Homesaver Ltd believes it can sell 10,000 home smoke detectors per year at Rs30 each. They cost Rs20 each to manufacture (variable cost). Fixed production costs will run to R$30,000 per year. The necessary equipment costs Rs150,000 to buy and will be depreciated prime cost to a zero-salvage value over the 5-year life of the project. The actual value will be Rs10,000 in 5 years. The discount rate is 12%, and the tax rate is 30%. What do you think of the proposal?

Homesaver Ltd believes it can sell 10,000 home smoke detectors per year at Rs30 each. They cost Rs20 each to manufacture (variable cost). Fixed production costs will run to R$30,000 per year. The necessary equipment costs Rs150,000 to buy and will be depreciated prime cost to a zero-salvage value over the 5-year life of the project. The actual value will be Rs10,000 in 5 years. The discount rate is 12%, and the tax rate is 30%. What do you think of the proposal?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A company is considering the purchase furniture at costing Rs 120,000 that would save Rs 30,000 each year for five years. The equipment could be sold at the end of its useful life for Rs 15,000. The company requires every project to yield a return of 10% or more otherwise they will be rejected. Should this equipment be purchased? a. Calculate the first NPV at 9%
You are considering a four-year project to improve production efficiency of your press. Buying a new machine press for Rs 530.000 is estimated to result in Rs 205,000 in annual pretax cost savings. The press falls in the MACRS five-year class, and it will have a salvage value at the end of the project of Rs 90,000. The press also requires an initial investment in spare parts inventory of Rs 20,000, along with an additional Rs 3,000 in inventory for each succeeding year of the project. If the tax rate is 35 percent and discount rate is 9 percent, should you buy and install the machine press?
A firm is considering purchasing computers that will reduce annual costs by P40,000. The Computers costs P300,000 and has a salvage value of P50,000 and a life of 7 years. The annual maintenance cost is P6,000, while not in use by the firm, the computers can be rented to others to generate an income of P10,000 per year. money can be invested for an 8% return, using the ANNUAL COST METHOD, how much is the savings or excess cost the firm has in buying the computers?
100,000 TL is priced by a machine dealer. The purchaser of the machine estimates that the useful life of the machine will be 12 years. At the end of 12 years, the machine is expected to be sold for 90,000 TL. The machine will result in annual costs of 6,000 TL during its 12-year useful life, as well as save 15,000 TL annually. Since the phys rate is expected to be 9%, how much should the buyer give to the machine whose price is determined as 100.000 TL by the seller?
A precision lathe costs $11,300 and will cost $26,500 a year to operate and maintain. If the discount rate is 12% and the lathe will last for 4 years, what is the equivalent annual cost of the tool? (Enter your answer as positive value. Round your answer to the nearest cent.) The equivalent annual cost $
The purchase price of the machine required to produce a certain part is 40000 TL, the maintenance cost is 14000 TL / year and the scrap value after 5 years is 8000 TL. Since the variable cost in the production of the part is 2.5 TL/piece and the sales price of the piece is 4 TL / piece, how many products should be sold to reach the breakeven point at 12% interest rate?
The Fine Clothing Factory wants to replace an old machine with a new one. The old machine can be sold to a small factory for R10 000. The new machine would increase annual revenue by R150 000 and annual operating expenses by R60 000. The new machine would cost R360 000. The estimated useful life of the machine is 12 years with zero salvage value. Using Average rate of return (ARR), Should Fine Clothing Factory purchase the machine if management desired rate of return of 15% on all capital investments? Show all the calculations and motivate your answer.
A new high-efficiency motor is being considered for a large compressor. The new motor will cost $20,000 but will save $8000 per year in electricity. If the firm’s MARR is 15%, what is the discounted payback period?
Cal Construction Company must choose between two types of cranes. Crane X costs $600,000, will last for 5 years, and will require $60,000 in maintenance each year. Crane Y costs $800,000 and will last for 7 years and will require $30,000 in maintenance each year. Maintenance costs for cranes X and Y are incurred at the end of each year. The appropriate discount rate is 10% per year. Which machine should the company purchase? Crane X as EAC is $218,278.49 Crane X as EAC is $827,447.21 Crane Y as EAC is $946,052.56 Crane Y as EAC is $194,324.40
Paul Restaurant is considering the purchase of a RM9,300 soufflé maker. The soufflé makerhas an economic life of five years and will be fully depreciated by the straight-line method.The machine will produce 1,400 soufflés per year, with each costing RM1.97 to make andpriced at RM4.95. The discount rate is 14 percent and the tax rate is 21 percent. Calculate theNPV of the project?
ASAP
Fabco, Inc., is considering purchasing flow valves that will reduce annual operating costs by $10,000 per year for the next 12 years. Fabco’s MARR is 7%/year. Using a present worth approach, determine the maximum amount Fabco should be willing to pay for the valves.

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