Zencorp is considering buying a $220,000 production machine. It would be depreciated (simplified straight line) for 10 years. This investment would allow the firm to increase sales by $130,000 per year. Operating expenses would increase by $80,000 per year also. The corporate tax rate is 21%. What is the annual cash flow for the project? O $75,720 O $44,120 O $170,520 O $71,100 O $53,720
Q: The Holly Tree Company plans to purchase a new machine that will increase its manufacturing speed…
A: Net present value can be calculated by difference between present value of cash flow and initial…
Q: Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball…
A: Calculation of Annual Depreciation Tax Shield:
Q: A new machine costing $100,000 is expected to save the McKaig Brick Company $15,000 per year for 12…
A: Annual net cash flows is calculated as the difference between the annual cash flows and cash…
Q: Tannen Industries is considering an expansion. The necessaryequipment would be purchased for $18…
A: a) The computation of initial investment outlay: Hence, the initial investment outlay is $20…
Q: SRJ Corporation is considering an expansion project. The necessary equipment could be purchased for…
A:
Q: Tannen Industries is considering an expansion. The necessary equipment would be purchased for $14…
A: Initial investment outlay is the expenditure which is required to purchase the asset and apart from…
Q: he new firm is planning a project with an initial cost of $50,000. This project will produce a cash…
A: In this we have to find out WACC and than based on WACC calculate the net present value.
Q: Calculate the PV of the project using the APV method.
A: Adjusted Present Value: It is a method used in capital budgeting to value a project or a company.…
Q: Tannen Industries is considering an expansion. The necessary equipment would be purchased for $19…
A: The initial investment of a project would include all the costs that are required to operate the…
Q: A corporation is considering purchasing a machine that costs $120,000 andwill save $X per year after…
A: Saving after tax can be calculated by this formula. X= saving after tax .i = Interest rate .n=…
Q: Blossom Corp. management is planning to convert an existing warehouse into a new plant that will…
A: The payback period is the amount of time it takes to recover the initial cash outflow. The NPV is…
Q: Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball…
A: Equivalent annual savings is $10,226.31. Computation of equivalent annual savings: Excel spread…
Q: Tannen Industries is considering an expansion. The necessary equipment would be purchased for $10…
A: Cost of Equipment = 10 Million Additional Investment = 3 Million Tax rate = 25% Initial investment…
Q: An investment of P270,000 can be made in a project that will produce a uniform annual revenue of…
A: NPV It is a capital budgeting tool to decide on whether the capital project should be considered or…
Q: What is the equivalent annual saving from the purchase
A: Equivalent annual savings is the cost of operating and maintaining an asset annually. It is also…
Q: The TinX Corp. is investing in a machine which will increase the quality of their product. The…
A: Net present value (NPV) is the distinction between the current estimation of money inflows and the…
Q: The TinX Corp. is investing in a machine which will increase the quality of their product. The…
A: NPV is helpful in evaluation of any project. Positive NPV is a good indicator and increase the…
Q: The LMN Corporation is considering an investment that will cost $80,000 and have a useful life of 4…
A: Payback periods is the time period required by a project to pay back the amount invested in it by…
Q: 19
A: The formula to calculate annual depreciation using straight line is given below:
Q: Gumamela Company is considering replacing a machine with one that will save P50,000 per year in cash…
A: ‘’Since you have asked multiple question, we will solve the first question for you. If you want any…
Q: Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball…
A: Calculation of equivalent annual savings: Answer: Equivalent annual savings is $4,080.11
Q: Your firm, Agrico Products, is considering a tractor that would have a cost of $36,000, would…
A: Hence, cash inflows from operation in scenario of 5 years life is $14,880.The cash flow after tax in…
Q: Talbot Industries is considering launching a new product. The new manufacturing equipment will cost…
A: A company evaluates and measures various costs and expenses before launching or starting a new…
Q: A corporation is considering purchasing a machine that will save $200,000 per year before taxes. The…
A: The net present value is the difference of the present value of cash inflows and the present value…
Q: A printing press machine has a cash equivalent of P250,000. For the first three years, it will…
A: Given Investment = P 250,000 Profit each year = P20,000 MARR = 7% EARR =15%
Q: Dinshaw Company is considering the purchase of a new machine. The invoice price of the machine is…
A: GIVEN Dinshaw Company is considering the purchase of a new machine. The invoice price of the…
Q: Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball…
A: Initial investment of the company is the sum of the cost of high pressure glueball plus after tax…
Q: Tannen Industries is considering an expansion. The necessary equipment would be purchased for $10…
A: Cost of equipment is $10 million, Working capital investment is $ 3 million, bonus depreciation in…
Q: Torpedo Co. is considering a new project generating an annual cash revenue of $500,000 in…
A: Time value of money (TVM) refers to the method used to measure the amount of money at different…
Q: Tannen Industries is considering an expansion. The necessary equipment would be purchased for $16…
A: Cashflow means inflow or outflow of the cash. Positive cashflows (inflows) increase the cash…
Q: Tannen Industries is considering an expansion. The necessary equipment would be purchased for $16…
A: Equipment purchased = $16,000,000 Net working capital = $1 million Tax rate = 25%
Q: US. Steel is considering a plant expansion to produce austenitic, precipitation hardened, duplex,…
A: Return is an additional amount earned on invested amount or total cost incurred to start and operate…
Q: Nine Point Industries is trying to decide whether to invest in equipment to manufacture a ne…
A: Increase in sales = $94,000 Decrease in Material Cost =$37,000 Equipment Cost = $148,000 Time Period…
Q: Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball…
A: Here, Purchase price of Glueball is $170,000 Selling Price of Old low-pressure glueball is $30,000…
Q: Tannen Industries is considering an expansion. The necessary equipment would be purchased for $11…
A: Given: Cost of equipment =$11 millionInvestment in working capital =$1 millionTax rate =25%
Q: A printing press machine has a cash equivalent of P250,000. For the first three years, it will…
A: Initial cost (C) = P 250000 Profit in year 1 (A1) = P 20000 A2 = P 20000 A3 = P 20000 A4 = P 35000…
Q: You are interested in purchasing a machine that will save $200,000 per yearbefore taxes. The cost of…
A: Net present value (NPV) is the difference between the present values of cash inflows and cash…
Q: The TinX Corp. is investing in a machine which will increase the quality of their product.The…
A: Particulars Year 1 yYear 2 Year 3 Year 4 Sales 4,00,000 4,00,000 4,00,000 4,00,000 Less:-…
Q: A corporation is considering purchasing amachine that will save $150,000 per year beforetaxes. The…
A: Given: Saved amount per year = $150,000 Cost of operating = $30,000 Income tax rate = 40% Return of…
Q: Tannen Industries is considering an expansion. The necessary equipment would be purchased for $10…
A: Initial investment also referred to as the initial investment outlay is the amount required to start…
Q: Goldie clothes are planning to expand their clothing business by opening a factory overseas. The…
A: After calculating all working in excel, the Net Present Value (NPV) is £4,35,640. NPV Calculation:…
Q: Tannen Industries is considering an expansion. The necessary equipment would be purchased for $16…
A: Capital Budgeting plays a significant role in evaluating long term projects that facilitates the…
Q: Tannen Industries is considering an expansion. The necessary equipment would be purchased for $9…
A: Cashflow means movement of cash, it can be positive and negative. Positive moment means cash inflow…
Q: Tannen Industries is considering an expansion. The necessary equipment would be purchased for $18…
A: Relevant cost analysis: In project costing and decision making, relevant costs play an important…
Q: our firm, Agrico Products, is considering a tractor that would have a cost of $37,000, would…
A: NPV of the tractor when the useful life is 5 years:
Trending now
This is a popular solution!
Step by step
Solved in 5 steps with 3 images
- Wansley Lumber is considering the purchase of a paper company, which would require an initial investment of $300 million. Wansley estimates that the paper company would provide net cash flows of $40 million at the end of each of the next 20 years. The cost of capital for the paper company is 13%. Should Wansley purchase the paper company? Wansley realizes that the cash flows in Years 1 to 20 might be $30 million per year or $50 million per year, with a 50% probability of each outcome. Because of the nature of the purchase contract, Wansley can sell the company 2 years after purchase (at Year 2 in this case) for $280 million if it no longer wants to own it. Given this additional information, does decision-tree analysis indicate that it makes sense to purchase the paper company? Again, assume that all cash flows are discounted at 13%. Wansley can wait for 1 year and find out whether the cash flows will be $30 million per year or $50 million per year before deciding to purchase the company. Because of the nature of the purchase contract, if it waits to purchase, Wansley can no longer sell the company 2 years after purchase. Given this additional information, does decision-tree analysis indicate that it makes sense to purchase the paper company? If so, when? Again, assume that all cash flows are discounted at 13%.Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated revenue producing life of 4 years. Falkland has a cost of capital of 8%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?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?
- Mason, Inc., is considering the purchase of a patent that has a cost of $85000 and an estimated revenue producing lite of 4 years. Mason has a required rate of return that is 12% and a cost of capital of 11%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?Each of the following scenarios is independent. All cash flows are after-tax cash flows. Required: 1. Patz Corporation is considering the purchase of a computer-aided manufacturing system. The cash benefits will be 800,000 per year. The system costs 4,000,000 and will last eight years. Compute the NPV assuming a discount rate of 10 percent. Should the company buy the new system? 2. Sterling Wetzel has just invested 270,000 in a restaurant specializing in German food. He expects to receive 43,470 per year for the next eight years. His cost of capital is 5.5 percent. Compute the internal rate of return. Did Sterling make a good decision?Your division is considering two investment projects, each of which requires an up-front expenditure of 25 million. You estimate that the cost of capital is 10% and that the investments will produce the following after-tax cash flows (in millions of dollars): a. What is the regular payback period for each of the projects? b. What is the discounted payback period for each of the projects? c. If the two projects are independent and the cost of capital is 10%, which project or projects should the firm undertake? d. If the two projects are mutually exclusive and the cost of capital is 5%, which project should the firm undertake? e. If the two projects are mutually exclusive and the cost of capital is 15%, which project should the firm undertake? f. What is the crossover rate? g. If the cost of capital is 10%, what is the modified IRR (MIRR) of each project?
- Redbird Company is considering a project with an initial investment of $265,000 in new equipment that will yield annual net cash flows of $45,800 each year over its seven-year life. The companys minimum required rate of return is 8%. What is the internal rate of return? Should Redbird accept the project based on IRR?Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided manufacturing system. The annual net cash benefits and savings associated with the system are described as follows: The system will cost 9,000,000 and last 10 years. The companys cost of capital is 12 percent. Required: 1. Calculate the payback period for the system. Assume that the company has a policy of only accepting projects with a payback of five years or less. Would the system be acquired? 2. Calculate the NPV and IRR for the project. Should the system be purchasedeven if it does not meet the payback criterion? 3. The project manager reviewed the projected cash flows and pointed out that two items had been missed. First, the system would have a salvage value, net of any tax effects, of 1,000,000 at the end of 10 years. Second, the increased quality and delivery performance would allow the company to increase its market share by 20 percent. This would produce an additional annual net benefit of 300,000. Recalculate the payback period, NPV, and IRR given this new information. (For the IRR computation, initially ignore salvage value.) Does the decision change? Suppose that the salvage value is only half what is projected. Does this make a difference in the outcome? Does salvage value have any real bearing on the companys decision?Your company is planning to purchase a new log splitter for is lawn and garden business. The new splitter has an initial investment of $180,000. It is expected to generate $25,000 of annual cash flows, provide incremental cash revenues of $150,000, and incur incremental cash expenses of $100,000 annually. What is the payback period and accounting rate of return (ARR)?
- Manzer Enterprises is considering two independent investments: A new automated materials handling system that costs 900,000 and will produce net cash inflows of 300,000 at the end of each year for the next four years. A computer-aided manufacturing system that costs 775,000 and will produce labor savings of 400,000 and 500,000 at the end of the first year and second year, respectively. Manzer has a cost of capital of 8 percent. Required: 1. Calculate the IRR for the first investment and determine if it is acceptable or not. 2. Calculate the IRR of the second investment and comment on its acceptability. Use 12 percent as the first guess. 3. What if the cash flows for the first investment are 250,000 instead of 300,000?Bouvier Restaurant is considering an investment in a grill that costs $140,000, and will produce annual net cash flows of $21,950 for 8 years. The required rate of return is 6%. Compute the net present value of this investment to determine whether Bouvier should invest in the grill.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?