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 ofexpenses. 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 beconsidered 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. Underthese conditions, what is the internal rate of return? (Round your answer to the nearest whole percentage. l.e. 0.123 should beconsidered as 12%.)1. Internal rate of return2. Net present value3. Internal rate of return9696

Machine cost = $170,595 Net cash inflows = $45,000 Life of machine = 5 years

Answered: 9 Henrie's Drapery Service is…

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 manufacturing company is considering investing in a new machine that costs $50,000. The machine is expected to have a useful life of 5 years. The company estimates that the salvage value of the machine at the end of its useful life will be $10,000. If the company uses straight-line depreciation, what will be the capitalized cost of the machine? A) $7,000 B) $7,500 C) $8,000 D) $8,500
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7) costs for the current machine. The current machine is based on older technology and has negligible market value. The purchase price of the new equipment is $500,000 and it is expected to last for 10 years. Its terminal salvage value is $50,000. Operating and maintenance (O&M) costs are estimated to be $20,000 for the first year. Thereafter, these O&M costs are expected to increase by $2,000 each year over the previous year's costs. MARR is 10% per year compounded annually. a) b) purchase this new equipment? Explain. EmKay, Inc. has decided to purchase new equipment because of the increasing maintenance Compute the present worth for this new equipment purchase. If the annual O&M costs for the current machine are $75,000, would you support the decision to
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Crane 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 here. Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Net present value Machine A $77,000 8 years 0 Profitability index $19,900 $4,800 Machine A Which machine should be purchased? 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.) Machine B should be purchased. $188,000 8 years 0 $40,200 $9,860…
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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. Machine A Machine B Original cost $ 77,500 $ 186,000 Estimated life 8 years 8 years Salvage value $ 19,500 $ 39,600 Estimated annual cash inflows $ 5,040 $ 9,800 Estimated annual cash outflows 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.) Machine A Machine B Net present value Profitability index Which machine should be purchased? should be…
TLC 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 is not equipped to do. Estimates for each machine are as follows: Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Machine A $78,500 8 years Net present value $ Profitability index 0 $22,200 $4,900 Machine B Machine A Which machine should be purchased? $190,100 Click here to view PV table. Calculate the net present value and profitability index of each machine. Assume a 10% discount rate. (If 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.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275. Round profitability index answers to 3 decimal places, eg. 12.521.) 8 years Calculate the net present value and…

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