None Problem 3 (MS Excel Required)You need to know whether the building of a new warehouse is justified under the following conditions.The proposal is for a warehouse costing $250,000.The warehouse has an expected useful life of 35 years and a net salvage value (net proceeds from sale aftertax adjustments) of $50,000.Annual receipts of $67,000 are expected, annual maintenance and administrative costs will be $12,000/year,and annual income taxes are $15,000.a.Is the proposal justified for an i = 15%?b. What is the NPV of the proposal if i = 20%?C. What is the maximum interest rate that makes this proposal acceptable?

Step 1: NPVNPV, or net present value, is how much an investment is worth throughout its lifetime,…

Answered: Problem 3 (MS Excel Required) You need…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 13P

See similar textbooks

Similar questions

You are given opportunity to purchase product for $42, 000. The product will have annual operating expenses of $4,000, and a salvage value of $20,000 at the end of its useful life of 6 years. Assuming a discount rate of 9.0%, what is the minimum acceptable revenue to justify taking this project? A 1.01% B $333 C $2704 D $767 E $10704
Give typing answer with explanation and conclusion A new production system for a factory is to be purchased and installed for $154982. This system will save approximately 300,000 kWh of electric power each year for a 6-year period. Assume the cost of electricity is $0.10 per kWh, and factory MARR is 15% per year, and the salvage value of the system will be $9668 at year 6. Using the PW method to analyzes if this investment is economically justified A- calculate the PW of the above investment and insert the result below.
2) An existing machine in the factory has an annual maintenance cost of 40,000. A new and more efficient machine will require an investment of 90,000 and it is estimated to have a salvage value of 30,000 at the end of 8 years. Its annual expenses for maintenance is 22,000. If the company's MARR is 12%, will it be worthwhile to purchase the new machine using (a) Present Worth Method? (B method?
Complete solution 6. The Green Spaces project involves purchasing equipment worth $300,000. Assuming a flat rate depreciation of 10% per year, calculate the book value of the equipment after 4 years (define a recurrence relation to answer this question). 7. If the Residential Infrastructure budget is used to purchase specialized machinery costing $800,000 with a unit cost depreciation of $20,000 per year, determine the book value after 3 years (define a recurrence relation to answer this question). The city expects the population in the Residential Infrastructure area to grow exponentially at a rate of 2% per year. a. Calculate the projected population after 10 years if the current population is 50,000 (define a recurrence relation to answer this question). b. Draw a graph illustrating the population growth over 10 years.
PROBLEM 1. New Project You must evaluate a proposal to buy a new milling machine. The base price is $108,000, and shipping and installation costs would add another $12,500. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $65,000. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The machine would require a $5,500 increase in working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but pretax labor costs would decline by $44,000 per year. The marginal tax rate is 35%, and the WACC is 12%. Also, the firm spent $5,000 last year investigating the feasibility of using the machine. What are the project's annual net cash flows during Years 0 through 3?
4. A warehouse is currently sitting empty, but can be rented out to a third party for $100,000 a year. A project is proposed in the warehouse by your company which will require an investment of $200,000 and will be depreciated using MACRS over a five year life. At the end of the project in THREE YEARS, the machinery will be sold for $50,000. Products sold will be 20,000 units per year at $30 each. Variable costs will be 35 percent of sales. Fixed costs (not counting the warehouse) will be $20,000 per year. Working capital will be $50,000. The tax rate is 30 percent. If the interest rate is 10 percent, what is the NPV of this project?
Consider the following project for Hand Clapper, Inc. The company is considering a 4-year project to manufacture clap-command garage door openers. This project requires an initial investment of $16.7 million that will be depreciated straight-line to zero over the project’s life. An initial investment in net working capital of $1,070,000 is required tosupport spare parts inventory; this cost is fully recoverable whenever the project ends. The company believes it can generate $14.3 million in revenues with $5.8 million in operating costs. The tax rate is 22 percent and the discount rate is 14 percent. Themarket value of the equipment over the life of the project is as follows:d. Compute the project NPV assuming the project is abandoned after only threeyears.Year: Market Value ($ millions)1: $ 14.702: $11.703: $9.204: $1.95
Questions and Problems (cont.) 3. Massey Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $450,000 is estimated to result in $150,000 in annual pretax cost savings. The press falls in the MACRS five-year class, and it will have a salvage value at the end of the project of $90,000. The press also requires an initial investment in spare parts inventory of $18,000, along with an additional $3,000 in inventory for each succeeding year of the project. If the shop's tax rate is 35 percent and its discount rate is 14 percent, should Massey buy and install the machine press?
Required Information [The following information applies to the questions displayed below.] Project A requires a $365,000 initial investment for new machinery with a five-year life and a salvage value of $42,000. The company uses straight-line depreciation. Project A is expected to yield annual net income of $25,300 per year for the next five years. Compute Project A's accounting rate of return. Choose Numerator: Accounting Rate of Return I Choose Denominator: = Accounting Rate of Return Accounting rate of return
A company is considering purchasing a machine for $26,500. The machine will generate income of $3,400 per year. Annual depreciation expense would be $1,600. What is the payback period for the new machine? Multiple Choice 3.3 years. 5.3 years. 7.8 years. 16.6 years. 14.7 years.
Required Information [The following information applies to the questions displayed below.] Project A requires a $365,000 initial investment for new machinery with a five-year life and a salvage value of $42,000. The company uses straight-line depreciation. Project A is expected to yield annual net income of $25,300 per year for the next five years. Compute Project A's payback period. Choose Numerator: Payback Period 7 Choose Denominator: = Payback Period Payback period =
Project Section 1: You are considering buying an industrial equipment whose price is 445000. The equipment is expected to earn an annual revenue of $150,000. The equipment will be depreciated under MACRS as a five-year recovery property. The equipment will be used for seven years, at the end of which time, you can sell it for $50,000. Your company's marginal tax rate is 35% over the project period. Perform the following: a) Determine the net after-tax cash flows for each period over the project life. b) Net present worth assuming company MARR 15% . c) Annual equivalent cash flow company MARR 15%. = =

SEE MORE QUESTIONS

Recommended textbooks for you

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

SEE MORE TEXTBOOKS