Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
12th Edition
ISBN: 9781259144387
Author: Richard A Brealey, Stewart C Myers, Franklin Allen
Publisher: McGraw-Hill Education
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Chapter 6, Problem 25PS
Summary Introduction
To determine: The product which is less expensive to use.
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Machine A costs $500,000 to purchase, result in electricity bills of $100,000 per year, and last for 12 years. Machine B costs $600,000 to purchase, result in electricity bills of $85,000 per year, and last for 15 years. The discount rate is 9%. What are the equivalent annual costs for two models? Which model is more cost-effective?
Econo - Cool air conditioners cost $390 to purchase, result in electricity bills of $168 per year, and last for 5 years. Luxury Air models cost $590, result in electricity bills of $136 per year, and last for 8 years. The discount rate is 23%. a. What is the equivalent annual cost of the Econo-Cool model?
Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
b. What is the equivalent annual cost of the Luxury Air model? Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
c. Which model is more cost-effective? multiple choice 1 Econo-Cool Luxury Air d-1. Now you remember that the inflation rate is expected to be 10% per year for the foreseeable future. What are the equivalent annual cost of the Econo - Cool and Luxury Air model?
Note: Do not round intermediate calculations. Round your answers to 2 decimal places. d-2, Which model is more cost- effective? multiple choice 2 Econo - Cool Luxury Air
A product currently sells for $12 per unit. The variable costs are $4 per unit, and 10,000 units are sold annually and a profit of $30,000 is realized per year. A new design will increase the variable costs by 20% and Fixed Costs by 10% but sales will increase to 12,000 units per year.
(a) At what selling price do we break even with the new design?.
(b) If the selling price is to be kept same ($12/unit) what will the annual profit be?
Chapter 6 Solutions
Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 6 - Cash flows Which of the following should be...Ch. 6 - Real and nominal flows Mr. Art Deco will be paid...Ch. 6 - Cash flows True or false? a. A projects...Ch. 6 - Depreciation How does the PV of depreciation tax...Ch. 6 - Working capital The following table tracks the...Ch. 6 - Prob. 6PSCh. 6 - Prob. 7PSCh. 6 - Mutually exclusive investments and project lives...Ch. 6 - Replacement decisions Machine C was purchased five...Ch. 6 - Prob. 10PS
Ch. 6 - Prob. 12PSCh. 6 - Working capital Each of the following statements...Ch. 6 - Depreciation Ms. T. Potts, the treasurer of Ideal...Ch. 6 - Project NPV and IRR A project requires an initial...Ch. 6 - Project NPV A widget manufacturer currently...Ch. 6 - Project NPV Marsha Jones has bought a used...Ch. 6 - Project NPV United Pigpen is considering a...Ch. 6 - Project NPV Hindustan Motors has been producing...Ch. 6 - Equivalent annual cash flows As a result of...Ch. 6 - Prob. 25PSCh. 6 - Replacement decisions Hayden Inc. has a number of...Ch. 6 - Prob. 27PSCh. 6 - Prob. 28PSCh. 6 - Prob. 29PSCh. 6 - Prob. 30PSCh. 6 - The cost of excess capacity The presidents...Ch. 6 - Effective tax rates One measure of the effective...Ch. 6 - Equivalent annual costs We warned that equivalent...
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