Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Please explain proper steps by Step and Do Not Give Solution In Image Format ? And Fast Answering Please ?
Transcribed Image Text:(d)
Determine the discounted payback period using after-tax cash flows. (Round present value factor calculations to 5 decimal places, e.g.
1.25124 and final answer to 2 decimal places e.g. 5,125.36.)
Discounted payback period
(e)
(f)
Save for Later
Find the ARR. (Round answer to 1 decimal place, e.g. 15.2%.)
ARR
Save for Later
Profitability index
%
Save for Later
Attempts: 0 of 2 used Submit Answer
Calculate the profitability index for this investment. (Round answer to 2 decimal places, e.g. 15.25.)
Attempts: 0 of 2 used
Attempts: 0 of 2 used
Submit Answer
Submit Answer
Transcribed Image Text:The consulting company Harris White & Jackson (HW J) is in that never-ending budgeting phase of the year. Realizing that they
couldn't defer a technology update any longer, the managers plan to replace all of the computers in the office. The old computers will
be sold for market value. When the new computers reach the end of their useful lives, they will be sold as well. The cost of the
combined new computers and annual software updates should be more than covered by efficiency gains and increased volume of sales
- at least that's what the managers are expecting. Information related to this investment is as follows.
Cost of new computers
Salvage value of new computers at end of useful life
Life of new computers (years)
Market value of old computers today (equal to book value)
Annual software update cost (necessary for all computers, old or new)
Annual operating cash inflows from efficiency gains and increased sales due to new computers
Minimum required rate of return
Applicable tax rate
Click here to view the factor table
Determine if this investment makes sound financial sense for this company by completing the following.
(a)
$25,400
$2,400
NPV $
Based on this NPV amount, is the IRR higher or lower than 5%?
5
$2,000
$3,200
$9,500
5%
Calculate the NPV of this investment. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answer to 2
decimal places e.g. 5,125.36. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
24%
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education