EBK CORNERSTONES OF COST MANAGEMENT
3rd Edition
ISBN: 9781305147102
Author: MOWEN
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 19, Problem 17E
Postman Company is considering two independent projects. One project involves a new product line, and the other involves the acquisition of forklifts for the Materials Handling Department. The projected annual operating revenues and expenses are as follows:
Required:
Compute the after-tax cash flows of each project. The tax rate is 40 percent and includes federal and state assessments.
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Edelman Engineering is considering including two pieces of equipment, a truck and an overhead pulley system, in this year's capital budget. The projects are independent. The cash outlay for the truck is $17,100, and that for the
pulley system is $22,430. The firm's cost of capital is 14%. After-tax cash flows, including depreciation, are as follows:
Year
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1.
$5,100
$7,500
5,100
7,500
5,100
7,500
5,100
7,500
5
5,100
7,500
Calculate the IRR, the NPV, and the MIRR for each project, and indicate the correct accept/reject decision for each. Do not round intermediate calculations. Round the monetary values to the nearest dollar and percentage values to
two decimal places. Use a minus sign to enter negative values, if any.
Truck
Pulley
Value
Decision
Value
Decision
IRR
%
Аcсept
%
Reject
%24
$
NPV
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MIRR
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%
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Jacob’s Engineering is considering including two pieces of equipment, a truck and an overhead pulley system, in this year’s capital budget. The projects are independent. The cash outlay for the truck is $39,500, and that for the pulley system is $94,800. The firm’s cost of capital is 14%. After-tax cash flows, including depreciation, are as follows:
Year
Truck
Pulley
1
$12,500
$31,000
2
12,500
31,000
3
12,500
31,000
4
12,500
31,000
5
12,500
31,000
Requirements:
Calculate the IRR, the NPV, Payback and Discounted Payback Periods for each project and indicate the correct accept/reject decision for each.
2. You are the project manager for Becker Enterprises, LTD. and have been asked to analyze two alternatives for the company’s newest plastics The two alternatives, A and B, will perform the same task, but Alternative A will cost $80,000 to purchase while Alternative B will cost only $55,000. Moreover, the two alternatives…
The Company is considering two independent projects. One project involves a new product line, and the other involves the acquisition of a special equipment for the Materials Handling Department. The projected annual operating revenues and expenses are as follows:
1. How much is the after tax cash flows of Project 1?
2. How much is the net benefit of investing in Project 2?
Chapter 19 Solutions
EBK CORNERSTONES OF COST MANAGEMENT
Ch. 19 - Explain the difference between independent...Ch. 19 - Explain why the timing and quantity of cash flows...Ch. 19 - Prob. 3DQCh. 19 - Prob. 4DQCh. 19 - What is the accounting rate of return?Ch. 19 - What is the cost of capital? What role does it...Ch. 19 - Prob. 7DQCh. 19 - Explain how the NPV is used to determine whether a...Ch. 19 - Explain why NPV is generally preferred over IRR...Ch. 19 - Prob. 10DQ
Ch. 19 - Prob. 11DQCh. 19 - Prob. 12DQCh. 19 - Prob. 13DQCh. 19 - Prob. 14DQCh. 19 - Prob. 15DQCh. 19 - Jan Booth is considering investing in either a...Ch. 19 - Prob. 2CECh. 19 - Carsen Sorensen, controller of Thayn Company, just...Ch. 19 - Manzer Enterprises is considering two independent...Ch. 19 - Keating Hospital is considering two different...Ch. 19 - Prob. 6CECh. 19 - Prob. 7ECh. 19 - Prob. 8ECh. 19 - Each of the following scenarios is independent....Ch. 19 - Roberts Company is considering an investment in...Ch. 19 - NPV A clinic is considering the possibility of two...Ch. 19 - Refer to Exercise 19.11. 1. Compute the payback...Ch. 19 - Buena Vision Clinic is considering an investment...Ch. 19 - Consider each of the following independent cases....Ch. 19 - Gina Ripley, president of Dearing Company, is...Ch. 19 - Covington Pharmacies has decided to automate its...Ch. 19 - Postman Company is considering two independent...Ch. 19 - Prob. 18ECh. 19 - Prob. 19ECh. 19 - Prob. 20ECh. 19 - Prob. 21ECh. 19 - Prob. 22ECh. 19 - Prob. 23ECh. 19 - Prob. 24PCh. 19 - Prob. 25PCh. 19 - Prob. 26PCh. 19 - Kent Tessman, manager of a Dairy Products...Ch. 19 - Friedman Company is considering installing a new...Ch. 19 - Okmulgee Hospital (a large metropolitan for-profit...Ch. 19 - Mallette Manufacturing, Inc., produces washing...Ch. 19 - Prob. 31PCh. 19 - Prob. 32P
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