The same Company as in Question 2 has just invested in a new Machining Center that cost $250,000. The company believes that it will be able to use this new piece of equipment for the next 10 years. At the end of this 10 year period, the company thinks that they can sell this equipment for $50,000. The company's MARR value is 10% ycy. 0.3855 0.06275 15.9374 0.16275 6.1446 Assume: The Annual Capital Recovery & Return Value (CR) for this new equipment = $-37,550 The Annual Labor Costs = $50,000 The Annual Material Costs = $17,000 The Annual Overhead Costs = $25,000 Annual Sales Revenue resulting from the purchase of the new machine $200,000 Question: Now the same company wants to know how many complete years (integer value) will it take for the company to pay back its initial investment of $250,000 assuming a 0% time value of money

The same Company as in Question 2 has just invested in a new Machining Center that cost $250,000. The company believes that it will be able to use this new piece of equipment for the next 10 years. At the end of this 10 year period, the company thinks that they can sell this equipment for $50,000. The company's MARR value is 10% ycy. 0.3855 0.06275 15.9374 0.16275 6.1446 Assume: The Annual Capital Recovery & Return Value (CR) for this new equipment = $-37,550 The Annual Labor Costs = $50,000 The Annual Material Costs = $17,000 The Annual Overhead Costs = $25,000 Annual Sales Revenue resulting from the purchase of the new machine $200,000 Question: Now the same company wants to know how many complete years (integer value) will it take for the company to pay back its initial investment of $250,000 assuming a 0% time value of money

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section10.A: Mutually Exclusive Investments Having Unequal Lives

Problem 2P

See similar textbooks

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?
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?
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.
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 companys tax rate is 40%. a. What is the initial investment outlay? b. The company spent and expensed 150,000 on research related to the new product last year. Would this change your answer? Explain. c. 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. How would this affect your answer?
Washington-Pacific (W-P) invested $4 million to buy a tract of land and plant some young pine trees. The trees can be harvested in 10 years, at which time W-P plans to sell the forest at an expected price of $8 million. What is W-P’s expected rate of return?
The Scampini Supplies Company recently purchased a new delivery truck. The new truck cost $22,500, and it is expected to generate net after-tax operating cash flows, including depreciation, of $6,250 per year. The truck has a 5-year expected life. The expected salvage values after tax adjustments for the truck are given here. The company’s cost of capital is 10%. Should the firm operate the truck until the end of its 5-year physical life? If not, then what is its optimal economic life? Would the introduction of salvage values, in addition to operating cash flows, ever reduce the expected NPV and/or IRR of a project?