Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
Bartleby Related Questions Icon

Related questions

Question

ANSWERS: 

NPW= 220,148.69

NFW= 442,797.66

AW= 65,673.78

PI= 1.44

IRR i%= 31.39%

ERR i%= 23.71%

PAYBACK Simple= 2.5 years and Discounted= between 3&4 years

B/C Conventional= 1.44 and Modified= 1.44

1. Production engineers of a manufacturing firm have proposed a new equipment to
increase productivity of a manual gas-cutting operation. The initial investment
(first cost) is 500,000 and the equipment will have a salvage value of 100,000 at
the end of its expected life of 5 years. Increased productivity will yield an annual
revenue of 200,000 per year. If the firm's minimum attractive rate of return is
15%, is the procurement of the new equipment economically justified? Show
whether this is a desirable investment by using the NPW, NFW, AW, IRR, ERR,
PI, Payback and B/C.
100,000
20,000 20,000 20,000 20,000 | 20,000
1
2
3
MARR = 15%
%3D
500,000
expand button
Transcribed Image Text:1. Production engineers of a manufacturing firm have proposed a new equipment to increase productivity of a manual gas-cutting operation. The initial investment (first cost) is 500,000 and the equipment will have a salvage value of 100,000 at the end of its expected life of 5 years. Increased productivity will yield an annual revenue of 200,000 per year. If the firm's minimum attractive rate of return is 15%, is the procurement of the new equipment economically justified? Show whether this is a desirable investment by using the NPW, NFW, AW, IRR, ERR, PI, Payback and B/C. 100,000 20,000 20,000 20,000 20,000 | 20,000 1 2 3 MARR = 15% %3D 500,000
Expert Solution
Check Mark
Knowledge Booster
Background pattern image
Finance
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.
Similar questions
SEE MORE QUESTIONS
Recommended textbooks for you
Text book image
Essentials Of Investments
Finance
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Mcgraw-hill Education,
Text book image
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:9781260013962
Author:BREALEY
Publisher:RENT MCG
Text book image
Financial Management: Theory & Practice
Finance
ISBN:9781337909730
Author:Brigham
Publisher:Cengage
Text book image
Foundations Of Finance
Finance
ISBN:9780134897264
Author:KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:Pearson,
Text book image
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Text book image
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