B eBook Question 7 of Check My Work (1 remaining) Unequal Lives The Perez Company has...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
B eBook Question 7 of Check My Work (1 remaining) Unequal Lives The Perez Company has the opportunity to invest in one of two mutually exclusive machines that will produce a product it will need for the foreseeable future. Machine A costs $8 million but realizes after-tax inflows of $4.5 million per year for 4 years. After 4 years, the machine must be replaced. Machine B costs $17 million and realizes after-tax inflows of $4 million per year for 8 years, after which it must be replaced. Assume that machine prices are not expected to rise because inflation will be offset by cheaper components used in the machines. The cost of capital is 13%. Using the replacement chain approach to project analysis, by how much would the value of the company increase if it accepted the better machine? Do not round intermediate calculations. Enter your answer i millions. For example, an answer of $1.23 million should be entered as 1.23, not 1,230,000. Round your answer to two decimal places. $ million What is the equivalent annual annuity for each machine? Do not round intermediate calculations. Enter your answers in millions. For example, an answer of $1.23 million should be entered as 1.23, not 1,230,000. Round your answers to two decimal places. Machine A: $ million Machine B: $ million B eBook Question 7 of Check My Work (1 remaining) Unequal Lives The Perez Company has the opportunity to invest in one of two mutually exclusive machines that will produce a product it will need for the foreseeable future. Machine A costs $8 million but realizes after-tax inflows of $4.5 million per year for 4 years. After 4 years, the machine must be replaced. Machine B costs $17 million and realizes after-tax inflows of $4 million per year for 8 years, after which it must be replaced. Assume that machine prices are not expected to rise because inflation will be offset by cheaper components used in the machines. The cost of capital is 13%. Using the replacement chain approach to project analysis, by how much would the value of the company increase if it accepted the better machine? Do not round intermediate calculations. Enter your answer i millions. For example, an answer of $1.23 million should be entered as 1.23, not 1,230,000. Round your answer to two decimal places. $ million What is the equivalent annual annuity for each machine? Do not round intermediate calculations. Enter your answers in millions. For example, an answer of $1.23 million should be entered as 1.23, not 1,230,000. Round your answers to two decimal places. Machine A: $ million Machine B: $ million
Expert Answer:
Posted Date:
Students also viewed these finance questions
-
Lacoste t-shirts come with an average price of $ 120 a piece, at their factory outlet with a std. deviation of $ 17. But at the Seasonal Sale (Discount) outlets of these t- shirts, it was also...
-
A 24-ft-long pole AB is placed in a hole and is guyed by three cables. Knowing that the tensions in cables BD and BE are 221 lb and 161 lb, respectively, determine (a) The tension in cable CD, (b)...
-
Explain how standard costs can be used in a process cost system.
-
There are several ways of accounting for the sale of scrap material resulting from manufac- turing processes. One is to credit the proceeds to the Manufacturing Overhead account. Another is to reduce...
-
A lease agreement that qualifies as a capital lease calls for annual lease payments of $26,269 over a six-year lease term, with the first payment at January 1, the lease's inception. The interest...
-
8. Consider the following limit order book for a share of stock. The last trad the stock occurred at a price of $130. Limit Buy orders Limit Sell orders Price(S) shares Price(S) Shares 129.75 400...
-
Hebron Co. sells two products X and Y at 60 dinars and 30 dinars, respectively. In the last week of 2020, the company presented a special offer to customers to sell the two products together as one...
-
Let y = tan(3x+6). Find the differential dy when x = 5 and dx = 0.1 Find the differential dy when x = 5 and da = 0.2
-
An analyst has identified three periods; boom, normal growth, and recession. The expected return of a stock fund in a boom, normal growth, and recession is 20%, 15%, and 10%. The expected return of...
-
What are Human Rights of Social Work What are Social Justice of Social Work What are Approaches to Social Work Practice What are Diversity and Empowerment Involving Social Work Practice What are...
-
Compute the future values of your savings after 10 years based on the followings: i) Deposit RM1,200 at the end of each year in a financial institution which pays an interest rate of 12% p.a....
-
If a bank offers Customer A a $10,000 loan at a 6% interest rate and Customer B a $10,000 loan at a 4% interest rate, which loan do you expect is higher risk
-
Using ITA 85(1),Christine Rue sells non-depreciable capital property to a corporation at an elected amount of $95,000. The property has an ACB of $82,000 and a FMV of $202,000. As consideration, she...
-
Identify one local business that uses a perpetual inventory system and another that uses a periodic system. Interview an individual in each organization who is familiar with the inventory system and...
-
What is a sales discount? Use credit terms 1/10, n/30 in your explanation.
-
Contrast the effects of weighted average versus FIFO on cash outflow and inflow.
-
Contrast the statement of earnings effect of weighted average versus FIFO (i.e., on earnings before income taxes) when (a) prices are rising and (b) prices are falling.
Study smarter with the SolutionInn App