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A: Initial Investment refers to the initial cost of any project that is capitalised and used to…
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A: Initial Investment is the amount of investment which is required to start a project, it includes all…
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A: This is related to capital budgeting. Equivalent annual cost (EAC) is used to compare projects that…
Q: Arnold Inc. is considering a proposal to manufacture high-end protein bars used as food supplements…
A: This question is about finding out the NPV of the Project where Cash inflows and outflows are given.…
Q: Parker & Stone, Incorporated, is looking at setting up a new manufacturing plant in South Park to…
A: Cash flow to initial investment refers to the amount that is being invested in the business…
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A: The process through which an entity analyzes and evaluates a project's profitability and decides on…
Q: Arnold Inc. is considering a proposal to manufacture high-end protein bars used as food supplements…
A: The net present value(NPV) is a popular technique for assessing a project or investment's…
Q: Parker & Stone, Inc., is looking at setting up a new manufacturing plant in South Park to produce…
A: Proper cash flow for the Initial investment or the Initial cost= Opportunity cost of the land + Cost…
Q: Parker & Stone, Incorporated, is looking at setting up a new manufacturing plant in South Park to…
A: Cash flows to be used as initial investment in fixed asset will include :Sales value of the land…
Q: Parker & Stone, Incorporated, is looking at setting up a new manufacturing plant in South Park to…
A: Cash flow amount = $4.3m of land + $11.5 m of building + $670k of grading = $16.47 million…
Q: Parker & Stone, Incorporated, is looking at setting up a new manufacturing plant in South Park to…
A: Initial Investment is the amount of investment which is required to start a project, It includes all…
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Q: Big Rock Brewery currently rents a bottling machine for $50,000 per year, including all maintenance…
A: The process through which an entity analyzes and evaluates a project's profitability and decides on…
Q: The Sweetwater Candy Company would like to buy a new machine that would automatically dip…
A: Reduction in annual operating costs: A) Operating cost , present hand method $38,000 B)…
Q: Parker & Stone, Incorporated, is looking at setting up a new manufacturing plant in South Park to…
A: Current market value of land = $4.9 million. The land was purchased 6 years ago for use as a…
Q: decide which truck they should purchase.
A: Present value is the value of future cash flows today, discounted at the rate of interest.
Q: Parker & Stone, Incorporated, is looking at setting up a new manufacturing plant In South Park to…
A: Initial Investment refers to the initial cost of any project that is capitalised and used to…
Q: A firm is considering replacing the existing industrial air conditioning unit. They will pick one of…
A: EAC is used to compare investments or projects with different lifespans or time horizons, by…
Q: Arnold Inc. is considering a proposal to manufacture high-end protein bars used as food supplements…
A: In the NPV analysis, we compute the present value of all future benefits. This present value is then…
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A: The net present value is the difference between the present value of future cash flows and the…
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A: Net present worth (NPW) is used to determine the present value of all future cash flows. Net present…
Q: Parker & Stone, Incorporated, is looking at setting up a new manufacturing plant in South Park to…
A: 1. Cost of the land: Even though the land was purchased six years ago for $6 million, its current…
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A: MARR stands for Minimum acceptable rate of return.It reflects this opportunity cost of capital.
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Q: Arnold Inc. is considering a proposal to manufacture high-end protein bars used as food supplements…
A: Given, The cost of equipment is $1.3 million Tax rate is 30%
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A: Net present value (NPV) is the difference between present value(PV) of all cash inflows/benefits and…
Q: Parker & Stone, Incorporated, is looking at setting up a new manufacturing plant in South Park to…
A: Variables in the question:Cost of land bought 6 years ago=$5.4 millionCurrent cost of the land=$5.7…
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A: --------------
Q: Parker & Stone, Incorporated, is looking at setting up a new manufacturing plant in South Park to…
A: Cash flow refers to the movement of inflows and outflows of cash during the year which is helpful in…
Q: A local sanitation authority needs to purchase a new garbage truck. The authority has two truck…
A: Time interval plays a big role in determining the inflows and outflows of an investment ,therefore…
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A: Present Value is the current price of future value which will be received in near future at some…
Q: Parker & Stone, Incorporated, is looking at setting up a new company bought some land six years ago…
A: Plant cost = $22.2 million, which is $22.2*1 million = $22.2*$1,000,000 = $22,200,000Grading cost =…
Q: er & Stone, Incorporated, is looking at setting up a new manufacturing plant in South Park to…
A: Cash flow refers to the transfer of funds into and out of a business or individual's accounts,…
Q: a. What are the free cash flows of the project? (starting with year 0) b. If the cost of capital is
A: Cash flow refers to the amount of cash that a company has after considering all the expenses and…
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Q: A firm is considering replacing the existing industrial air conditioning unit. They will pick one of…
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The Fleming Company, a food distributor, is considering replacing a filling line at its Oklahoma City warehouse. The existing line was purchased several years ago for $600,000. The line’s book value is $200,000, and Fleming management feels it could be sold at this time for $150,000. A new, increased capacity line can be purchased for $1,200,000. Delivery and installation of the new line are expected to cost an additional $100,000. Assuming Fleming’s marginal tax rate is 40%, calculate the net investment for the new line.
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- The Sweetwater Candy Company would like to buy a new machine that would automatically “dip” chocolates. The dipping operation is currently done largely by hand. The machine the company is considering costs $200,000. The manufacturer estimates that the machine would be usable for five years but would require the replacement of several key parts at the end of the third year. These parts would cost $10,100, including installation. After five years, the machine could be sold for $9,000. The company estimates that the cost to operate the machine will be $8,100 per year. The present method of dipping chocolates costs $41,000 per year. In addition to reducing costs, the new machine will increase production by 8,000 boxes of chocolates per year. The company realizes a contribution margin of $1.40 per box. A 20% rate of return is required on all investments. Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables.…A flour mill is considering buying a new jumbo sifter, which would have an installed cost of $80,000. The new one would replace the existing sifter that was purchased 3 years ago at an installed cost of $60,000. If the company moves forward with the replacement, it could sell the old sifter for $19,000. Purchasing the new sifter would resu in the company's current assets increasing by $10,000 and current liabilities increasing by $8,000. The company uses the 5-year MACRS table for depreciation and is taxed at 21%. a) What is the accumulated depreciation of the old sifter? b) What is the current book value of the old sifter? c) What is the amount of depreciation recapture/recovery? d) What is the tax on the sale of the old sifter? e) What are the after-tax proceeds from the sale of the old sifter? f) What is the change in Net Working Capital? g) What is the initial investment for the project?A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,654.00 to install, $5,060.00 to operate per year for 7 years at which time it will be sold for $7,020.00. The second, RayCool 8, costs $41,774.00 to install, $2,009.00 to operate per year for 5 years at which time it will be sold for $9,022.00. The firm’s cost of capital is 6.27%. What is the equivalent annual cost of the AC360? Assume that there are no taxes.
- ABC CO. is considering replacing a production line with a new, more productive one. You are given the information that follows. • The existing production line currently generates $100,000 profit per year and could be sold today for $40,000. • The new proposed production line would generate profits of $150,000 per year • The new proposed production line requires an initial investment $80,000. • The company is seeking your advice regarding whether to replace the production line or keep the existing one. Required: a) Based on the Marginal analysis concept, what would you recommend? b) State the reasons why focusing on profit only should not be the optimal goal for companies.A local sanitation authority needs to purchase a new garbage truck. The authority has two truck models under consideration. The purchase price for Model A is $90, 000. The maintenance and operation costs are $10,000/year. Model B is less expensive to acquire ($60,000 at purchase), but costs more on operation and maintenance. Details of the costs are shown in the table below. Interest rate is 3%. Please help this authority to decide which truck they should purchase. Year Model A Truck Model B Truck Purchase Price $90,000 $60,000 Annual Operation and Maintenance 1 $10,000 $20,000 2 $10,000 $20,000 3 $10,000 $20,000 4 $10,000 $20,000 Calculate the present values of total costs for Model A Truck and Model B Truck, respectively. (Interest rate: 3%) (1’) *Results round to the nearest 2 decimal places. (Note: you may consider using an Excel worksheet to do the calculation). Present value of Model A Truck…Jill Republic Publishers, Inc. is considering replacing an old press that cost P600,000 six years ago with a new one that would cost P2,100,000. Shipping and installation would cost an additional P 50,000. The old press' book value is P120,000 and could be sold currently for P90,000. The increased production of the new press would increase inventories by P 150,000, accounts receivable by P100,000 and accounts payable by P120,000. Jill Republic's net initial investment for analyzing the acquisition of the new press assuming a 30% income tax rate would be P
- Alliance Manufacturing Company is considering the purchase of a new automated drill press to replace an older one. The machine now in operation has a book value of zero and a salvage value of zero. However, it is in good working condition with an expected life of 10 additional years. The new drill press is more efficient than the existing one and, if installed, will provide an estimated cost savings (in labor, materials, and maintenance) of $6,000 per year. The new machine costs $25,000 delivered and installed. It has an estimated useful life of 10 years and a salvage value of $1,000 at the end of this period. The firm’s cost of capital is 14 percent, and its marginal income tax rate is 40 percent. The firm uses the straight-line depreciation method. Complete the following table to compute the net present value (NPV) of the investment. (Hint: Remember that, in Year 10, Alliances also receives the salvage value of the machine.) Year Cash Flow PV Interest Factor at 14%…Arnold Inc. is considering a proposal to manufacture high-end protein bars used as food supplements by body builders. The project requires use of an existing warehouse, which the firm acquired three years ago for $4 million and which it currently rents out for $121,000. Rental rates are not expected to change going forward. In addition to using the warehouse, the project requires an upfront investment into machines and other equipment of $ 1.4 million. This investment can be fully depreciated straight-line over the next 10 years for tax purposes. However, Arnold Inc. expects to terminate the project at the end of eight years and to sell the machines and equipment for $474,000. Finally, the project requires an initial investment into net working capital equal to 10% of predicted first-year sales. Subsequently, net working capital is 10% of the predicted sales over the following year. Sales of protein bars are expected to be $4.6 million in the first year and to stay constant…A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,729.00 to install, $5,020.00 to operate per year for 7 years at which time it will be sold for $6,912.00. The second, RayCool 8, costs $41,419.00 to install, $2,021.00 to operate per year for 5 years at which time it will be sold for $8,947.00. The firm’s cost of capital is 5.34%. What is the equivalent annual cost of the RayCool8? Assume that there are no taxes.
- The Sweetwater Candy Company would like to buy a new machine that would automatically “dip” chocolates. The dipping operation currently is done largely by hand. The machine the company is considering costs $210,000. The manufacturer estimates that the machine would be usable for five years but would require the replacement of several key parts at the end of the third year. These parts would cost $11,300, including installation. After five years, the machine could be sold for $6,000. The company estimates that the cost to operate the machine will be $9,300 per year. The present method of dipping chocolates costs $53,000 per year. In addition to reducing costs, the new machine will increase production by 5,000 boxes of chocolates per year. The company realizes a contribution margin of $1.65 per box. A 19% rate of return is required on all investments. Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using tables. Required: 1. What are…VijayArnold Inc. is considering a proposal to manufacture high-end protein bars used as food supplements by body builders. The project requires use of an existing warehouse, which the firm acquired three years ago for $3 million and which it currently rents out for $101,000. Rental rates are not expected to change going forward. In addition to using the warehouse, the project requires an upfront investment into machines and other equipment of $1.5 million. This investment can be fully depreciated straight-line over the next 10 years for tax purposes. However, Arnold Inc. expects to terminate the project at the end of eight years and to sell the machines and equipment for $468,000. Finally, the project requires an initial investment into net working capital equal to 10 percent of predicted first-year sales. Subsequently, net working capital is 10 percent of the predicted sales over the following year. Sales of protein bars are expected to be $4.5 million in the first year and to stay…
