Cori's Dog House is considering the installation of a new computerized pressure cooker for hot dogs. The cooker will increase sales by $8,800 per year and will cut annual operating costs by $14,900. The system will cost $51,000 to purchase and install. This system is expected to have a 7-year life and will be depreciated to zero using straight-line depreciation and have no salvage value.

Cori's Dog House is considering the installation of a new computerized pressure cooker for hot dogs. The cooker will increase sales by $8,800 per year and will cut annual operating costs by $14,900. The system will cost $51,000 to purchase and install. This system is expected to have a 7-year life and will be depreciated to zero using straight-line depreciation and have no salvage value.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 10P

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Cori's Dog House is considering the installation of a new computerized pressure cooker for hot dogs. The cooker will increase sales by $7,900 per year and will cut annual operating costs by $14,000. The system will cost $48,300 to purchase and install. This system is expected to have a 6-year life and will be depreciated to zero using straight-line depreciation and have no salvage value. The tax rate is 21 percent and the required return is 11.5 percent. What is the NPV of purchasing the pressure cooker? Multiple Choice $30,900 -$5,834 ○ $4,909 о $34,134 -$20,096
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DeYoung Entertainment Enterprises is considering replacing the latex molding machine it uses to fabricate rubber chickens with a newer, more efficient model. The old machine has a book value of $450,000 and a remaining useful life of 5 years. The current machine would be worn out and worthless in 5 years, but DeYoung can sell it now to a Halloween mask manufacturer for $135,000. The old machine is being depreciated by $90,000 per year for each year of its remaining life. If DeYoung doesn't replace the old machine, it will have no salvage value at the end of its useful life. The new machine has a purchase price of $775,000, an estimated useful life and MACRS class life of 5 years, and an estimated salvage value of $105,000. The applicable depreciation rates are 20.00%, 32.00%, 19.20%, 11.52%, 11.52%, and 5.76%. Being highly efficient, it is expected to economize on electric power usage, labor, and repair costs, and, most importantly, to reduce the number of defective chickens. In total,…
DeYoung Entertainment Enterprises is considering replacing the latex molding machine it uses to fabricate rubber chickens with a newer, more efficient model. The old machine has a book value of $450,000 and a remaining useful life of 5 years. The current machine would be worn out and worthless in 5 years, but DeYoung can sell it now to a Halloween mask manufacturer for $135,000. The old machine is being depreciated by $90,000 per year for each year of its remaining life. If DeYoung doesn't replace the old machine, it will have no salvage value at the end of its useful life. The new machine has a purchase price of $775,000, an estimated useful life and MACRS class life of 5 years, and an estimated salvage value of $105,000. The applicable depreciation rates are 20.00%, 32.00%, 19.20%, 11.52%, 11.52%, and 5.76%. Being highly efficient, it is expected to economize on electric power usage, labor, and repair costs, and, most importantly, to reduce the number of defective chickens. In total,…
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