Current Attempt in ProgressCullumber Partners is evaluating the replacement of an older machine with either the new SuperPlus or MaxPlus machine. The marketvalue of the original machine is $8,000 but it has an expected salvage value of $1,000 in 5 years. The details regarding the two newmachines are as follows:Reduced Annual PretaxMachineCostUseful LifeSalvage ValueOperating Cash FlowsSuperPlusMaxPlus$25,0005 years$2,000$5,700$38,0005 years$3,000$5,900The company's tax rate is 40% and the machines are Class 10 assets with a 30% CCA rate. The company's required return is 11%.Estimate the NPV of replacement. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).Round intermediate and final answers to O decimal places, e.g., 2,345.)NPV of SuperPLUS$NPV of MaxPLUS$

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Answered: Current Attempt in Progress Cullumber…

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 10E: Roberts Company is considering an investment in equipment that is capable of producing more...

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Gallant Sports s considering the purchase of a new rock-climbing facility. The company estimates that the construction will require an initial outlay of $350,000. Other cash flows are estimated as follows: Assuming the company limits its analysis to four years due to economic uncertainties, determine the net present value of the rock-climbing facility. Should the company develop the facility if the required rate of return is 6%?
The management of Ryland International Is considering Investing in a new facility and the following cash flows are expected to result from the investment: A. What Is the payback period of this uneven cash flow? B. Does your answer change if year 6s cash inflow changes to $920,000?
Roberts Company is considering an investment in equipment that is capable of producing more efficiently than the current technology. The outlay required is 2,293,200. The equipment is expected to last five years and will have no salvage value. The expected cash flows associated with the project are as follows: Required: 1. Compute the projects payback period. 2. Compute the projects accounting rate of return. 3. Compute the projects net present value, assuming a required rate of return of 10 percent. 4. Compute the projects internal rate of return.
Given the following information, what is the required cash outflow associated with the acquisition of a new machine; that is, in a project analysis, what is the initial investment outlay at t = 0?(need answer, and explanation) Purchase price of new machine $8,000 Installation charge 2,000 Market value of old machine 2,000 Book value of old machine 1,000 Inventory decrease if new machine is installed 1,000 Accounts payable increase if new machine is installed 500 Tax rate 34% Required rate of return 15%
The Post Company is considering investing in two alternative projects: Investment Useful life (years) Estimated annual net cash inflows for useful life Residual value Depreciation method Required rate of return What is the accounting rate of return for Project 1? OA. 52.5% B. 20% OC. 30% OD. 7.5% Project 1 $200,000 4 $60,000 $20,000 Straight-line 15% Project 2 $260,000 8 $45,000 $16,000 Straight-line 10%
Pitt Company is considering two alternative Investments. The company requires a 12% return from its Investments. Neither option has a salvage value. Project X Project Y $243,046 $175,883 Initial Investment Net cash flows anticipated: Year 1 Year 2 Year 3 Year 4 Year 5 82,000 60,000 91,000 82,000 75,000 A. Compute the IRR for both projects using the IRR spreadsheet function. Project X Project Y B. Which project should be recommended. Project X ✓ % % 35,000 54,000 73,000 69,000 26,000
IRR of an uneven cash flow stream) Microwave Oven Programming in comidering the construction of a new plant. The plant will have an intal cash oulay of 16 1 milion (= $61 milion) and will produce can fows of 57 9 month and of year 1, 157 milion at the end of your 2, and $15 million at the end of years 3 through 5 What is the internal cale of retam on th The Wd of the project is (ound to two decinal places)
Solo Corp. is evaluating a project with the following cash flows: Year Cash Flow 0. s29,200 11.400 14,100 16,000 13,100 2. 3. 4. 9,600 The company uses a discount rate of 13 percent and a reinvestment rate of 6 percent on all of its projects. a. Calculate the MIRR of the project using the discounting approach. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the MIRR of the project using the reinvestment approach. (Do not round intermediate colculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. Calculate the MIRR of the project using the combination approach. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) % a. Discounting approach MIRR b. Reinvestment approach MIRR % C. Combination approach MIRR
1. Two mutually exclusive alternatives requiring different investments are being considered. The life of all two alternatives is estimated to be 20 years with no salvage value. The MARR that is considered is acceptable is 12%. The cash flows representing these two alternatives are as follows: Investment cost Net income per year Alternative A $100,000 $15,000 Alternative B $60,000 $11,000 Find the investment that should be selected using IRR on incremental investment (use PW formula).
INFORMATIONThe management of SARB Limited must choose between two projects to expand their business operations. The twoprojects are called Project FIC and Project PA. Each project requires an initial investment of R250 000. No scrap values are expected.You have been presented with the following information:PROJECT FICProject FIC has net cash inflows of R63000 for each of the five years of the projects lifespan.PROJECT PAProject PA is a five-year project with annual profit of R8000, R18000, R12000, R20000 and R7000 for years one to fiverespectively.The required rate of return is 15%. Depreciation is calculated using the straight-line method. REQUIREDUse the information provided above to calculate the following:1. Net Present Value of Project PA. (Round off amounts to the nearest Rand.)
Giant Machinery Ltd is considering to invest in one of the two following Projects to buy a newequipment. Each project will last 5 years and have no salvage value at the end. The company’s requiredrate of return for all investment projects is 9%. The cash flows of the projects are provided below. project 1 project 2 cost 175000 185000 future cash flows year 1 76000 87000 year 2 83000 78000 year 3 67000 69000 year 4 65000 65000 year 5 55000 57000 Required:a) Identify which project should the company accept based on NPV method. (Note: Pleaseround up the result of each calculation of PV to 2 decimal places only for simplification)b) Identify which project should the company accept based on simple pay back method if thepayback criteria is maximum 2 years. c) Which project Giant Machinery should choose if two methods are in conflict.
Findell Corporation Is considering two projects, A and B, and It has gathered the following estimates for the projects: Project A Project B Useful life 5 Years 5 Years Present value of cash inflows Present value of cash outflows $84,360 $55,100 $77,000 $49,000 What Is the net present value of cash flows for project B? Multiple Choice $7.360 $6,100 $1,260 None of these answerS are correct

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