Dane Cosmetics is evaluating a new fragrance mixing machine. The machine requires an initial investment of $24,000 and will generate after-tax cash inflows of $5,000 per year for 8 years. For each of the costs of capital listed, (1) calculate the net present value (NPV), (2) indicate whether to accept or reject the machine, and (3) explain your decision. a. The cost of capital is 10%. b. The cost of capital is 12%. c. The cost of capital is 14%.

Managers of Central Embroidery have decided to purchase a new monogram machine and are considering two alternative machines. The first machine costs $100,000 and is expected to last five years. The second machine costs $160,000 and is expected to last eight years. Assume that the opportunity cost of capital is 8 percent. Which machine should Central Embroidery purchase?

An investment of $120,000 with a service life of 12 years is being considered. The expected revenues are provided in the cash flow diagram below. The company would like to perform an after-tax calculation to see if the investment is a good one. The company uses an after tax MARR of 8% and has a tax rate of 45%. The CCA depreciation rate for this type of investment is 20% and there would be a salvage value of $14,400 at the end of the 12 years. 0 i = 8% 35,000 Salvage = 14,400 25,000 Years 8 12 ▼ 120,000 What is the after tax annual worth of the investment? Do you recommend investing?

Compute the net present value of this investment.

You are considering starting a new doughnut shop in the Prince Kuhio Mall. You wish to complete a cash flow statement to be used for capital budgeting purposes. You will have to purchase $80,000 of equipment with cash you have saved to manufacture the doughnuts. You will purchase the equipment on the day you start the business. You will depreciate the equipment using 3-year straight-line depreciation to a salvage value of $20,000. You will need to have $20,000 of inventory and you will need to have $5,000 in cash for the cash registers. You will need to have the inventory and cash in place the day you start the business and it will remain in place throughout the life of the business. You will owe your suppliers $5,000 at all times, beginning the day that you start the business and continuing through the life of the business. Based on your sales estimate, you believe that you will be able to sell $1,000,000 of doughnuts per year. You have estimated labor costs to be $200,000 for the…

Assume you are the finance manager of Almanor Company, and the company is considering investing in one of the three projects. The life for both the Projects X, M and Project Y is 5 years. Project X costs OMR. 20500, Project M costs OMR. 20500 and Project Y costs OMR.20500. The discount rate/cost of capital is 4.15%. Required: Use the following techniques to help company to decide which Machine is better and justify why? a) Payback period b) Discount payback period c) Net Present Value d) Present value index -Profitability index. Year Project X Project M Project Y 7865 3748 8752 4567 7609 8393 3. 9676 4628 4508 7292 8905 7836 9904 0066 8287 (Ctrl) - 45

Munch N' Crunch Snack Company is considering two possible investments: a delivery truck or a bagging machine. The delivery truck would cost $43,056 and could be used to deliver an additional 95,000 bags of pretzels per year. Each bag of pretzels can be sold for a contribution margin of $0.45. The delivery truck operating expenses, excluding depreciation, are $1.35 per mile for 24,000 miles per year. The bagging machine would replace an old bagging machine, and its net investment cost would be $61,614. The new machine would require three fewer hours of direct labor per day. Direct labor is $18 per hour. There are 250 operating days in the year. Both the truck and the bagging machine are estimated to have 7-year lives. The minimum rate of return is 13%. However, Munch N' Crunch has funds to invest in only one of the projects. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 0.943 0.909 0.893 0.870 0.833 1.833 1.736 1.690 1.626 1.528 2.673 2.487 2.402 2.283…

eEgg is considering the purchase of a new distributed network computer system to help handle its warehouse inventories. The system costs $60,000 to purchase and install and $30,000 to operate each year. The system is estimated to be useful for 4 years. Management expects the new system to reduce the cost of managing inventories by $62,000 per year. The firm’s cost of capital (discount rate) is 10%.   Required: 1. What is the net present value (NPV) of the proposed investment under each of the following independent situations? (Use the appropriate present value factors from Appendix C, TABLE 1 and Appendix C, TABLE 2.) 1a. The firm is not yet profitable and therefore pays no income taxes. 1b. The firm is in the 30% income tax bracket and uses straight-line (SLN) depreciation with no salvage value. Assume MACRS rules do not apply. 1c. The firm is in the 30% income tax bracket and uses double-declining-balance (DDB) depreciation with no salvage value. Given a four-year life, the DDB…

Peng Company is considering buying a machine that will yield income of $2,400 and net cash flow of $16,000 per year for three years. The machine costs $48,900 and has an estimated $8,100 salvage value. Compute the accounting rate of return for this investment. Numerator: Accounting Rate of Return Denominator: = Accounting Rate of Return Accounting rate of return

K Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product are $4.98 million. The product is expected to generate profits of $1.09 million per year for 10 years. The company will have to provide product support expected to cost $98,000 per year in perpetuity. Assume all profits and expenses occur at the end of the year. a. What is the NPV of this investment if the cost of capital is 5.6%? Should the firm undertake the project? Repeat the analysis for discount rates of 1.6% and 14.5%, respectively. b. What is the IRR of this investment opportunity? c. What does the IRR rule indicate about this investment? a. What is the NPV of this investment if the cost of capital is 5.6%? Should the firm undertake the project? Repeat the analysis for discount rates of 1.6% and 14.5%, respectively. If the cost of capital is 5.6%, the NPV will be $ (Round to the nearest dollar.) Should the firm undertake the project? (Select the best choice…