Question: Michaels Bakery is evaluating a new electronic oven. The oven requires an initial cash outlay of $19,000 and will generate after-tax cash inflows of $4,000

Michael’s Bakery is evaluating a new electronic oven. The oven requires an initial cash outlay of $19,000 and will generate after-tax cash inflows of $4,000 per year for eight years. For each of the costs of capital listed,
(1) Calculate the NPV,
(2) Indicate whether to accept or reject the machine, and
(3) Explain your decision.
a. The is 10%.
b. The is 12%.
c. The is 14%.

Step by Step Solution

★★★★★

3.26 Rating (158 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

CF0 19000 Cash flows of 4000Year for 8 years a NPV at 10 233970 accep... 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)

428-B-C-F-C-B (1995).docx

120 KBs Word File

Students Have Also Explored These Related Corporate Finance Questions!

Use the following adjusted trial balance and previous statement of stockholder's equity to prepare a classified balance sheet (use Current and Noncurrent in the appropriate classifications): Account...

An insurance company is evaluating a new software system designed to reduce the time for claims processing. The fixed costs with the new system are $120,000 per year. The average variable costs with...

A project requires an initial cash outlay of $40,000 and has expected cash inflows of $12,000 annually for 7 years. the cost of capital is 10%, what is the project's npv?

In a decision about whether to accept or reject a special order, explain why it is important to know if this a 'one-off' decision.

3. Premier Corporation is evaluating a capital budgeting project that will generate $700,000 per year for the next 10 years. The project costs $4.7 million, and Premier's required rate of return is...

Michaels Bakery is evaluating a new electronic oven. The oven requires an initial cash outlay of $19,000 and will generate after-tax cash inflows of $4,000 per year for eight years. For each of the...

Michael's Bakery is evaluating a new electronic oven. The oven requires an initial cash outlay of $19,000 and will generate after-tax cash inflows of $4,000 per year for eight years. For each of the...

michael's Bakery is evaluating a new electronic oven. The oven requires an initial cash outlay of $19,000 and will generate after-tax cash inflows of $4,000 per year for eight years. For each of the...

Michaels Bakery is evaluating a new electronic oven. The oven requires an initial cash outlay of $25,000 and will generate after-tax cash inflows of $5,000 per year for 7 years. Calculate the IRR.

Michael's Bakery is evaluating a new electronic oven. The oven requires an initial cash outlay of $25,000 and will generate after-tax cash inflows of $5,000 per year for 7 years. Calculate the IRR.

Requirement 4. Division is considering two posible expansion plans Plan A would expand a current product line at a cost of $8.410.000 Expected annual net cash inflows are $1.500.000, with rato...

At the beginning of the current period, Funko Co. had a balance of $92,000 in Accounts Receivable and a $6,440 credit balance in Allowance for Doubtful Accounts. In the period, it had net credit...

You have seen how asymmetric information can reduce the average quality of products sold in a market, as low-quality products drive out high-quality products. For those markets in which asymmetric...

Express the following sums using sigma notation. a . 7 8 9 1 0 1 1 b . 9 1 8 2 7 3 6 4 5 5 4 c . 1 5 2 5 3 5 4 5 d . 1 1 2 1 3 1 4 a . 7 8 9 1 0 1 1 = k = 1 5

and Let {e, h, f} and {x, y, z) be bases for A with Lie products [h, e] = 2e, [h, f] = -2f, [e, f] = h [x, y] =2x + 2y, Find functions gr, gy and 9z such that x gr(e, h), defines an automorphism of...

(a) Summarize the results with an ANOVA table. Short-circuit computational work by using the results in Question 16.5 for the SS terms, that is, between = 154.12, within = 132.75, and total = 286.87....

Read the case study CRUISE INTERNATIONAL, INC. A VIRTUAL SERVICE CASE and give the following answer: Describe the outsourcing environment at CII. Describe any operations currently done by CII which...

A company estimated the sales of 20,000 units during the month of June. The beginning inventory on hand is 2,100 units and the desired ending inventory for the month of June is 2,400 units. How many...

8-20. (Preferred stockholder expected return) You own 150 shares of James Corporation preferred stock at a market price of $22 per share. James pays dividends of $1.55. What is your expected rate of...

A professor in the Computer Science department at United States Institute of Technology has just patented a new search engine technology and would like to sell it to you, an interested venture...

Consider again the electric car dealership in Section 22.3. Suppose the current value of a dealership is $5 million because the first-year free cash flow is expected to be $500,000 rather than...

Under the same assumptions as in Section 22.3, suppose your corporation owns an operating electric car dealership, together with one-year options to open five more. a. What is the value and beta of...

Financial Indicators and Trend Analysis\ Analyze various ratio analyses and compare them to the financial statements and footnotes. Note any similarities or differences.\ In reviewing the gross...

Sales 45,788,000.00 Variable Costs -22,877,000.00 Revenue Before Fixed Costs 22,911,000.00 Fixed Costs -9,205,000.00 EBIT 13,706,000.00 Interest Expense -1,398,000.00 Earning before Taxes...

Exercise 1. For the cereal dataset, identify one variable that is approximately normally distributed. Construct a histogram for at least two variables and describe the shape of the distribution....