Compo Research plans to purchase a new centrifuge machine for its New Mexico facility. The machine...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Compo Research plans to purchase a new centrifuge machine for its New Mexico facility. The machine costs $567,000 and is expected to have a useful life of 8 years, with a terminal disposal value of $54,000. Savings in cash operating costs are xpected to be $108,000 per year. However, additional working capital is needed to keep the machine running efficiently. The working capital must continually be replaced, so an investment of $38,000 needs to be maintained at all times, but this nvestment is fully recoverable (will be "cashed in") at the end of the useful life. Compo Research's required rate of return is 8%. Ignore income taxes in your analysis. Assume all cash flows occur at year-end except for initial investment amounts. Compo Research uses straight-line depreciation for its machines. Requirement 1. Calculate net present value. (Use factors to three decimal places, X.XXX, and use a minus sign or parentheses for a negative net present value. Enter the net present value of the investment rounded to the nearest whole dollar) The net present value is Requirement 2. Calculate internal rate of return. (Use a trial-and-error approach and straight-line interpolation as necessary. Round all present value calculations The internal rate of return (IRR) is %. o the nearest whole dollar and round the IRR to two decimal places, X.XX%.) Compo Research plans to purchase a new centrifuge machine for its New Mexico facility. The machine costs $567,000 and is expected to have a useful life of 8 years, with a terminal disposal value of $54,000. Savings in cash operating costs are xpected to be $108,000 per year. However, additional working capital is needed to keep the machine running efficiently. The working capital must continually be replaced, so an investment of $38,000 needs to be maintained at all times, but this nvestment is fully recoverable (will be "cashed in") at the end of the useful life. Compo Research's required rate of return is 8%. Ignore income taxes in your analysis. Assume all cash flows occur at year-end except for initial investment amounts. Compo Research uses straight-line depreciation for its machines. Requirement 1. Calculate net present value. (Use factors to three decimal places, X.XXX, and use a minus sign or parentheses for a negative net present value. Enter the net present value of the investment rounded to the nearest whole dollar) The net present value is Requirement 2. Calculate internal rate of return. (Use a trial-and-error approach and straight-line interpolation as necessary. Round all present value calculations The internal rate of return (IRR) is %. o the nearest whole dollar and round the IRR to two decimal places, X.XX%.)
Expert Answer:
Answer rating: 100% (QA)
Requirement 1 Calculate Net Present Value NPV To calculate the Net Present Value NPV we need to disc... View the full answer
Related Book For
Managerial Accounting Decision Making and Motivating Performance
ISBN: 978-0137024872
1st edition
Authors: Srikant M. Datar, Madhav V. Rajan
Posted Date:
Students also viewed these accounting questions
-
Compo Research plans to purchase a new centrifuge machine for its New Mexico facility. The machine costs $ 382,000 and is expected to have a useful life of 10 years, with a terminal disposal value of...
-
Century Lab plans to purchase a new centrifuge machine for its New Hampshire facility. The machine costs $137,500 and is expected to have a useful life of eight years, with a terminal disposal value...
-
DCF, accrual accounting rate of return, working capital, evaluation of performance, no income taxes. Century Lab plans to purchase a new centrifuge machine for its New Hampshire facility. The machine...
-
Is this a confined or unconfined aquifer? Please explain. 100 m amsl 78 m amsl 56 m amsl 48 m amsl A 50 m 11m B Clay Sand Clay 100 m
-
During 2011 the following selected transactions affecting stockholders equity occurred for Orlando Corporation: a. Apr. 1 Purchased in the market 200 shares of the companys own common stock at $20...
-
True Or False For frolic and detour to apply, if the deviation is reasonable, the employer can still be liable.
-
Consider the following cash flow profile and assume MARR is 10 percent/year. a. What does Descartes' rule of signs tell us about the IRR(s) of this project? b. What does Norstrom's criterion tell us...
-
Uttinger Company has the following data at December 31, 2015. The available-for-sale securities are held as a long-term investment. Instructions (a) Prepare the adjusting entries to report each class...
-
Chef needs to prepare 120 portions of steamed cauliflower. Each cooked portion is 3 oz. The vegetable loses 28% of its weight when cooked. Raw cauliflower costs $3.59/lb. How many ounces of raw...
-
A backgammon player will be playing three consecutive matches with friends tonight. For each match, he will have the opportunity to place an even bet that he will win; the amount bet can be any...
-
A 93 kg object is traveling due north at 14.2 m/s when it begins to experience a constant net force of 1700 N towards the south. How long will it take to stop under the influence of this force?
-
Today we are going to play the "Questionizer" game. I will start by asking a question related to Lesson 1. The first student to respond to my question will do his or her best to answer it and then...
-
Read the given case study and answer the following questions (Question 1-Question 5) You are appointed by a local consulting company for a project to design and implement an employee's records...
-
Scenario one Each regional site will produce for their own region Demand is met! No site has exceeded their capacity! Minimized fixed costs by running each site at 200k Total cost (fixed and...
-
To find the utility-maximizing combination of goods x and y for this consumer, we can use the concept of consumer optimization subject to a budget constraint. The consumer's goal is to maximize...
-
Unemployment insurance benefits help individuals who have lost their job to sustain a desirable consumption level. An MIT economist, Jonathan Gruber, argues that private insurance or savings are not...
-
Methods of analyzing financial statements include Select one: a. ratio analysis. b. horizontal analysis. c. vertical analysis. d. all of the above. e. only A and C above.
-
Match each of the key terms with the definition that best fits it. _______________ A record of the sequence of data entries and the date of those entries. Here are the key terms from the chapter. The...
-
The controller of the Dorsey Company wants you to estimate a cost function from the following two observations in a general ledger account called Maintenance: Required 1. Estimate the cost function...
-
The Roberts Company sells its razors at $ 3 per unit. The company incurs fixed manufacturing overhead costs of $ 700,000 each year to support production of 1,400,000 units so that the fixed...
-
Gold- o- licious makes candy bars for vending machines and sells them to vendors in cases of 30 bars. Although Gold- o- licious makes a variety of candy, the cost differences are insignificant, and...
-
Describe an example of resistance to change that you have observed. Why did it occur?
-
Discuss: The best organizational structure to generate innovative ideas might not be the best structure to implement those ideas.
-
You have been charged with staffing and organizing an R&D group in a new high-tech firm. What will you do to ensure that the group is innovative?
Study smarter with the SolutionInn App