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- 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.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.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?
- The Ham and Egg Restaurant is considering an investment in a new oven that has a cost of $60,000, with annual net cash flows of $9,950 for 8 years. The required rate of return is 6%. Compute the net present value of this investment to determine whether or not you would recommend that Ham and Egg invest in this oven.Average rate of returncost savings Maui Fabricators Inc. is considering an investment in equipment that will replace direct labor. The equipment has a cost of 125,000 with a 15,000 residual value and an eight-year life. The equipment will replace one employee who has an average wage of 28,000 per year. In addition, the equipment will have operating and energy costs of 5,150 per year. Determine the average rate of return on the equipment, giving effect to straight-line depreciation on the investment.A hydraulic lift is purchased for a warehouse for $60,000. This lift is expected to generate $7000 in annual income for its useful life of 12 years. No Salvage value is expected. O&M costs are estimated to be $1000 annually. What is the approximate rate of return for this investment? [Enter your response as a percentage to one decimal point]
- A machine, costing $25000 to buy and $ 3000 per year to operate, will save mainly labor expenses in packaging over 6 years. The anticipated salvage value of the machine at the end of 6 years is $5000. To desire a 10% return on investment (rate of return), what is the minimum required annual savings in labor from this machine? Select one: a. $8092 b. $4050 c. $9010 d. $6092 12Consider a machine that costs $1000 to purchase. The machine creates an annual operating expense of $500 at the end of first year, which is going to increase by $50 in each year thereafter. The salvage value of this machine is $200, independent of the usage period. Find the economic life of this machine under nominal MARR 25%, compounding annually. A 8. B. 6.Saved Required information Pollution control equipment for a pulverized coal cyclone furnace is expected to cost $190,000 two years from now and another $120,000 3 years from now. If Monongahela Power wants to set aside enough money now to cover these costs, how much must be invested at an interest rate of 9% per year compounded weekly? NOTE: This is a multi-part question. Once an answer is submitted, you will be unable to return to this part. Solve using spreadsheet functions. The spreadsheet function used is PV(0.1731%, 104, -190000) + PV(0.1731%, 156,-120000)✓ The amount that must be invested by Monongahela Power is $
- A service center has installed a new computer costing 1.6 million dollars. The system is expected to serve for 8 years and straight-line depreciation is acceptable. There are additional fixed costs of $300,000 per year. The service repair charges a flat fee of $30 per customer. Variable costs are $20. What will profit be if annual volume is 75,000 units? Question 1 options: $1,000,000.00 $500,000.00 -$250,000.00 $250,000.00A machine, costing $30,000 to buy and $2.500 per year to operate. will save mainly labor expenses in packaging over seven years. The anticipated salvage value of the machine at the e nd of seven years is $4,500.(a) 1f a 12% return on investment (rate of return) is desired, what is the minimum required annual savings in labor from this machine?(b) U the service life is just five years. instead of seven years, what is the minimum required annual savings in labor for the firm to realize a 12% return on investment?(c) If the annual operating cost increases 10%, say. from $2,500 to $2,750, what will happen to the answer to (a)?A replacement electric motor is being considered for purchase. It is capable of providing 200 hp. The pertinent data are follows: Cost - 3200 dollars Maintenance Cost per year - 50 dollars Life expectancy - 14years Salvage value after - 1,429.93 dollars The motor is used for 400 h/year and the cost of electricity is 0.0 dollars/kWh. What is most nearly the effective annual cost using an interest rate of 10%
