A manufacturer is contemplating the purchase of either of two machines at a cost of Kshs 155 million and Kshs 180 million respectively. The machines will generate cashflows receivable at the end of each respective year as follows. Machine B cashflows (millions) cashflows (millions) Year Machine A 1 55 90 35 85 3 (35) 55 4 68 46 72 37 41 Machine A has an estimated salvage value of Kshs 10 million at the end of year six. Machine B would cost jambo an estimated Kshs 10 million to dispose off at the end of year five. Jambo has a cost of capital of 15 percent per annum. i) Using NPV approach, advice jambo as to which of the machines it should invest in.

A manufacturer is contemplating the purchase of either of two machines at a cost of Kshs 155 million and Kshs 180 million respectively. The machines will generate cashflows receivable at the end of each respective year as follows. Machine B cashflows (millions) cashflows (millions) Year Machine A 1 55 90 35 85 3 (35) 55 4 68 46 72 37 41 Machine A has an estimated salvage value of Kshs 10 million at the end of year six. Machine B would cost jambo an estimated Kshs 10 million to dispose off at the end of year five. Jambo has a cost of capital of 15 percent per annum. i) Using NPV approach, advice jambo as to which of the machines it should invest in.

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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ITS URGENT. HKU purchased a face mask making machine to make face mask for the students and staffs at a price of $3.15 million. The net cash flow is estimated at $500,000 per year and a salvage value of $400,000 is anticipated regardless of when it is sold. (a) Determine, the number of years the machine must be used to obtain payback at MARR values of, 0%, 8% and 15% per year. (b) Plot the payback years against MARR obtained in (i) and discuss the behavior.
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The Marigold Company is planning to purchase $577,000 of equipment with an estimated seven-year life and no estimated salvage value. The company has projected the following annual cash flows for the investment. Year 1 2 3 456 7 Total Projected Cash Flows $214,000 169,500 124,500 Payback period 55,200 55,200 48,500 The company 48,500 (a) Calculate the payback period for the proposed equipment purchase. Assume that all cash flows occur evenly throughout the year. $715,400 years and (b) If Marigold requires a payback period of 4 years or less, should the company make this investment? months. make this investment.
For each of the following problems, (a) draw the cash flow diagram; (b) present clean and clear manual solutions to the problem; (c) highlight the final answer (only the final answer as required by the problem) by enclosing it within a box. An asset with an expected life of eight years is to be purchased for $10,000. Annual revenue is estimated at $5,000 with annual expenses of $1,00. At the end of the 8th year, the asset is expected to be sold for $2,000. The interest rate is 10%. Use the AW method to determine whether the asset should be purchased or not.
Please help me to solve this problem
Heidi Company is considering the acquisition of a machine that costs $828,800. The machine is expected to have a useful life of six years, a negligible residual value, an annual net cash flow of $112,000, and annual operating income of $80,000. What is the estimated cash payback period for the machine (round to one decimal point)? a.10.4 years b.4.3 years c.7.4 years d.1.4 years Determine the average rate of return for a project that is estimated to yield total income of $411,040 over four years, cost $668,000, and has a $66,000 residual value. %
costing $150,000. Grover intends to keep the truck for five years before Grover Contracting, Inc., is considering the purchase of a new cement truck trading it in on a new one. The truck's estimated salvage value at the end of he five-year period is approximately $25,000. The truck is expected to increase annual income and cash flows by the following amounts: Year Increase in Net Cash Flows 2$ Increase in Income 2$ 37,500 37,500 37,500 37,500 1 10,000 12,000 14,000 3 4 16,000 5 18,000 37,500 $70,000 $187,500 Required: a. Compute the payback period associated with this investment. b. Compute the return on average investment of this proposal. Compute the net present value of this investment if Grover requires a minimum return of с. 12%. d. Comment on your findings.
The Lana company is planning to purchase a machine known as machine D. Machine D would cost $ 28580 and would have a useful life of 5 years with zero salvage value. The expected annual cash inflow of the machine is $ 9529. Answer:
Hayden Company is considering the acquisition of a machine that costs $429,000. The machine is expected to have income of $71,400. The estimated cash payback period for the machine is (round to one decimal place) O a. 7.2 years Ob. 6.0 years O c. 1.2 years O d. 5.1 years useful life of 6 years, a negligible residual value, an annual net cash inflow of $84,000, and annual operating
Factor Company is planning to add a new product to its line. To manufacture this product, the company needs to buy a new machine at a $480,000 cost with an expected four-year life and a $20,000 salvage value. Additional annual information for this new product line follows. Required 1. Determine income and net cash flow for each year of this machine’s life.2. Compute this machine’s payback period, assuming that cash flows occur evenly throughout each year.3. Compute net present value for this machine using a discount rate of 7%.
Hayden Company is considering the acquisition of a machine that costs $561,000. The machine is expected to have a useful life of 6 years, a negligible residual value, an annual net cash inflow of $100,000, and annual operating income of $85,000. The estimated cash payback period for the machine is (round to one decimal place) a.6.6 years b.5.6 years c.7.8 years d.1.2 years
Heidi Company is considering the acquisition of a machine that costs $536,000. The machine is expected to have a useful life of 6 years, a negligible residual value, an annual net cash inflow of $104,000, and annual operating income of $84,095. The estimated cash payback period for the machine is (round to one decimal point)? Oa. 5.2 years Ob. 6.4 years Oc. 6.0 years Od. 6.5 years

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