Your firm has the option of making an investment in new software that will cost $130,000 today

Question:

Your firm has the option of making an investment in new software that will cost $130,000 today and is estimated to provide the savings shown in the following table over its 5-year life:

Year Savings estimate

1 ...........$35,000

2 ........... 50,000

3 ........... 45,000

4 ........... 25,000

5 ........... 15,000

Should the firm make this investment if it requires a minimum annual return of 9% on all investments?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Principles Of Managerial Finance

ISBN: 978-0136119463

13th Edition

Authors: Lawrence J. Gitman, Chad J. Zutter

See More Books

Question Posted: Mar 05, 2012 04:49 AM

See More Questions

Fairco, a family business is considering making an investment in its manufacturing operation. Three decisions are under consideration: (1) a large investment; (2) a medium investment; and (3) a small...
The brain weighs about 1.3 kg and is estimated to have about 100 billion neurons and 10 to 50 times as many other cells (glial cells). Is this consistent with our previous estimates? The above...
Your best friend is considering making an investment in Photometric Tailoring Co. She seeks your advice in interpreting the company's information. Specifically, she asks whether this trial balance...
A team of workers will build a wall of 400 m in 15 days if they work 8 hours every day. How long will they take if the wall has 600 m and they work 10 hours every day?
The Fashion Palace Inc. sells a variety of home decorating merchandise, including pictures, small furniture items, dishes, candles, and area rugs. The company uses a periodic inventory system and...
One way that TNRE may occur involves the formation of _________ that disrupts ____________. a. a double-strand break, chromosome segregation b. an apurinic site, DNA replication c. a hairpin, DNA...
Verify that the $j$-factor is related to the drag coefficient by the relation \[j_{\mathrm{D}}=\frac{c_{\mathrm{D}}}{2}\] for mass transfer for flow over a flat plate.
Is there a significant difference in Internet use per week between different educational groups? Using data from the GSS10SSDS, we ran an ANOVA model using DEGREE (educational attainment) as the...
A key falls from a bridge that is 54 m above the water. It falls directly into a model boat, moving with constant velocity, that was 10 m from the point of impact when the key was released. What is...
On December 31, the capital balances and profit and loss ratios in the MRS Partnership are as follows Capital Profit and Partner Balance loss ratio B. McLaren $106,000 51% P. Ready 93,000 24% D....
Gabrielle just won $2.5 million in the state lottery. She is given the option of receiving a total of $1.3 million now, or she can elect to be paid $100,000 at the end of each of the next 25 years....
Joseph is a friend of yours. He has plenty of money but little financial sense. He received a gift of $12,000 for his recent graduation and is looking for a bank in which to deposit the funds....
Many gifts are made for reasons that sour with the passage of time. Unfortunately, gift law does not allow a donor to recover/revoke a gift simply because his or her reasons for giving it have...
Sketch the graph of each equation in Problems 3-30. $y=\frac{1}{3} x^{2}$
This case is a continuation of the Burburr Resorts & Hotels Corporation serial case that began in Chapter. The components of the Burburr serial case can be completed in any order. Burburr Resorts &...
A 20-ounce bottle of Dasani water typically costs about $$1.99$ at a convenience store. At an airport shop, that same bottle of Dasani water could cost $$2.89$ or more. The costs of operating...
During 2023, it was common on some social media sites and internet discussion boards to hear people say, No one is willing to work anymore. Go to the Hubbard and OBrien Economics Blog and read the...
In 2023, an article in the Wall Street Journal noted that many employers say they had to raise wages last year to recruit and hold on to restaurant servers, hotel housekeepers, and retail store...
A Ltd owns 85% of B Ltd and 60% of C Ltd. B Ltd owns 90% of D Ltd. The remaining 40% of C Ltd is owned by E Ltd. All these percentages represent holdings of ordinary shares and all companies are UK...
Explain how the graph of each function can be obtained from the graph of y = 1/x or y = 1/x 2 . Then graph f and give the (a) Domain (b) Range. Determine the largest open intervals of the domain over...
List Garvins eight dimensions of product quality.
Three assets'F, G, and H'are currently being considered by Perth Industries. The probability distributions of expected returns for these assets are shown in the following table. a. Calculate the...
Assuming that the rates of return associated with a given asset investment are normally distributed; that the expected return, r, is 18.9%; and that the coefficient of variation, CV, is 0.75; answer...
Jamie Wong is considering building an investment portfolio containing two stocks, L and M. Stock L will represent 40% of the dollar value of the portfolio, and stock M will account for the other 60%....
You are working in a clinic and have just roomed a patient. When you come out of the room, you overhear me complaining to two co-workers about you and how slow you are. [Take the role of the other...
What are the advantages and pitfalls of the media's appetite for telling and selling stories? As we reach the point where almost all media exist on the Internet in some form, how have our culture and...
When looking at a project to convert data into information, data analysis is the methodology thatshould be used to accomplish the output. When reviewing the tools used in the course and the data that...

Your firm has the option of making an investment in new software that will cost $130,000 today

Question:

Step by Step Answer:

To solve this problem you must first find the present value of the expected savings over the 5year ...View the full answer

Principles Of Managerial Finance

Students also viewed these Finance questions