Question: KLS Excavating needs a new crane. It has received two proposals from suppliers. Proposal A costs $ 900,000 and generates cost savings of $325,000 per

KLS Excavating needs a new crane. It has received two proposals from suppliers. Proposal A costs $ 900,000 and generates cost savings of $325,000 per year for 3 years, followed by savings of $200,000 for an additional 2 years. Proposal B costs $1,500,000 and generates cost savings of $400,000 for 5 years. If KLS has a discount rate of 12%, and prefers using the IRR criterion to make investment decisions, which proposal should it accept?

Step by Step Solution

★★★★★

3.32 Rating (155 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

Year Crane A Crane B 0 900000 1500000 1 325000 ... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

296-B-F-F-M (2612).docx

120 KBs Word File

Students Have Also Explored These Related Finance Questions!

The Trial Balance taken from the books of Felix Company Ltd as at 30th November 2020 is as follows: Dr $ Cr $ Issued Capital (200 000 @ $2 per share) 400 000 Uncalled Capital (25 cents on 200 000...

A crane of mass 3 000 kg supports a load of 10 000 kg as in Figure P12.47, the crane is pivoted with a frictionless pin at A and rests against a smooth support at B. Find the reaction forces at A and...

An investment generates $10,000 per year for 25 years. If you can earn 10 percent on other investments, what is the current value of this investment? If its current price is $120,000, should you buy...

KLS Excavating needs a new crane. It has received two proposals from suppliers. Proposal A costs $900,000 and generates cost savings of $325,000 per year for three years, followed by savings of...

1.KLS Excavating needs a new crane. It has received two proposals from suppliers. Proposal A costs $900,000 and generates cost savings of $325,000 per year for three years, followed by savings of...

After the Internet investment bubble burst, the original concept of easyInternetcaf? (eIc) was just not working out. The management decided to retrench, closing and downsizing some of the original...

1/ COASTAL CROPS LTD. (CCL) CASE Coastal Crops Ltd. (CCL) has been unionized since it was founded in 1968. It has always operated out in the west end of St. John's, Newfoundland. While the firm...

plz answerr question 3 only those are the questions before it, but i only need answer for question 3. dont report this request as multipe questions :) thank you Question 3: There are many aspects...

Refer to the textbook case study "Pan-Europa Foods SA". a. Consider the project proposal 11 - Strategic Acquisition. What is its initial investment capital in million euros in the year zero? (Note:...

The potential due to a point charge Q at the origin may be written as (a) Calculate E., EY' and E, using Eqs. (23.19). (b) Show that the result of part (a) agrees with Eq. (21.7) for the electric...

Claire Pierce comments on her life circumstances and investment outlook: I must support my parents who live overseas on Pogo Island. The Pogo Island economy has grown rapidly over the past 2 years...

1.Explain briefly or write short notes on Cost of conformance

WACC If Wild Widgets were an all-equity company, it would have a beta of 1.1. The company has a target debt-equity ratio of 0.40. The expected return on the market portfolio is 13 per cent, and...

Define each of the following terms: a. Informal restructuring; reorganization in bankruptcy b. Assignment; liquidation in bankruptcy; fairness; feasibility c. Absolute priority doctrine; relative...

Why do creditors usually accept a plan for financial rehabilitation rather than demand liquidation of the business?

Would it be a sound rule to liquidate whenever the liquidation value is above the value of the corporation as a going concern? Discuss.

You have $100,000 to invest in a portfolio containing Stock X and Stock Y. Your goal is to create a portfolio that has an expected return of 17 percent. Stock X has an expected return of 14.8 percent...

spremu stock willing at 554 on the market and pays an annual dividend of 20 per share What are the Rosar manierences between debt hond) and equity (stock? (8 marks) (4 marks What is the expected rate...

The following information concerns production in the Baking Department for August. All direct materials are placed in process at the beginning of production. a. Determine the number of units in work...