A piece of labor-saving equipment has just come onto the market that Mitsui Electronics, Limited, could use to reduce costs in one ofits plants in Japan. Relevant data relating to the equipment follow:Purchase cost of the equipmentAnnual cost savings that will beprovided by the equipmentLife of the equipmentRequired:1a. Compute the payback period for the equipment.1b. If the company requires a payback period of four years or less, would the equipment be purchased?2a. Compute the simple rate of return on the equipment. Use straight-line depreciation based on the equipment's useful life.2b. Would the equipment be purchased if the company's required rate of return is 16%?Complete this question by entering your answers in the tabs below.Req 1AReq 1B$ 378,000$ 70,00012 yearsReq 2AYearsReq 2BCompute the payback period for the equipment. (Round your answer to 1 decimal place.)Payback Period< Req 1AReq 1B >

Payback Period= Purchase Cost / Annual Cost SavingsNet income = Annual Cost Savings -…

Answered: A piece of labor-saving equipment has…

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 company is considering two types of equipment for its manufacturing plant. Pertinent data are as follows in the given figure below. If the minimum required rate of return is 15%, which equipment should be selected ? Use present worth cost method.
Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $45,000 and a remaining useful life of five years. It can be sold now for $52,000. Variable manufacturing costs are $36,000 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. Req B Revenues Machine A: Keep or Replace Analysis Req C and D Compute the income increase or decrease from replacing the old machine with Machine A. (Amounts to be…
3- Please solve this question in detail.
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vaibhav
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Thanks to acquisition of a key patent, your company now has exclusive production rights for barkelgassers (BGs) in North America. Production facilities for 210,000 BGs per year will require a $25.2 million immediate capital expenditure. Production costs are estimated at $67 per BG. The BG marketing manager is confident that all 210,000 units can be sold for $102 per unit (in real terms) until the patent runs out five years hence. After that, the marketing manager hasn’t a clue about what the selling price will be. Assume the real cost of capital is 10%. To keep things simple, also make the following assumptions: The technology for making BGs will not change. Capital and production costs will stay the same in real terms. Competitors know the technology and can enter as soon as the patent expires, that is, they can construct new plants in year 5 and start selling BGs in year 6. If your company invests immediately, full production begins after 12 months, that is, in year 1. (Assume it…
Thanks to acquisition of a key patent, your company now has exclusive production rights for barkelgassers (BGs) in North America. Production facilities for 210,000 BGs per year will require a $25.2 million immediate capital expenditure. Production costs are estimated at $67 per BG. The BG marketing manager is confident that all 210,000 units can be sold for $102 per unit (in real terms) until the patent runs out five years hence. After that, the marketing manager hasn't a clue about what the selling price will be. Assume the real cost of capital is 10%. To keep things simple, also make the following assumptions: • The technology for making BGs will not change. Capital and production costs will stay the same in real terms. Competitors know the technology and can enter as soon as the patent expires, that is, they can construct new plants in year 5 and start selling BGs in year 6. If your company invests immediately, full production begins after 12 months, that is, in year 1. (Assume it…
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