A 1987 advertisement in the New Yorker solicited offers on a 1967 Mercury Cougar XR7 (Motor Trend's 1967 car of the year) that had been stored undriven in a climate controlled environment for 20 years. If the original owner paid $4000 for this car in 1967, what price would he have to receive in 1987 to obtain a 10 percent annual return on his investment?

Georgia Energy is contemplating replacing an oil-powered generator with a solar powered generator. The old generator was purchased twenty-two years ago and is being depreciated over its 25-year life to a zero salvage value using straight-line depreciation.  The old generator has a book value of $4.5 million but could be sold today for $3.0 million. The solar powered generator would cost $10 million and be depreciated over a 4-year life using MACRS (.3333,.4445,.1481,.0741). Due to the rapidly changing technology, it is anticipated that the new generator will be sold after three years for $1.0 million. The new generator is expected to save Georgia Energy $10 million a year during its 3-year life. Georgia Energy will need to increase working capital by $1.5 million. The company’s WACC is 10% and the tax rate is 35%.   What is the project’s net present value (NPV)? Should the oil-powered generator be replaced? View keyboard shortcuts

Assume that United Technologies is evaluating a proposal to change the company's manual design system to a computer-aided design (CAD) system. The proposed system is expected to save 10,000 design hours per year; an operating cost savings of $50 per hour. The annual cash expenditures of operating the CAD system are estimated to be $250,000. The CAD system requires an initial investment of $500,000. The estimated life of this system is five years with no salvage value. The tax rate is 40 percent. United Technologies has a cost of capital of 20 percent.Assume that management intends to use double-declining balance depreciation with a switch to straight-line depreciation (applied to any undepreciated balance) starting in Year 4.Determine the project's net present value

What is the future worth when leased ?

What is the net present value of the investment in the car wash?

The Baltic Company is considering the purchase of a new machine tool to replace an obsolete one.  The machine being used for the operation has a current book value of $80,000, with an annual depreciation expense of $8,000.  It has a resale value today of $40,000, is in good working order, and will last, physically, for at least 10 more years.  The proposed machine will perform the operation so much more efficiently that Baltic engineers estimate that labor, material, and other direct costs of the operation will be reduced $60,000 a year if it is installed.  The proposed machine costs $240,000 delivered and installed, and its economic life is estimated at 10 years, with zero salvage value.  The company expects to earn 14 percent on its investment after taxes (14 percent is the firm's cost of capital).  The tax rate is 22 percent, and the firm uses straight-line depreciation.  Any gain or loss on the sale of the machine at retirement is subject to tax at 40 percent.    Would it be better…

You own a coal mining company and are considering opening a new mine. The mine will cost $117.1 million to open. If this money is spent immediately, the mine will generate $21.5 million for the next 10 years. After that, the coal will run out and the site must be cleaned and maintained at environmental standards. The cleaning and maintenance are expected to cost $1.9 million per year in perpetuity. What does the IRR rule say about whether you should accept this opportunity? If the cost of capital is 8.1%, what does the NPV rule say? Use the graph below to determine the IRR(s) in the problem. NPV ($ millions) 31- 21- NPV of the Investment in the Coal Mine 5 10 15 20 Discount Rate (%) What does the IRR rule say about whether you should accept this opportunity? (Select the best choice below.) A. Accept the opportunity because the IRR is greater than the cost of capital. O B. The IRR is r= 11.83%, so accept the opportunity. O C. Reject the opportunity because the IRR is lower than the 8.1%…