The production department is proposing the purchase of an automatic insertion machine. It has asked the accountant to analyze them to determine the best cash payback. Machine A Machine B Machine C Annual cash flow Average investment $40,000 $50,000 $75,000 $300,000 $250,000 $500,000 Oa. Machine B Ob. Machine C Oc. Machine A Od. All of these choices are equal.
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- Covington Pharmacies has decided to automate its insurance claims process. Two networked computer systems are being considered. The systems have an expected life of two years. The net cash flows associated with the systems are as follows. The cash benefits represent the savings created by switching from a manual to an automated system. The companys cost of capital is 10 percent. Required: 1. Compute the NPV and the IRR for each investment. 2. Show that the project with the larger NPV is the correct choice for the company.Assume a company is going to make an investment of $450,000 in a machine and the following are the cash flows that two different products would bring in years one through four. Which of the two options would you choose based on the payback method?Assume a company is going to make an investment in a machine of $825,000 and the following are the cash flows that two different products would bring. Which of the two options would you choose based on the payback method?
- Garnette Corp is considering the purchase of a new machine that will cost $342,000 and provide the following cash flows over the next five years: $99,000, $88,000, $92,000. $87,000, and $72,000. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return in Excel. see Appendix C.The production department is proposing the purchase of an automatic insertion machine. It has identified three machines and has asked the accountant to analyze them to determine which one has the best cash payback. Machine A Machine B Machine C Annual cash flow $40,000 $50,000 $75,000 Average investment 300,000 250,000 500,000 a.Machine A b.Machine C c.Machine B d.Machines B and C have the same preferred payback period.For each of the following problems, (a) draw the cash flow diagram; (b) present clean and clear manual solutions to the problem; (c) highlight the final answer (only the final answer as required by the problem) by enclosing it within a box. The cost for an imported equipment is $80,000 and the in-country cost for one with twice the capacity is $120,000. What is the value of the exponent in the cost-capacity equation?
- The investment committee of Sentry Insurance Co. is evaluating two projects, office expansion and upgrade to computer servers. The projects have different useful lives, but each requires an investment of $1,104,000. The estimated net cash flows from each project are as follows: Net Cash Flow Year OfficeExpansion Server 1 $308,000 $407,000 2 308,000 407,000 3 308,000 407,000 4 308,000 407,000 5 308,000 6 308,000 The committee has selected a rate of 15% for purposes of net present value analysis. It also estimates that the residual value at the end of each project's useful life is $0, but at the end of the fourth year, the office expansion's residual value would be $385,000. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5…For each of the following problems, (a) draw the cash flow diagram (as needed); (b) present clean and clear manual solutions to the problem; (c) highlight the final answer (only the final answer as required by the problem) by enclosing it within a box. A process for producing the mosquito repellant Deet has an initial investment of $20,000 with annual costs of $51,000. Income is expected to be $90,000 per year. What is the simple payback period? What is the compounded payback period at an interest rate of 12%? no excel and round two decimal places as requiredThe financial manager of Sarap Corporation wants to determine the amount of cash outlays to be spent for the nextperiod. He asked the help of the accountant and the latter provided a cash budget for the next year. According tothe computations, the company would be incurring cash expenses of P6,612,500 per month. The financial managerhas estimated a cost of P40 per transaction in case non-cash asset is converted to cash. The firm’s opportunity costratio is 12%.a. The optimum cash balance is?b. The average cash balance is?c. the number of conversion made during the year is?d. The total cash cost is?
- (Show the Cashflow Diagram if needed) The amount of raw material required for a certain machine part is 2.05 cm3. The finished part will have a 1.07 cm3 volume. The processing time of each piece is 50 seconds for copper and 35 seconds for aluminum. The cost of copper is P 30.50 per kg, without a scrap value. The cost of aluminum is P55.00 per kg, with a scrap value of P20.00 per kg. The operator wage is P50.00 per hour and the overhead cost is P60.00 per hour. The copper and aluminum weight 0.0091 and 0.0098 kg per cm3, respectively. Which material will you recommend?For each of the following problems, (a) draw the cash flow diagram; (b) present clean and clear manual solutions to the problem; (c) highlight the final answer (only the final answer as required by the problem) by enclosing it within a box. Company E is considering installing Valutemp temperature loggers in all of its refrigerated trucks for monitoring temperatures during transit. If the systems will reduce insurance claims by $500,000 in each of the next 5 years, how much should the company be willing to spend now if it uses an interest rate of 10% per year?You recently went to work for Allied Components Company, a sup-plier of auto repair parts used in the after-market with products from Daimler AG, Ford, Toyota, and other automakers. Your boss, the chief financial officer (CFO), has just handed you the estimated cash flows for two proposed projects. Project L involves adding a new item to the firm’s ignition system line; it would take some time to build up the market for this product, so the cash inflows would increase over time. Project S involves an add-on to an existing line, and its cash flows would decrease over time. Both projects have 3-year lives because Allied is planning to introduce entirely new models after 3 years. Here are the projects’ after-tax cash flows (in thousands of dollars): 02 1 Project L Project S ⫺$100 ⫺$100 $10 $70 $60 $50 3 $80 $20 Depreciation, salvage values, net operating working capital requirements, and tax effects are all included in these cash flows. The CFO also made subjective risk assessments of…