Angelus Press is considering replacing all of its old cash registers with new ones. The old registers are fully depreciated and have no disposal value and will be sold for $ $50,000. The new registers cost $ 680,000. Because the new registers are more efficient than the old registers, Angelus Press willI have annual cost savings from using the new registers in the amount of $140,000, for the first four years and then $ 100,000 for the remaining two years. The registers have a 6-year useful ife, and are depreciated using the straight line method with no disposal value. Angelus Press require a 12% real rate of return. Ignore income taxes Required: a) Calculate the Net present value and based on your answer state if project should be accepted Calculate the Payback period and based on your answer state if project should be accepted Calculate the Internal Rate of return and based on your answer state if project should be accepted b) c)

Angelus Press is considering replacing all of its old cash registers with new ones. The old registers are fully depreciated and have no disposal value and will be sold for $ $50,000. The new registers cost $ 680,000. Because the new registers are more efficient than the old registers, Angelus Press willI have annual cost savings from using the new registers in the amount of $140,000, for the first four years and then $ 100,000 for the remaining two years. The registers have a 6-year useful ife, and are depreciated using the straight line method with no disposal value. Angelus Press require a 12% real rate of return. Ignore income taxes Required: a) Calculate the Net present value and based on your answer state if project should be accepted Calculate the Payback period and based on your answer state if project should be accepted Calculate the Internal Rate of return and based on your answer state if project should be accepted b) c)

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter11: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 4P: Although the Chen Company’s milling machine is old, it is still in relatively good working order and...

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Although the Chen Company’s milling machine is old, it is still in relatively good working order and would last for another 10 years. It is inefficient compared to modern standards, though, and so the company is considering replacing it. The new milling machine, at a cost of $110,000 delivered and installed, would also last for 10 years and would produce after-tax cash flows (labor savings and depreciation tax savings) of $19,000 per year. It would have zero salvage value at the end of its life. The project cost of capital is 10%, and its marginal tax rate is 25%. Should Chen buy the new machine?
A mini-mart needs a new freezer and the initial Investment will cost $300,000. Incremental revenues, including cost savings, are $200,000, and incremental expenses, including depreciation, are $125,000. There is no salvage value. What is the accounting rate of return (ARR)?
. Fancy Foods is considering replacing all 12 of its meat scales with new, digital ones. The old scales are fully depreciated and have no disposal value. The new scales cost $120,000 (in total). Because the new scales are more efficient and more accurate than the old scales, Fancy Foods will have annual incremental cash savings from using the new scales in the amount of $30,000 per year. The scales have a 6-year useful life and no terminal disposal value and are depreciated using the straight-line method. Fancy Foods requires a 6% real rate of return. Q. Again assuming that the company faces a 25% tax rate, calculate the NPV of the project under an inflation rate of 4%.
. Fancy Foods is considering replacing all 12 of its meat scales with new, digital ones. The old scales are fully depreciated and have no disposal value. The new scales cost $120,000 (in total). Because the new scales are more efficient and more accurate than the old scales, Fancy Foods will have annual incremental cash savings from using the new scales in the amount of $30,000 per year. The scales have a 6-year useful life and no terminal disposal value and are depreciated using the straight-line method. Fancy Foods requires a 6% real rate of return. Q. Now assume that the company’s tax rate is 25%. Calculate the NPV of the project assuming no inflation.
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Kingbird Bottling Corporation is considering the purchase of a new bottling machine. The machine would cost $200,000 and has an estimated useful life of eight years with zero salvage value. Management estimates that the new bottling machine willprovide net annual cash flows of $39,500. Management also believes that the new machine will save the company money because it is expected to be more reliable than other machines, and thus will reduce downtime. Assume a discount rate of 12%. Click here to view the factor table. Calculate the net present value. (lf the net present value is negative, use either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided, e.8. 1.25124. 5 Round present value answer to 0 decimal places, e.8. 1,250.) 1. net present value? 2. How much would the reduction in downtime have to be worth in order for the project to be acceptable? Present value of reduction…
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