You are operating an old machine that is expected to produce a cash inflow of $5,300 in each of the next 3 years before it fails. You can replace it now with a new machine that costs $20,300 but is much more efficient and will provide a cash flow of $10,450 a year for 4 years. Calculate the equivalent annual cost of the new machine if the discount rate is 16%.
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- Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided manufacturing system. The annual net cash benefits and savings associated with the system are described as follows: The system will cost 9,000,000 and last 10 years. The companys cost of capital is 12 percent. Required: 1. Calculate the payback period for the system. Assume that the company has a policy of only accepting projects with a payback of five years or less. Would the system be acquired? 2. Calculate the NPV and IRR for the project. Should the system be purchasedeven if it does not meet the payback criterion? 3. The project manager reviewed the projected cash flows and pointed out that two items had been missed. First, the system would have a salvage value, net of any tax effects, of 1,000,000 at the end of 10 years. Second, the increased quality and delivery performance would allow the company to increase its market share by 20 percent. This would produce an additional annual net benefit of 300,000. Recalculate the payback period, NPV, and IRR given this new information. (For the IRR computation, initially ignore salvage value.) Does the decision change? Suppose that the salvage value is only half what is projected. Does this make a difference in the outcome? Does salvage value have any real bearing on the companys decision?Your company is planning to purchase a new log splitter for is lawn and garden business. The new splitter has an initial investment of $180,000. It is expected to generate $25,000 of annual cash flows, provide incremental cash revenues of $150,000, and incur incremental cash expenses of $100,000 annually. What is the payback period and accounting rate of return (ARR)?Bouvier Restaurant is considering an investment in a grill that costs $140,000, and will produce annual net cash flows of $21,950 for 8 years. The required rate of return is 6%. Compute the net present value of this investment to determine whether Bouvier should invest in the grill.
- You are operating an old machine that is expected to produce a cash inflow of $5,000 in each of the next 3 years before it fails. You can replace it now with a new machine that costs $20,000 but is much more efficient and will provide a cash flow of $10,000 a year for 4 years. Calculate the equivalent annual cost of the new machine if the discount rate is 15%. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Equivalent annual cost of the purchase price Should you replace your equipment now? O Yes NoYou are operating an old machine that is expected to produce a cash inflow of $6,000 in each of the next 3 years before it fails. You can replace it now with a new machine that costs $21,000 but is much more efficient and will provide a cash flow of $11,500 a year for 4 years. Calculate the equivalent annual cost of the new machine if the discount rate is 15%. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Answer is complete but not entirely correct. $ (8,697.12) ► Equivalent annual cost of the purchase priceYou are operating an old machine that is expected to produce a cash inflow of $5,100 in each of the next 3 years before it fails. You can replace it now with a new machine that costs $20,100 but is much more efficient and will provide a cash flow of $10,150 a year 4 years. Calculate the equivalent annual cost of the new machine if the discount rate is 14%. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Equivalent ann the purchase price Should you replace your equipment now? Yes No
- You are operating an old machine that is expected to produce a cash inflow of $5,600 in each of the next 3 years before it fails. You can replace it now with a new machine that costs $20,600 but is much more efficient and will provide a cash flow of $10,900 a year for 4 years. Calculate the equivalent annual cost of the new machine if the discount rate is 15%. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Equivalent annual cost of the purchase price $ 791.60 xSuppose you want to purchase equipment costing $500 and which will give you a cash flow of $35 every year. The equipment has a useful life of 7 years. Every year the equipment's price decreases by 34% and the discount rate is 4%. What is the NPV of the equipment if you purchase it now and when should you buy the equipmentYou purchase a machine. It costs $75,000 and will expand cash flow by $1,000 /month in year 1 growing by 2% per year after that. The system will work for 10 years before you have to replace it. What are the NPV (at a 3.3% discount rate) and IRR? The vendor offers you another machine costing $100,000 and lasting 12 years, with the same cash flow gains and a 3% growth rate. What are the NPV and the IRR for it? Should you get it?
- You have just been offered a contract worth $1.01 million per year for 6 years. However, to take the contract, you will need to purchase some new equipment. Your discount rate for this project is 12.3%. You are still negotiating the purchase price of the equipment. What is the most you can pay for the equipment and still have a positive NPV? The most you can pay for the equipment and achieve the 12.3% annual return is $ decimal places.) million. (Round to twoElijah Enterprises will need to upgrade the computer system in 4 years. They anticipate the upgrade to cost $105,300. If the discount rate is 13%, what will be the required yearly investment needed to obtain the money for the upgrade?Round your (1+R)^n value to 2 decimal places and use that number for your final amount required rounded to the nearest dollar. Future Value / (1+R)^n = Amount Required / = What would be required if the discount rate was 8%? Future Value / (1+R)^n = Amount Required / =You have just been offered a contract worth $1.02 million per year for 6 years. However, to take the contract, you will need to purchase some new equipment. Your discount rate for this project is 11.7% You are still negotiating the purchase price of the equipment. What is the most you can pay for the equipment and still have a positive NPV? CEED The most you can pay for the equipment and achieve the 11.7% annual return is $ million (Round to two decimal places)