Suppose we are thinking about replacing an old computer with a new one. The old one cost us $1,680,000; the new one will cost, $2,027,000. The new machine will be depreciated straight-line to zero over its five-year life. It will probably be worth about $450,000 after five years. The old computer is being depreciated at a rate of $360,000 per year. It will be completely written off in three years. If we don't replace it now, we will have to replace it in two years. We can sell it now for $558,000; in two years, it will probably be worth $162,000. The new machine will save us $378,000 per year in operating costs. The tax rate is 21 percent, and the discount rate is 12 percent.
Q: Alternative R has a first cost of $76,000, annual M&O costs of $56,000, and a $20,000 salvage value…
A: Let the annual M&O cost be X, and find the incremental difference between two…
Q: (a) What is the present value of $25,000 due 11 periods from now, discounted at 12%? (Round answer…
A: Future Value = fv = $25,000Time = t = 11Discount rate = r = 12%
Q: Pharoah Technologies Ltd. issued bonds with a face value of $72,000,000 that mature in 15 years. The…
A: The bond amortization table refers to the tabular representation of the schedule of repayment of the…
Q: You are considering a 25-year, $1,000 par value bond. Its coupon rate is 10%, and interest is paid…
A: Bond price means the price at which a bond should trade in the market. It is the summation of…
Q: If you are a U.S. international bond investor deciding to invest in one of the following 4…
A: When money is invested in other country then rate of return depends on the exchange rate and…
Q: The management of Blanche Inc. controls 58% of the company’s stock. The firm did not meet any of its…
A: The objective of the question is to identify the most suitable measure that the institutional…
Q: A new production system for a factory is to be purchased and installed for $135331 . This system…
A: Initial investment = $135,331MARR = 15%Cost of electricity = $0.10 per kWhNumber of years = 6…
Q: Holmes Manufacturing is considering a new machine that costs $290,000 and would / reduce pretax…
A: Honor codeAs per the Q&A guidelines, if multiple subparts are asked at once then the answer for…
Q: Suppose that General Motors Acceptance Corporation issued a bond with 10 years until maturity, a…
A: Bond price:Bond prices are an essential aspect of the financial market, and they play a crucial…
Q: Simms Corp. is considering a project that has the following cash flow data. What is the project's…
A: IRR is the required rate of return for the project to have zero Net Present value.IRR can be…
Q: Bonds of Zello Corporation with a par value of $1,000 sell for $960, mature in five years, and have…
A: Face value = $1,000Coupon rate = 7%Years to maturity = 5 yearsReinvestment rate = 6%Bond's price =…
Q: b. As the table above shows, the plant is carried on Androscoggin's books at $48.68 million.…
A: A financial indicator is Economic Value Added. EVA indicates whether a business is generating or…
Q: A corporation issues a 20 year bond with the final redemption value equal to the face value of…
A: The possible least value of return rate that an investor can earn based on the assumption that the…
Q: Remember, the expected value of a probability distribution is a statistical measure of the average…
A: According to bartleby guidelines , if question involves multiple sub parts , then 1st sub 3 parts…
Q: payoff matrix
A: Portfolio weights: P1 = 1P2 = ?Payoff matrix (unchanged):
Q: Maggie's Resorts was wondering how to use capital budgeting to decide if their $7,952,000 expansion…
A: According to bartleby guidelines , if question involves multiple sub parts , then 1st sub 3 parts…
Q: Ang Electronics, Inc, has developed a new HD DVD. If the HD DVD is successful, the present value of…
A: Payoff in success = $33,600,000Payoff in failure = $11,600,000Probability of success = 40%…
Q: stock’s contribution to the market risk of a well-diversified portfolio is called Q1. ______risk. It…
A: Risk is uncertainty involved and risk may be due to the company or may be due to the overall risk of…
Q: The Investments Fund sells Class A shares with a front-end load of 5% and Class B shares with 12b-1…
A: Variables in the question:Class A shares:Front-end load = 5%Class B shares:12b-1 fees = 0.5%…
Q: Maggie's Resorts was wondering how to use capital budgeting to decide if their $7,952,000 expansion…
A: Annual percentage return refers to the return that is being earned over the initial investment…
Q: a. For this base-case scenario, what is the NPV of the plant to manufacture lightweight tractors? b.…
A: Net present value is determined by deducting the initial investment from the current value of cash…
Q: Consider a four-year project with the following information: initial fixed asset investment =…
A: When the variations in company's income from operations with respect to the variations in the…
Q: 3. You are given the following summarized financial statements of Tech Inc. for the year 2020. Sales…
A: Financial ratio analysis-It is a method of comparing the ratio between two or more items of…
Q: Find the following values, using the equations, and then work the problems using a financial…
A: Future value is the certain amount of asset or sum of money at a certain point of time on the basis…
Q: a. Finding TTC's stock worth today, its expected dividend, and capital gains yields Year Dividend…
A: To calculate Dividends for Year 1 and Year 2:Year 1 Dividend = Last Dividend (1 + Normal Growth…
Q: What is the present value of $3,000 paid at the end of each of the next 70 years if the interest…
A: Here:Payment value (p) = $3000Time (t) = 70 yearsInterest rate (r) = 6%= 6/100= 0.06
Q: ompare the monthly payments and total loan costs for the following pairs of loan options. Assume…
A: Loans are paid by equal monthly payments that carry payment for interest and payment for the loan.
Q: Consider the following cash flows and assume i = 10% for all analyses purposes: 12 0 1 2 3 4 5 6 7 8…
A: Businesses apply capital budgeting, a financial procedure, to assess and choose long-term investment…
Q: Yield to maturity The relationship between a bond's yield to maturity and coupon interest rate can…
A: Yield to maturity is the return on the bond if held till maturity. A premium bond is a bond that is…
Q: \table[[Cuantivy, \table[[Totil], [Cost]], \table [[Fined], [Cost]], \table[[Variable], [Cost]], \…
A: Variable in the question:Fixed cost=$50
Q: Rini Airlines is considering two alto Planes. Plane A has an expected life of S years, has an after…
A: Plane A:After-tax cost = $80 millionAfter-tax cash flow = $40 millionLife = 5 yearsIf Renee needs to…
Q: Boeing Corporation has just issued a callable (at par) three-year, 4.7% coupon bond with…
A: a. Calculate the yield to maturityThe yield to maturity is the discount rate that equates the bond's…
Q: eBook Holmes Manufacturing is considering a new machine that costs $285,000 and would reduce pretax…
A: Capital budgeting is a strategic financial planning process used by companies to evaluate and…
Q: Andouille Spices, Incorporated, has the following mutually exclusive projects available. The company…
A: When the acceptance of an investment alternative automatically results in the rejection of the rest…
Q: Targaryen Corporation has a target capital structure of 70 percent common stock, 5 percent preferred…
A: Weight of Equity = we = 70%Weight of Preferred Stock = wp = 5%Weight of Debt = wd = 25%Cost of…
Q: total revenue, total cost, and total profit or loss for each selling price.
A: Total Demand (In LB Units)(A)856007450056000491003480027100Per unit Price(In…
Q: Question 1 of 5 Calculate the current ratio for Borderline Bariatrics, given the following data:…
A: The objective of this question is to calculate the current ratio for Borderline Bariatrics. The…
Q: Do a comparative analysis of taxation in Keny howing how these countries have addressed i. Income…
A: CountryIncome Tax RateTaxable IncomeExemptionsKenya25%Individual income above Ksh 230,000; Company…
Q: Pat Radigan is planning to buy a Toyota hybrid for $18,989 with $2,100 down and plans to finance the…
A: A finance fee is the cost of getting credit or giving credit. A finance charge is an all-inclusive…
Q: please respond to both. Company Dividend Yield Dividend next year Chesapeake Energy Corp…
A: The term "stock price" refers to the current market price at which a share or unit of ownership in a…
Q: explain what is Net profit margin with a comprehensive example
A: The objective of this question is to understand the concept of Net Profit Margin, a key…
Q: Problem 6-2 Determinants of Interest Rates for Individual Securities (LG6-6) You are considering an…
A: Understand the Fisher Equation:The Fisher Equation relates the nominal interest rate (i) to the real…
Q: Risk-free rate (rRF) Q1 Market risk premium (RPM) Q2 Happy Corp. stock’s beta Q3 Required rate…
A: The capital asset pricing model aids analysts and investors in calculating the expected return on…
Q: A bond has a face value (and redemption value) of $504,000, and pays coupons annually. The effective…
A: A bond refers to an instrument that is used to raise debt capital for the issuing company from…
Q: You have determined in your mind that you would like to have a business of your own, although your…
A: Operating cash flow is main cash flow from the business after doing payments for all expenses and…
Q: A firm has a cost of debt of 6.5 percent and a cost of equity of 10.1 percent. The debt–equity ratio…
A: Solution:Weighted Average Cost of Capital (WACC) means the average cost of capital for the firm…
Q: Modern Artifacts can produce keepsakes that will be sold for $100 each. Nondepreciation fixed costs…
A: The degree of operational leverage (DOL) is a financial indicator that assesses a company's…
Q: What is the Nominal and Effective interest rates per year (compounded semiannually)?
A: The effective annual interest rate is a crucial concept in finance that is used to describe the true…
Q: You see an opportunity to invest $1 million in a business. The investment is expected to generate…
A: Capital budgeting refers to the concept used for estimating the viability of the project through…
Q: You own a stock portfolio invested 20 percent in Stock Q, 20 percent in Stock R, 15 percent in Stock…
A: Portfolio beta will be reflective of the systematic risk of the portfolio and it cannot be…
Step by step
Solved in 3 steps with 2 images
- Although the Chen Company’s milling machine is old, it is still in relatively good working order and would last for another 10 years. It is inefficient compared to modern standards, though, and so the company is considering replacing it. The new milling machine, at a cost of $110,000 delivered and installed, would also last for 10 years and would produce after-tax cash flows (labor savings and depreciation tax savings) of $19,000 per year. It would have zero salvage value at the end of its life. The project cost of capital is 10%, and its marginal tax rate is 25%. Should Chen buy the new machine?Friedman Company is considering installing a new IT system. The cost of the new system is estimated to be 2,250,000, but it would produce after-tax savings of 450,000 per year in labor costs. The estimated life of the new system is 10 years, with no salvage value expected. Intrigued by the possibility of saving 450,000 per year and having a more reliable information system, the president of Friedman has asked for an analysis of the projects economic viability. All capital projects are required to earn at least the firms cost of capital, which is 12 percent. Required: 1. Calculate the projects internal rate of return. Should the company acquire the new IT system? 2. Suppose that savings are less than claimed. Calculate the minimum annual cash savings that must be realized for the project to earn a rate equal to the firms cost of capital. Comment on the safety margin that exists, if any. 3. Suppose that the life of the IT system is overestimated by two years. Repeat Requirements 1 and 2 under this assumption. Comment on the usefulness of this information.Suppose we are thinking about replacing an old computer with a new one. The old one cost us $1,620,000; the new one will cost, $1,949,000. The new machine will be depreciated straight-line to zero over its five-year life. It will probably be worth about $405,000 after five years. The old computer is being depreciated at a rate of $336,000 per year. It will be completely written off in three years. If we don't replace it now, we will have to replace it in two years. We can sell it now for $531,000; in two years, it will probably be worth $153,000. The new machine will save us $363,000 per year in operating costs. The tax rate is 23 percent, and the discount rate is 10 percent. a-1. Calculate the EAC for the the old computer and the new computer. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) a-2. What is the NPV of the decision to replace the computer now? (A negative answer should…
- Suppose we are thinking about replacing an old computer with a new one. The old one cost us $1,960,000; the new one will cost, $2,531,000. The new machine will be depreciated straight-line to zero over its five-year life. It will probably be worth about $660,000 after five years. The old computer is being depreciated at a rate of $472,000 per year. It will be completely written off in three years. If we don't replace it now, we will have to replace it in two years. We can sell it now for $684,000; in two years, it will probably be worth $204,000. The new machine will save us $413,000 per year in operating costs. The tax rate is 25 percent, and the discount rate is 8 percent. a-1. Calculate the EAC for the the old computer and the new computer. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) a - What is the NPV of the decision to replace the computer now? (A negative answer should be…Suppose we are thinking about replacing an old computer with a new one. The old one cost us $1.4 million; the new one will cost $1.7 million. The new machine will be depreciated straight-line to zero over its five-year life. It will probably be worth about $325,000 after five years. The old computer is being depreciated at a rate of $281,000 per year. It will be completely written off in three years. If we don't replace it now, we will have to replace it in two years. We can sell it now for $450,000; in two years, it will probably be worth $130,000. The new machine will save us $315,000 per year in operating costs. The tax rate is 22 percent, and the discount rate is 12 percent. a-1. Calculate the EAC for the old and the new computer. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) a-2. What is the NPV of the decision to replace the computer now? (A negative answer should be…Suppose we are thinking about replacing an old computer with a new one. The old one cost us $1,660,000; the new one will cost, $2,001,000. The new machine will be depreciated straight-line to zero over its five-year life. It will probably be worth about $435,000 after five years. The old computer is being depreciated at a rate of $352,000 per year. It will be completely written off in three years. If we don't replace it now, we will have to replace it in two years. We can sell it now for $549,000; in two years, it will probably be worth $159,000. The new machine will save us $373,000 per year in operating costs. The tax rate is 25 percent, and the discount rate is 12 percent. a-1. Calculate the EAC for the the old computer and the new computer. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) a-2. What is the NPV of the decision to replace the computer now? (A negative answer should…
- give me the right answer only ASAP Suppose we are thinking about replacing an old computer with a new one. The old one cost us $1.4 million; the new one will cost $1.7 million. The new machine will be depreciated straight-line to zero over its five-year life. It will probably be worth about $325,000 after five years. The old computer is being depreciated at a rate of $281,000 per year. It will be completely written off in three years. If we don’t replace it now, we will have to replace it in two years. We can sell it now for $450,000; in two years, it will probably be worth $130,000. The new machine will save us $315,000 per year in operating costs. The tax rate is 22 percent, and the discount rate is 12 percent. a-1. Calculate the EAC for the old and the new computer. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) a-2. What is the NPV of the decision to…Suppose we are thinking about replacing an old computer with a new one. The old one cost us $1,260,000; the new one will cost $1,520,000. The new machine will be depreciated straight-line to zero over its five-year life. It will probably be worth about $260,000 after five years. The old computer is being depreciated at a rate of $252,000 per year. It will be completely written off in three years. If we don’t replace it now, we will have to replace it in two years. We can sell it now for $380,000; in two years, it will probably be worth $116,000. The new machine will save us $286,000 per year in operating costs. The tax rate is 24 percent and the discount rate is 10 percent. a. Calculate the EAC for the old computer and the new computer. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b. What is the NPV of the decision to replace the computer now? (A…Tyrell Corp. is considering replacing a machine. The old one is currently being depreciated at $70,000 per year (straight-line), and is scheduled to end in five years with no remaining book value. If you don't replace it, you will be lucky to get it removed for the amount you could salvage it for, so you don't expect any profit in five years. If you replace the old machine now, you believe you can salvage it for $375,000 and buy a new machine for $850,000, plus $25,000 shipping fee and another $25,000 for installation. The new machine will not change the revenue or NOWC, but it will reduce the operating costs of the company by $145,000 per year. The new machine will be depreciated using the three-year MACRS schedule (the table is provided on the Moodle for your convenience). The useful life of this machine is five years, and it is expected that the machine can be sold at $20,000 at the end of the five years. Assume a tax rate of 25% and the cost of capital for the company is 8%.…
- Mitchell, Inc. is considering investment in a machine to produce computer keyboards. The price of the machine is $400,000 and its economic life is ten years. The machine will be depreciated to a value of zero over the ten-year period. The total size of the market is 1,000,000 keyboards per year. You can capture 1% of the market share each year. The price of the keyboards is $40 in the first year. You will incur fixed costs of $80,000 per year. The variable cost per unit of the keyboard is $20. The corporate tax rate is 34%. The discount rate is 15 percent. Estimate the total cash flows and find out the NPV, IRR, and PI of this project.Tyrell Corp. is considering replacing a machine. The old one is currently being depreciated at $70,000 per year (straight-line), and is scheduled to end in five years with no remaining book value. If you don’t replace it, you will be lucky to get it removed for the amount you could salvage it for, so you don’t expect any profit in five years. If you replace the old machine now, you believe you can salvage it for $375,000 and buy a new machine for $850,000, plus $25,000 shipping fee and another $25,000 for installation. The new machine will not change the revenue or NOWC, but it will reduce the operating costs of the company by $145,000 per year. The new machine will be depreciated using the three-year MACRS schedule (the table is provided on the Moodle for your convenience). The useful life of this machine is five years, and it is expected that the machine can be sold at $20,000 at the end of the five years. Assume a tax rate of 25% and the cost of capital for the company is 8%.…Denny Corporation is considering replacing a technologically obsolete machine with a new state-of-the-art numerically controlled machine. The new machine would cost $340,000 and would have a ten-year useful life. Unfortunately, the new machine would have no salvage value. The new machine would cost $50,000 per year to operate and maintain, but would save $95,000 per year in labor and other costs. The old machine can be sold now for scrap for $30,000. The simple rate of return on the new machine is closest to (Ignore income taxes.): (Round your answer to 1 decimal place.)