A shoe manufacturer is evaluating new equipment that would custom fit athletic shoes. The new equipment costs $90,000 and will generate $35,000 in net cash flows for five years. (Negative cumulative cash flows should be indicated with a minus sign.) Determine the break-even time for this equipment using a 10% discount rate.

A shoe manufacturer is evaluating new equipment that would custom fit athletic shoes. The new equipment costs $90,000 and will generate $35,000 in net cash flows for five years. (Negative cumulative cash flows should be indicated with a minus sign.) Determine the break-even time for this equipment using a 10% discount rate.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 2CE

See similar textbooks

Similar questions

A restaurant is considering the purchase of new tables and chairs for their dining room with an initial investment cost of $515,000, and the restaurant expects an annual net cash flow of $103,000 per year. What is the payback period?
A convenience store is looking into the possibility of installing a 24/7-automated refill system to increase its projected revenues by P800,000 per year over the next 5 years. Annual expenses to maintain the system are expected to be $200,000. The system will cost $2,000,000 and will have no market value at the end of the 5-year study period. The store's MARR is 20% per year. Using the AW (annual worth) method, it can be concluded that this is not a good investment. (A) True (B) False
Campbell Manufacturing is considering the purchase of a new welding system. The cash benefits will be $480,000 per year. The system costs $1,350,000 and will last 10 years. Compute the NPV for Campbell Manufacturing, assuming a discount rate of 12%
Ayayai's Lawn Service needs to purchase a new lawnmower costing $8,476 to replace an old lawnmower that cannot be repaired. The new lawnmower is expected to have a useful life of 4 years, with no salvage value at the end of that period. Click here to view the factor table. (a) If Ayayai's required rate of return is 11%, what level of annual cash savings must the lawnmower generate to be considered an acceptable investment under the net present value method? (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to 0 decimal place, e.g. 58,971) Annual cash savings should be $ (b) If Ayayai's required rate of return is 14%, what level of annual cash savings must the lawnmower generate to be considered an acceptable investment under the net present value method? (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to 0 decimal place, e.g. 58,971) Annual cash savings should…
Management of Blossom Mints, a confectioner, is considering purchasing a new jelly bean-making machine at a cost of $312,500. They project that the cash flows from this investment will be $75,000 for the next seven years. If the appropriate discount rate is 14 percent, what is the NPV for the project? - NPV $?
Wendy ice cream factory is considering the purchase of a new machine. The machine would cost $400,000 and has an estimated useful life of 10 years with a residual value of 50,000. Management estimates that the new machine will provide net annual cash flow of $60 000. Management also believes that the new machine will save the company money because it is expected to be more reliable than other machine and will reduce downtime. Assume the discount rate is 10%, how much would the reduction in downtime have to be worth, in present value dollars, in order for this investment to be acceptable? (Use Present Value Tables to help calculate your answer) Select one: а. 13,049 O b. 40,000 с. 29,000 O d. 12,049
Management of a confectioner is considering purchasing a new jelly bean-making machine at a cost of $340,022. They project that the cash flows from this investment will be $126,710 for the next seven years. If the appropriate discount rate is 14 percent, what is the IRR that management can expect on this project? (Do not round discount factors. Round other intermediate calculations to 0 decimal places e.g. 15 and final answer to 2 decimal places, e.g. 5.25%.)
A new transmission in your truck will cost $9,500. Luckily, it should reduce maintenance expense by $3,150 each year for the next 10 years. What is the NPV of the transmission? Use a discount rate of 10.6%.
Cecil company is considering the of a new machine. The machine cost $227,500 and will generate a yearly cash inflow of $35,000. what is the payback period? Requirement: what is the payback period?
A new transmission in your truck will cost $5,000. Luckily, it should reduce maintenance expense by $3,725 each year for the next 10 years. What is the profitability index of the transmission? Use a discount rate of 11.8%.
Calculate the financial impact of buying a mobile C-Arm and accessories that would cost 100,000, would have a 5 year useful life, 10% salvage value, have a profit per procedure of 50.00, and would generate an estimated volume of 200 procedures per year. The bank tells me the discount rate should be 10%.
Elijah Enterprises will need to upgrade the computer system in 6 years. They anticipate the upgrade to cost $106,200. If the discount rate is 13%, what will be the required yearly investment needed to obtain the money for the upgrade?Round your (1+R)^n value to 2 decimal places and use that number for your final amount required rounded to the nearest dollar.