of $70,000, an estimated annual operating cost of $20,000, a maximum useful life of 5 years, and a salvage value of $10,000 at any time. With an interest rate of 11% per year, determine the economic life of the service and the corresponding amount for year 6. a)-35,382.8 b.)-35,482.8 c.)-35,582.8 d.)-35,282.8
A research laboratory which requires P5M for original construction; P100k at the end of every year for the first 6 years and then P120T each year thereafter for operating expenses, and P500k every 5 years for replacement of equipment with interest at 12% per annum. What is the cost of perpetual operation? a. P917,771.854 b. P471,936.467 c. P971,936.854 d. P1,411.140.732
Question99)Managers of a factory want to make a replacement analysis for a machine that needs to be upgraded if they will continue using it in production. The upgrade will cost $50,000 and the machine can be kept for a maximum of 3 years after that. The salvage value will be $20,000 if sold at the end of first year, or it will be zero. Annual operating cost will be $40,000 the first year and increase by $10,000 each year. A new machine can be purchased for $150,000 with a maximum useful life of 7 years. Its salvage value is described by the relation S = 120,000 - 20,000 k, where k is the number of years since it was purchased. (Salvage value cannot be less than 0). The annual operation costs are estimated with equation AOC = 60,000 + 10,000 k. If the interest rate is 15% per year, determine if and when the machine should be replaced..
Thornton Manufacturing Company has an opportunity to purchase sometechnologically advanced equipment that will reduce the company's cash outflow foroperating expenses by $1, 278,000 per year. The cost of the equipment is S7,661,925.67. Thornton expects it to have a 9 - year useful life and a zero salvagevalue. The company has established an investment opportunity hurdle rate of 15percent and uses the straight - line method for depreciation. (PV of S1 and PVA of S1) (Use appropriate factor (s) from the tables provided.) Required Calculate theinternal rate of return of the investment opportunity. (Do not round intermediatecalculations.) Indicate whether the investment opportunity should be accepted.
XYZ company has A piece of new equipment will cost $70,000. The equipment will provide a cost savings of $15,000 per year for ten years, after which it will have a $3,000 salvage value. If the required rate of return is 14%, the equipment's net present value is: a. (8240) b. None of answers are correct c. 9050 d. 23888
CLC Publishing is considering the purchase of an offset printing machine. A study of three available alternatives shows the following estimates: A B C Acquisition Cost P700 000.00 P850 000.00 P1000 000.00 Shipping Cost 5% 5% 8% Net Annual Benefit P155 000.00 P145 000.00 P170 000.00 Useful Life 8 years 16 years 16 years Salvage Value P35 000.00 P70 000.00 P80 000.00 If at the end of eight years, alternative A could be replaced with an identical machine having the same cost and benefits, determine the alternative to be selected using present worth analysis and a 14% MARR. (Ans. PTA= - P5005.80; PTB = P24 536.06; PTC = - P5108.53; select alternative B) Determine the best printing…
Green is considering the replacement of some machinery that has zero book value and a current market value of P28,000. One possible alternative is to invest in new machinery that costs P300,000. The new equipment has a four-year service life and an estimated salvage value of P35,000, will produce annual cash operating savings of P94,000, and will require a P22,000 overhaul in year 3. The company uses straight-line depreciation. Required: Prepare a net-present-value analysis of Green's replacement decision, assuming an 8% hurdle rate and no income taxes. Should the machinery be acquired? Note: Round calculations to 3 decimal places.
QRW Corp, needs to replace an old machine with a new, more efficient model. The new machine being considered will result in an increase in camings before interest and taxes of $70,000 per year. The purchase price is $200,000, and it would cost an additional $10,000 to properly install the machine. In addition, to properly operate the machine, inventory must be increased by S10,000. This machine has an expected life of 10 years, with no salvage value. Assume that a straight-line depreciation method being used and that this machine is being depreciated down to zero, the marginal tax rate is 34%, and a required rate of return of 15%. (i) Solve for the value of the initial outlay associated with this project. (ii) Solve for the value of annual after-tax cash flows for this project from 1 through 9
QRW Corp, needs to replace an old machine with a new, more efficient model. The new machine being considered will result in an increase in camings before interest and taxes of $70,000 per year. The purchase price is $200,000, and it would cost an additional $10,000 to properly install the machine. In addition, to properly operate the machine, inventory must be increased by S10,000. This machine has an expected life of 10 years, with no salvage value. Assume that a straight-line depreciation method being used and that this machine is being depreciated down to zero, the marginal tax rate is 34%, and a required rate of return of 15%. (i)Solve for the value to show whether this machine should be purchase or not (ii) Solve for the value of terminal cash flow in year 10 (annual after-tax cash flow in year 10 plus any additional cash flows associated with the termination of the project).
A new high-efficiency digital-controlled flange-lipper can be purchased for $130,000, including installation costs. During its 5-year life, it will reduce cash operating expenses by $45,000 per year, although it will not affect sales. At the end of its useful life, the high-efficiency machine is estimated to be worthless. MACRS depreciation will be used, and the machine will be depreciated over its 3-year class life rather than its 5-year economic life, so the applicable depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%. The old machine can be sold today for $50,000. The firm's tax rate is 35%, and the appropriate cost of capital is 14%. If the new flange-lipper is purchased, what is the amount of the initial cash flow at Year 0? Round your answer to the nearest whole dollar.$ What are the incremental net cash flows that will occur at the end of Years 1 through 5? Do not round intermediate calculations. Round your answers to the nearest whole dollar. CF1 $ CF2 $…

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