Sheridan Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the companyto bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided here.Original costEstimated lifeSalvage valueEstimated annual cash inflowsEstimated annual cash outflows.Machine A$78,2008 years0$19,800$5,130Machine B$182,0008 years0$39,600$10,180 Click here to view the factor table,Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative,use either a negative sign preceding the number eg -45 or parentheses eg (45). Round answer for present value to 0 decimal places, e.g. 125 andprofitability index to 2 decimal places, e.g. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)Net present valueProfitability indexMachine AWhich machine should be purchased?should be purchased.Machine B

NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…

Sheridan Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided here. Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Machine A $78,200 8 years 0 $19,800 $5,130 Machine B $182,000 8 years 0 $39,600 $10,180

Sheridan Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided here. Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Machine A $78,200 8 years 0 $19,800 $5,130 Machine B $182,000 8 years 0 $39,600 $10,180

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

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Alliance Manufacturing Company is considering the purchase of a new automated drill press to replace an older one. The machine now in operation has a book value of zero and a salvage value of zero. However, it is in good working condition with an expected life of 10 additional years. The new drill press is more efficient than the existing one and, if installed, will provide an estimated cost savings (in labor, materials, and maintenance) of $6,000 per year. The new machine costs $25,000 delivered and installed. It has an estimated useful life of 10 years and a salvage value of $1,000 at the end of this period. The firm’s cost of capital is 14 percent, and its marginal income tax rate is 40 percent. The firm uses the straight-line depreciation method. Complete the following table to compute the net present value (NPV) of the investment. (Hint: Remember that, in Year 10, Alliances also receives the salvage value of the machine.) Year Cash Flow PV Interest Factor at 14%…
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Sandhill Corp, is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided here. Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Machine A $77,300 8 years 0 $20,200 $4,970 Machine B $180,000 8 years 0 $40,000 $9,860
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An oil company is planning to install a new pipeline to connect storage tanks to a processing plant 1500m away. The connection will be needed for the foreseeable future. Both 80mm and 120mm pipes are being considered. 80 mm pipe 120mm pipe Initial cost $1500 $2500 Service life 12 yrs 12 yrs Salvage value $200 $300 Annual maintenance $400 $300 Pump cost/hour $2.50 $1.40 Pump operation 600 hours/yr 600 hours/yr For this analysis, the company will use an annual interest rate of 8%. Annual maintenance and pumping costs may be considered to be paid in their entireties at the end of the years in which their costs are incurred. Disregarding the the initial and replacement pipe costs, what is the capitalized cost($) of the maintenance and pumping costs for the 80mm pipe?
Follow the format shown in Exhibit 12B.1 and Exhibit 12B.2 as you complete the requirement below. Woodard Company wants to buy a numerically controlled (NC) machine to be used in producing specially machined parts for manufacturers of trenching machines. The outlay required is $700,000. The NC equipment will last five years with no expected salvage value. The expected after-tax cash flows associated with the project follow: Year Cash Revenues Cash Expenses 1 2 3 4 5 $1,400,000 1,400,000 1,400,000 1,400,000 1,400,000 $1,200,000 1,200,000 1,200,000 1,200,000 1,200,000 Required: Compute the investment's Net Present Value, assuming a required rate of return of 8 percent. Round present value calculations and your final answer to the nearest dollar. NPV = $ X
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Alliance Manufacturing Company is considering the purchase of a new automated drill press to replace an older one. The machine now in operation has a book value of zero and a salvage value of zero. However, it is in good working condition with an expected life of 10 additional years. The new drill press is more efficient than the existing one and, if installed, will provide an estimated cost savings (in labor, materials, and maintenance) of $6,000 per year. The new machine costs $25,000 delivered and installed. It has an estimated useful life of 10 years and a salvage value of $1,000 at the end of this period. The firm’s cost of capital is 14 percent, and its marginal income tax rate is 40 percent. The firm uses the straight-line depreciation method.a. What is the net cash flow in year 0 (i.e., initial outlay)?b. What are the net cash flows after taxes in each of the next 10 years?c. What is the NPV of the investment?d. Should Alliance replace its existing drill press?
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