hapter 5 Present Value Analysis A firm is considering three mutually exclusive alternatives as part of a production improvement program. The alternatives are: Installed Cost Uniform Annual Benefit Useful life, in years A $10,200 $ 1,625 10 B $14,500 $ 1,530 20 C $20,000 $ 1,895 20 For each alternative, the salvage value at the end of its useful life is zero. At the end of ten years, A cou be replaced with another A with identical costs and benefits. The minimum attractive rate of retu (MARR) is 6%. Which alternative should be selected? Provide cash flow diagrams and show your wo

hapter 5 Present Value Analysis A firm is considering three mutually exclusive alternatives as part of a production improvement program. The alternatives are: Installed Cost Uniform Annual Benefit Useful life, in years A $10,200 $ 1,625 10 B $14,500 $ 1,530 20 C $20,000 $ 1,895 20 For each alternative, the salvage value at the end of its useful life is zero. At the end of ten years, A cou be replaced with another A with identical costs and benefits. The minimum attractive rate of retu (MARR) is 6%. Which alternative should be selected? Provide cash flow diagrams and show your wo

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 2E: Average rate of returncost savings Maui Fabricators Inc. is considering an investment in equipment...

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Reference: Case Study S Dunn Manufacturing is considering the following two alternatives. The cost information for the two proposals for replacing an equipment are provided are in table below. Initial cost Benefits/year Machine X $120,000 $20,000 for the first 10 years and $9,000 for the next 10 years Life Salvage value $40,000 MARR 5.2. The NPW of machine X is A) $35,158 B) $48,192 C) $50,752 Machine Y $96,000 $12,000 per year for 20 years. 20 years 8% $20,000
A firm is considering three mutually exclusive alternatives as part of a production improvement program. The alternatives are as follows: A B C Installed cost $8,000 $12,000 $16,000 Uniform annual benefit 1,600 1,750 2,050 Useful life, in years 10 20 20 For each alternative, the salvage value at the end of useful life is zero. At the end of 10 years, Alt. A could be replaced by another A with identical cost and benefits. (a)Construct a choice table for interest rates from 0% to 100%. (b)The MARR is 12%. If the analysis period is 20 years, which alternative should be selected?
A Mountain Frost is considering a new project with an initial cost of $270,000. The equipment will be depreciated on a straight-line basis to a zero book value over the four-year life of the project. The projected net income for each year is $21,300, $22,200, $24,600, and $18.200, respectively, What is the average accounting return? Multiple Choice O O O C 14.65% 15.00% 11.99% 1712%
Accounting 4. Imagine that there are two approaches to solving a particular environmental problem. The first approach involves an initial investment of $400M and ongoing costs of $2M each year over a 10-year lifetime. The second approach involves an initial investment of $300M and ongoing costs of $15M each year over a 10-year lifetime. Neither project has any residual value or remediation costs at the end of 10 years. A. Assuming that the projects are otherwise similar with regard to reliability, sustainability and robustness, how do the present value of the costs of each project compare? How does your answer depend on the interest rate you use to discount future time periods? B. Can you determine at what interest rate do the two projects have equal costs? its a request plzz answer correctly otherwise skip it thanku
A new project has an initial cost of $250,000. The equipment will be depreciated on a straight-line basis to a zero book value over the five-year life of the project. The projected net income each year is $13,250, $18,000, $20,240, $15,150, and $11,900, respectively. What is the average accounting return? Multiple Choice 11.52% 8.95% 13.46% 12.57% 5.33%
Compare two alternatives, A and B, on the basis of a present worth evaluation using i = 10% per year and a study period of 8 years. Alternative A B First cost, $ −15,000 −28,000 Annual operating cost, $/year −6,000 −9,000 Overhaul in year 4, $ — −2000 Salvage value, $ 3,000 5,000 Life, years 4 8
25 01:08:30 Consider a four-year project with the following information: initial fixed asset investment = $488,000; straight-line depreciation to zero over the four-year life; zero salvage value; price = $39; variable costs $30; fixed costs $208,000; quantity sold 97,000 units; tax rate=34%. How sensitive is OCF to changes in quantity sold? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) AOCF/AQ
#24 * Using NPW to Decide Between Competing Projects: Machine X has an initial cost of $12,000 and annual maintenance of $700 per year. It has a useful life of four years and no salvage value at the end of that time. Machine Y costs $22,000 initially and has no maintenance costs during the first year. Maintenance is $200 at the end of the second year and increases by $200 per year thereafter. Machine Y has a useful life of eight years and an anticipated salvage value of $5,000 at the end of its useful life. If the MARR is 6%, what is the approximate Net Present Worth (NPW) of machine Y? A. -$33,015 B. -$23,781 C. -$22,831 D. -$19,365
Which process line should be built for a new chemical? The expected market for the chemi- cal is 20 years. A 9% rate is used to evaluate new process facilities, which are compared with present worth. How much does the better choice save? First O&M Cost Cost/year Salvage Life A $18M $5M $4M 10 years В 25M 3M 6M 20 years
onsider the following financial informationabout a retooling project at a computer manufacturing company:• The project costs $2.5 million and has a five-yearservice life.• The retooling project can be classified as sevenyear property under the MACRS rule.• At the end of the fifth year, any assets held for theproject will be sold. The expected salvage valuewill be about 10% of the initial project cost.• The firm will finance 40% of the project moneyfrom an outside financial institution at an interestrate of 10%. The firm is required to repay the loanwith five equal annual payments.• The firm’s incremental (marginal) tax rate on theinvestment is 35%.• The firm’s MARR is 18%.With the preceding financial information,(a) Determine the after-tax cash flows.(b) Compute the annual equivalent worth for thisproject.
Given the following project alternatives, determine the most economical investment given an MARR of 10% using IRR method. Project A B C D 6.12% -2.8067% -3.394% 2699% Investment 13.69% $ 100,000 $ Annual Profit Useful Life Salvage Value $ 140,500 $ 148,200 $ 27,500 38,600 38,500 $ 98,000 $ 22,100 What is the incremental IRR of the second comparison? 5 5 5 5 $ 10,000 $ $ 14,000 25,600 14,000
Consider a project with a life of 4 years with the following information: initial fixed asset investment = $370,000; straight - line depreciation to zero over the 4 - year life; zero salvage value; price = $26; variable costs = $18; fixed costs $177,600; quantity sold = 85,248 units; tax rate 25 percent. How sensitive is OCF to changes in quantity sold? Multiple Choice $6.84 $6.00 $4.26 $0.17 $7.74