nted payback period using after-t ver to 2 decimal places e.g. 5,125.3

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
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(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:(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
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%
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%
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