9 You have been asked to evaluate two alternatives, X and Y. that may increase plant capacity for manufacturing high-pressure hydraulichoses. The parameters associated with each alternative have been estimated. Which one should be selected on the basis of a presentworth comparison at an interest rate of 11% per year? Why is yours the correct choice?AlternativeFirst CostMaintenance cost, perYearSalvage ValueLifeX$-30,000$-9000$1,5005 yearsThe present worth of alternative X is SAlternative YXMY$-60,000$-3000$2.5005 yearsand that of alternative Y is Sis selected by the company

The present value of a project is the current worth of its future cash flows, discounted at a…

Answered: You have been asked to evaluate two…

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter15: Capital Investment Analysis

Section: Chapter Questions

Problem 15.15E

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You have been asked to evaluate two alternatives, X and Y, that may increase plant capacity for manufacturing high-pressure hydraulic hoses. The parameters associated with each alternative have been estimated. Which one should be selected on the basis of a present worth comparison at an interest rate of 14% per year? Why is yours the correct choice? X $-40,000 $-12000 $1,500 5 years The present worth of alternative X is $ Alternative (Click to select) is selected by the company. Alternative First Cost Maintenance cost, per Year Salvage Value Life Y $-60,000 $-2000 $2,500 5 years and that of alternative Y is $
You have been asked to evaluate two alternatives, X and Y, that may increase plant capacity for manufacturing high-pressure hydraulic hoses. The parameters associated with each alternative have been estimated. Which one should be selected on the basis of a present worth comparison at an interest rate of 13% per year? Why is yours the correct choice? Alternative First Cost X $-45,000 Maintenance cost, per $-9000 Year Salvage Value $1,000 Life 5 years Y $-55,000 $-4000 $6,500 5 years The present worth of alternative X is $ 13888 and that of alternative Y is $ 44459.4 Alternative X is selected by the company.
You have been asked to evaluate two alternatives, X and Y, that may increase plant capacity for manufacturing high-pressure hydraulic hoses. The parameters associated with each alternative have been estimated. Which one should be selected on the basis of a present worth comparison at an interest rate of 10% per year? Why is yours the correct choice? Alternative First Cost Maintenance cost, per Year Salvage Value Life X $-25,000 $-8000 $1,000 5 years Y $-55,000 $-2000 $2,000 5 years and that of alternative Y is $1 The present worth of alternative X is $. Alternativ (Click to select) is selected by the company.
Assume that a company is considering purchasing a machine for $50,500 that will have a five-year useful life and no salvage value. The machine will lower operating costs by $17,000 per year. The company's required rate of return is 18%. The profitability index for this investment is closest to: Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. Multiple Choice C O 0.95. 1.01. 1.05. 1.11.
A company that manufactures magnetic flow meters expects to undertake a project that will have the cash flows below. At an interest rate of 10% per year, what is the equivalent annual cost of the project? Find the AW value using (a) tabulated factors, (b) calculator functions, and (c) a spreadsheet. Which method did you find the easiest to use?
REQUIRED Study the information given below and calculate the following: Payback period (in years, months and days) Net Present Value Internal Rate of Return (expressed to two decimal places). (Note: Your answer must include the interpolation.) information Eva Limited is considering the purchase of a machine. The company desires a minimum required rate of return of 12%. The machine will cost R2 200 000 plus installation costs of R200 000 and is expected to have a useful life of six years. It is anticipated that the machine will have a salvage value of R100 000. The machine is expected to increase revenues by R800 000 per year but will require the employment of two new machine operators at R100 000 per year for each operator, and it will also require maintenance and repairs averaging R50 000 per year. Depreciation is estimated to be R400 000 per year.
Zandri Industries is evaluating whether to invest in solar panels to provide some of the electrical needs of its main office building in Buffalo, New York. The solar panel project would cost $475,000 and would provide cost savings in its utility bills of $45,000 per year. It is anticipated that the solar panels would have a life of 15 years and would have no residual value. (Click the icon to view the present value factor table.) (Click the icon to view the present value annuity factor table.). (Click the icon to view the future value factor table.) (Click the icon to view the future value annuity factor Read the requirements. table.) Requirement 1. Calculate the payback period in years of the solar panel project. Determine the formula, then calcuste the payback period. (Round your answer to two decimal places.) Initial investment Expected annual net cash inflow Payback period %3D %24 475,000 $4 45,000 10.56 years Requirement 2. If the company uses a discount rate of 10%, what is the…
Assume that the company, where you are working as a team in Financial Department, is considering a potential project with a new product. It will require the company to buy a new equipment that will generate the same revenue for the company each year. The table below shows the initial and annual costs for each option. Cost Option A Option B Initial Investment 1,400,000 1,500,000 Year 1 35000 25000 Year 2 35000 25000 Year 3 35000 25000 Year 4 35000 25000 Year 5 25000 Required: Perform capital budgeting technique based on EquivalentAnnual Cost (EAC) to advise the Company Management which option should be chosen if therelevant discount rate is 9%?
Suppose a project with a 6% discount rate yields R5000 for the next three years. Annual operating costs amount to R1000 for each year, and the one time initial investment cost is R8000. a. Calculate the Net Present Value (NPV) of this project.b. Calculate the cost-benefit ratio for the project. c. Is the project acceptable? Motivate your answer.
Please view the following video before answering this question. Video Example 4.3 Click here to access the TVM Factor Table Calculator Consider a palletizer at a bottling plant that has a first cost of $141,000, operating and maintenance costs of $16,500 per year, and an estimated net salvage value of $23,500 at the end of 33 years. Assume an interest rate of 6.00%. What is the present equivalent cost of the investment if the planning horizon is 33 years? O $387,900 O $362,900 O $372,363 O $423,400
es Lopez Company is considering three alternative investment projects below: Project 1 5.2 years $ 26,700 Project 2 5.7 Years $ 33,700 14.2% 13.1% Payback period Net present value Internal rate of return a. Payback period b. Net present value c. Internal rate of return. Which project is preferred if management makes its decision based on (a) payback period, (b) net present value, and (c) internal rate of return? Preferred Investment Project 3 4.9 Years Reason $19,700 12.5%
3. Use Expected NPVand PVR analysis for a minimum rate of return of 20.0% to evaluate the economic potential of buying and developing the rights to a new process with the following estimated costs, revenues, and success probabilities. The process rights would cost $100,000 at time zero, and it is considered 100% certain that an experimental development pilot plan work will be done one year later for a cost of $500,000. There is a 60.0% probability that the experimental development results will look good enough to take the project to production for a $400,000 capital cost at year one. If the experimental development results are unsatisfactory, a pilot plan abandonment cost of $40,000 will be incurred at year 1. If the project is taken to production, it is estimated there will be a 50.0% probability of generating production that will give $450,000 per year net positive cash flow for years 2 through 10, a 35.0% probability of generating $300,000 per year net positive cash flow for years 2…

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