6Check my work16.7pointseBookPrintReferencesHenrie's Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost$137,320, including freight and installation. Henrie's estimated the new machine would increase the company's cash inflows, net ofexpenses, by $40,000 per year. The machine would have a five-year useful life and no salvage value.Click here to view Exhibit 12B-1 and Exhibit 12B-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 beconsidered as 12%.)2. Using a discount rate of 14%, 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 $34,390 per year. Underthese conditions, what is the internal rate of return? (Round your answer to the nearest whole percentage, i.e. 0.123 should beconsidered as 12%.)1. Internal rate of return2. Net present value3. Internal rate of return14 %010 %

Henrie's Drapery Service is contemplating the acquisition of a new machine designed for cleaning and…

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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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Friedman Company is considering installing a new IT system. The cost of the new system is estimated to be 2,250,000, but it would produce after-tax savings of 450,000 per year in labor costs. The estimated life of the new system is 10 years, with no salvage value expected. Intrigued by the possibility of saving 450,000 per year and having a more reliable information system, the president of Friedman has asked for an analysis of the projects economic viability. All capital projects are required to earn at least the firms cost of capital, which is 12 percent. Required: 1. Calculate the projects internal rate of return. Should the company acquire the new IT system? 2. Suppose that savings are less than claimed. Calculate the minimum annual cash savings that must be realized for the project to earn a rate equal to the firms cost of capital. Comment on the safety margin that exists, if any. 3. Suppose that the life of the IT system is overestimated by two years. Repeat Requirements 1 and 2 under this assumption. Comment on the usefulness of this information.
Henrie's Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost $113.730. including freight and installation. Henrie's estimated the new machine would increase the company's cash inflows, net of expenses, by $30,0o00 per year. The machine would have a five-year useful life and no salvage value. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table. Required: 1. What is the machine's internal rate of return? (Round your final answer to the nearest whole percentage.) 2 Using a discount rate of 10%, what is the machine's net present value? 3. Suppose the new machine would increase the company's annual cash inflows, net of expenses, by only $27,000 per year. Under these conditions, what is the internal rate of return? (Round your final answer to the nearest whole percentege.) 1. Internal rate of return 2. Net present value 3. Internal rate of return
Henrie's Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost $102,990, including freight and installation. Henrie's estimated the new machine would increase the company's cash inflows, net of expenses, by $30,000 per year. The machine would have a five-year useful life and no salvage value. Click here to view Exhibit 12B-1 and Exhibit 12B-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 14%, 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 $26,475 per year. Under these conditions, what is the internal rate of return? (Round your answer to the nearest whole percentage, i.e. 0.123 should be considered as 12%.) 1.…
Henrie's Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost $151,640, including freight and installation, Henrie's estimated the new machine would increase the company's cash inflows, net of expenses, by $40,000 per year. The machine would have a five-year useful life and no salvage value. Required: 1. What is the machine's internal rate of return? Note: Round your answer to the nearest whole percentage.
Henrie’s Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost $137,320, including freight and installation. Henrie’s estimated the new machine would increase the company’s cash inflows, net of expenses, by $40,000 per year. The machine would have a five-year useful life and no salvage value. Click here to view Exhibit 13B-1 and Exhibit 13B-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 whole decimal place i.e. 0.123 should be considered as 12%.) 2. Using a discount rate of 14%, 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 $31,720 per year. Under these conditions, what is the internal rate of return? (Round your answer to whole decimal place i.e. 0.123 should be considered as 12%.)
Henrie’s Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost $137,320, including freight and installation. Henrie’s estimated the new machine would increase the company’s cash inflows, net of expenses, by $40,000 per year. The machine would have a five-year useful life and no salvage value. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table. Required: 1. What is the machine’s internal rate of return? 2. Using a discount rate of 14%, 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 $38,090 per year. Under these conditions, what is the internal rate of return?
Henrie's Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost $170,595, including freight and installation. Henrie's estimated the new machine would increase the company's cash inflows, net of expenses, by $45,000 per year. The machine would have a five-year useful life and no salvage value. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table. Required: 1. What is the machine's internal rate of return? Note: Round your answer to the nearest whole percentage, i.e. 0.123 should be considered as 12%. 2. Using a discount rate of 10%, 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 $40,500 per year. Under these conditions, what is the internal rate of return? Note: Round your answer to the nearest whole percentage, i.e. 0.123 should be considered as…
BAK Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided below. Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Net present value Machine A $78,200 8 years Profitability index 0 $19,800 $5,130 Machine A Machine B $182,000 8 years Click here to view the factor table. Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative, use either a negative sign preceding the number eg-45 or parentheses eg (45). Round answer for present value to 0 decimal places, e.g. 125 and profitability index to 2 decimal places, e.g. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) 0 $39,600 $10,180 Machine B
Henrie's Drapery Service Is Investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost $170,595, Including freight and Installation. Henrie's estimated the new machine would increase the company's cash Inflows, net of expenses. by $45,000 per year. The machine would have a five-year useful life and no salvage value. Click here to view Exhibit 12B-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, L.e. 0.123 should be considered as 12%.) 2. Using a discount rate of 10%, 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 $40,500 per year. Under these conditions, what is the internal rate of return? (Round your answer to the nearest whole percentage. l.e. 0.123 should be considered as 12%.) 1.…
BAK Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided below. Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Net present value. Machine A $76,600 Profitability index 8 years Which machine should be purchased? $19,900 $4,890 Machine A 0 Click here to view the factor table. Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative, use either a negative sign preceding the number eg-45 or parentheses eg (45). Round answer for present value to 0 decimal places, e.g. 125 and profitability index to 2 decimal places, e.g. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) should be purchased. Machine B $179,000 8 years 0 $40,400 $9,940 Machine…
Henrie's Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost $113,730, including freight and installation. Henrie's estimated the new machine would increase the company's cash inflows, net of expenses, by $30,000 per year. The machine would have a five-year useful life and no salvage value. Click here to view Exhibit 12B-1 and Exhibit 12B-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 10%, 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 $27,000 per year. Under these conditions, what is the internal rate of return? (Round your answer to the nearest whole percentage, i.e. 0.123 should be considered as 12%.)
6. The Imperial Chemical Company is considering purchasing a chemical analysis machine worth $13,000. Although the purchase of this machine will not produce any increase in sales revenues, it will result in a reduction of labour costs. In order to operate the machine properly, it must be calibrated each year. The machine has an expected life of 6 years, after which it will have no salvage value. The following table summarizes the annual savings in labour cost and the annual maintenance costs in calibration over 6 years: Net Cash Flow ($) Costs ($) Year (n) 0 Savings ($) 13,000 -13,000 1 2,300 6,000 3,700 2 2,300 7,000 4,700 3 2,300 9,000 6,700 4 2,300 9,000 6,700 5 2,300 9,000 6,700 6 2,300 9,000 6,700 Find the internal rate of return for this project. [6]

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