1. What would be the total annual cash inflows associated with the new machine for capital budgeting purposes? 2. What discount factor should be used to compute the new machine's internal rate of return? (Round your answers to 3 decimal places.) 3. What is the new machine's internal rate of return? (Round your final answer to the nearest whole percentage.) 4. In addition to the data given previously accume that the machine will have a $18 105 calvage value at the end of cix yoare Under

1. What would be the total annual cash inflows associated with the new machine for capital budgeting purposes? 2. What discount factor should be used to compute the new machine's internal rate of return? (Round your answers to 3 decimal places.) 3. What is the new machine's internal rate of return? (Round your final answer to the nearest whole percentage.) 4. In addition to the data given previously accume that the machine will have a $18 105 calvage value at the end of cix yoare Under

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter13: Capital Budgeting: Estimating Cash Flows And Analyzing Risk

Section: Chapter Questions

Problem 6P: New-Project Analysis The Campbell Company is considering adding a robotic paint sprayer to its...

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Exercise 14-3 (Algo) Internal Rate of Return [LO14-3] Wendell’s Donut Shoppe is investigating the purchase of a new $42,800 donut-making machine. The new machine would permit the company to reduce the amount of part-time help needed, at a cost savings of $5,700 per year. In addition, the new machine would allow the company to produce one new style of donut, resulting in the sale of 2,500 dozen more donuts each year. The company realizes a contribution margin of $1.50 per dozen donuts sold. The new machine would have a six-year useful life. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: 1. What would be the total annual cash inflows associated with the new machine for capital budgeting purposes? 2. What discount factor should be used to compute the new machine’s internal rate of return? (Round your answers to 3 decimal places.) 3. What is the new machine’s internal rate of return? (Round your final answer…
Exercise 14-3 (Algo) Internal Rate of Return [LO14-3] Wendell's Donut Shoppe is investigating the purchase of an $34,600 donut-making machine with a six-year useful life. The new machine would reduce labor costs by $6,500 per year. In addition, it would allow the company to produce one new style of donut, resulting in the sale of 2,500 dozen more donuts each year. The company realizes a contribution margin of $1.60 per dozen donuts sold. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: 1. What are the new machine's total annual cash inflows? 2. What discount factor should be used to compute the new machine's internal rate of return? Note: Round your answer to 3 decimal places. 3. What is the new machine's internal rate of return? Note: Round your final answer to the nearest whole percentage. 4. In addition to the data given previously, assume the machine will have a $13,755 salvage value at the end of six years.…
PART 2 (RATE OF RETURN) ABC Company is trying to decide whether or not to automate their product packing process. The machine costs $200,000, has a useful life of 10 years and a salvage value $10,000. The machine costs $9000 per year to operate and maintain but will save the company $50,000 per year in labor costs. ABC Company has asked you to evaluate the economics of this purchase. (Assume their MARR is 14% per year).
Elon Musk Capital Project – Assessment #11 Suppose Elon Musk has an existing business making electric bicycles. Sales are so strong that he is considering selling his existing factory and replacing it with a new factory. A: The current factory can be sold for $100mm; it has a tax value of $50mm.The current factory produces annual after tax cash flow of $50mm. Elon believe that after eight years from now, the existing factory would have a resale value of $20mm with a tax value then of $8mm. B: A new bicycle factory can be built for $250mm and equipment will cost $300mm plus installation costs of $50mm. Assume the plant and equipment can be built and operational on day one. C: Expect working capital needs as follows (starting on day one): Increase of $35mm in Accounts Receivable and $50mm of Inventory; expect increased $25mm of Accounts Payable. D: He initially projects after-tax cash flows of $200mm per year for eight years occurring on the last day of each year, starting at the…
Elon Musk Capital Project – Assessment #11 Suppose Elon Musk has an existing business making electric bicycles. Sales are so strong that he is considering selling his existing factory and replacing it with a new factory. A: The current factory can be sold for $100mm; it has a tax value of $50mm.The current factory produces annual after tax cash flow of $50mm. Elon believe that after eight years from now, the existing factory would have a resale value of $20mm with a tax value then of $8mm. B: A new bicycle factory can be built for $250mm and equipment will cost $300mm plus installation costs of $50mm. Assume the plant and equipment can be built and operational on day one. C: Expect working capital needs as follows (starting on day one): Increase of $35mm in Accounts Receivable and $50mm of Inventory; expect increased $25mm of Accounts Payable. D: He initially projects after-tax cash flows of $200mm per year for eight years occurring on the last day of each year, starting at the…
i 4 ances Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $47,000 and a remaining useful life of five years. It can be sold now for $57,000. Variable manufacturing costs are $50,000 per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is five years. Purchase price Variable manufacturing costs per year (a) Compute the income increase or decrease from replacing the old machine with Machine A (b) Compute the income increase or decrease from replacing the old machine with Machine B. (c) Should Lopez keep or replace its old machine? (d) if the machine should be replaced, which new machine should Lopez purchase? Req A Complete this question by entering your answers in the tabs below. Revenues Machine A: Keep or Replace Analysis Req B Compute the income increase or decrease from replacing the old machine with Machine A. (Amounts to be…
Exercise 12-15 (Algo) Internal Rate of Return and Net Present Value [LO12-2, LO12-3] Henrie's Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost $151,410, including freight and installation. Henrie's estimated the new machine would increase the company's cash inflows, net of expenses, by $42,000 per year. The machine would have a five-year useful life and no salvage value. Click here to view Exhibit 128-1 and Exhibit 128-2, to determine the appropriate discount factor(s) using table. Required: 1. What is the machine's internal rate of return? (Round your answer to the nearest whole percentage, i.e. 0.123 should be considered as 12%.) 2. Using a discount rate of 12%, what is the machine's net present value? Interpret your results. 3. Suppose the new machine would increase the company's annual cash inflows, net of expenses, by only $36,930 per year. Under these conditions, what is the internal rate of return? (Round…
QUESTION 1 Agro Tech Corporation is considering investing in a new IT system for selling to its clients. The company has identified two new possible systems, which would be suitable for its customers. Only one of the systems can be selected and the directors are looking for guidance on which system would be the best. The company requires a 15% rate of return on projects of this nature. The installation cost per project will be R100 000 each, while systems can be disposed for R200 000 each after five- years life span. Cash flows for Agro Tech Corporation: IT System (Rands) PERIOD 1 2 3 4 5 SYSTEM A -4 000 000 R1 800 000 R1 700 000 R1 600 000 R1 500 000 R1 400 000 SYSTEM B -3 500 000 1 500 000 1 500 000 1 500 000 1 400 000 R1 300 000 Required: 1.1 Determine the payback period in years, months and days for both systems 1.2 Based on your calculations in 1.1, which system should Agro Tech Corporation consider? Why? 1.3 Calculate the Net Present Value for both systems. 1.4 Calculate the…
13 Spartan Scooters is contemplating rolling out a new model of motor scooter, which will sell for $2000 each It has estimated that its Fixed Costs will be S1000.000 annual Depreciation will be $200,000, annual Operating Cash Flow will be $440.000, and the varlable cost per scooter will be $1200. What is the financial break even quantity? Mupie Choice 1500 1940 201
Q. 3 The cost of a replacement packaging machine is $95,000. The machine is anticipated to reduce the packaging costs by $20 per parcel. The_purchasing company is expected to yield an output of 25,000 parcels per year. The salvage value of the machine is anticipated to be $23,000 at the end of 10 years. What is the present worth of the machine if the after-tax MARR is 10%, the CCA rate is 20%, and the tax rate is 40%?
Exercise 1 (Simple Rate of Return Method) The management of Ann Gee MicroBrew is considering the purchase of an automated bottling machine for P80,000. The machine would replace an old niece of equipment that costs P33,000 per year to operate. The new machine would cost P10,000 per year to operate. The old machine currently in use could be sold now for a scrap value of P5,000. The new machine would have a useful life of 10 years with no salvage value. Required: Compute the simple rate of return on the new automated bottling machine.
Problem:15 Engine valves company is considering building an assembly plant .The decision has been narrowed down to two possibilities. The company desires to choose the best plant at a level of operation of 10,000 gadgets a month. Both plants have an expected life of 10 years and are expected to have any salvage value at the time of their retirements .The cost of capital is 10 percent . Assuming a zero income tax rate , suggest what would be the desirable choice ? Cost of the monthly output of 10,000 valves Large Plant Rs Small plant Rs Initial cost 30,00,000 22,93,500 Direct labour : First shift 15,00,000 per year 7,80,000 per year Second shift 9.00,000 per year Overheads 2,40,000 per year 2,10,000 per year