question 15

question 15

Machine V tal cash flows from convert Chestne present a NTV this stment's nemal rate of tum She the company convert to Machine B? Why dining cash flows NTV, IRR) This problem shohim 14. It is now four years later. The e did buy Machine X, but just today Machine Yon the market Machine Y could be purchased e Machine Xl acquired, Machine Y would SEU and would be depreciated for tax pur- in the strugght-line method over an est- the year life to its expected salvage value of SOS Machine Y would require S160.000 of work mal but would add an additional $300.000 per per op Machine X's salvage value 5125.000, but it could be sold today for Soy the incremental cash flows from convert to Machine y Citate this investment's net present value (NPV) calculate this investment's internal rate of return Sheld the company convert to Machine Y? Why Calculate the proces present Calculate the project's intematon Should the firm accept or the pe d. What is the value added to the form this proposed investment 13 Organizing cash flow, NPV, IRR) Norge chine would cost $120,000 and would be de evaluating the purchase of Machine The for tax purposessing the straight line an estimated ten-year life to po value of $20,000 The new machine would addition of $30,000 to working capital head of Machine A's life, the company w won pre-tex costs by 540.000. The company has of capital and pay taxes at a 215 rate 2. Identify the incremental cash flows from in Machine A b. Calculate the investment's net presenta Calculate the investments internal (IRR) Should the company purchase Machine Why why not? 14. Organizing cash flows, NPV, IRRI A.com evaluating the purchase of Machine X to product quality. The new machine would $1.000.000 and would be depreciated for the using the straight-line method over an et seven-year life to its expected salvage vald $125.000. The new machine would require and tion of $100,000 to working capital. In each you Machine X's life, the company would increase tax receipts by $100,000. The company has an is cost of capital and pays taxes at a 215 rate Identify the incremental cash flows from investing In Machine X b. Calculate the investment's net present value c. Calculate the investment's internal rate of an CIRR) d. Should the company purchase Machine X2 Why why not? 15. Organizing cash flows, NPV, IRR) This pellen follows Problem 13. It is now five years later. The company did buy Machine A, but just this chine B came on the market: Machine B could be per chased to replace Machine A. If acquired. Machine would cost $80,000 and would be deprecated for to purposes using the straight-line method over timated five-year life to its expected salg af $20,000. Machine B would also require SU working capital but would save an additional per year in pre-tax operating costs Machine A vage value remains $20,000, but it could be soldandy Adjusting the cost of capital for risk) A company ha 135 cost of capital is evaluating four indepen best polential capital budgeting proposals with the being borecasted intemal rates of return for $40,000 b. Calculate the project's internal rate of a. Calculate the project's presenta c Should the firm accept or reject the project d. What is the value added to the limit ding to Machine cap ving this proposed investment? 13 Organiring cash flows, NPV, IRR) AGO evaluating the purchase of Machine A. The two or why not? chine would cost $120,000 and would be de for tax purposes using the straight-line med ant estimated ten-year life to its expected value of $20,000. The new machine would require addition of $30,000 to working capital in each yes of Machine A's life, the company would reduce pre-tax costs by $40,000. The company has a 12 of capital and pays taxes at a 2176 rate. a. Identify the incremental cash flows from mig in Machine A. b. Calculate the investment's net present value Calculate the investment's internal rate of dum (IRR) d. Should the company purchase Machine A? Who why not? 14. (Organizing cash flow, NPV, IRR) Acos evaluating the purchase of Machine X to pro product quality. The new machine would con $1,000,000 and would be depreciated for tax purposes using the straight-line method over an estimated $125,000. The new machine would require an add ly the incremental cash flows from convert Ce this investment's net present value NPV) Cate this investment's internal rate of retum should the company convert to Machine B? Why Organizing cash flows, NPV, IRR) This problem w Pmblem 14. it is now four years later. The un did buy Machine X, but just today Machine ople Machine X. If acquired, Machine Y would Yaame on the market Machine Y could be purchased cost and would be depreciated for tax par Ane using the straight-line method over an esti med her life to its expected salvage value of SILOOL Machine Y would require $160,000 of work napral but would add an additional $300,000 per min $12000, but it could be sold today for your to pre-tax receipts. Machine X's salvage value re SIMO Identify the incremental cash flows from convert ing to Machine y & Calculate this investment's net present value (NPV) calculate this investment's internal rate of return GORRI or why not? d. Should the company convert to Machine Y? Why (Adjusting the cost of capital for risk) A company with a 13% cost of capital is evaluating four indepen- dient potential capital budgeting proposals with the following forecasted internal rates of return IRR) and betas: seven-year life to its expected salvage value of tion of $100.000 to working capital. In each year of Machine X's life, the company would increase its pre tax receipts by $400,000. The company has an 19 cost of capital and pays taxes at a 219 rate. a. Identify the incremental cash flows from investing in Machine X b. Calculate the investment's net present value (NPV) c Calculate the investment's internal rate of retum (IRR). d. Should the company purchase Machine X? Why ar why not? 15. (Organizing cash flows, NPV, IRR) This problem follows Problem 13. It is now five years later. The company did buy Machine A, but just this week M chine B came on the market: Machine B could be pur chased to replace Machine A. If acquired, Machine would cost $80,000 and would be depreciated for tax purposes using the straight-line method over an e timated five-year life to its expected salvage value of $20,000. Machine B would also require $30,000 of working capital but would save an additional $20,000 per year in pre-tax operating costs. Machine Assal vage value remains $20,000, but it could be sold today for $10,000 te IRRA the proposed ? of why not? Calculate the proper represent value Calculate the proces intemal rate of tim. Should their accept or reject the project? What is the value added to the firm fit acts evaluating the purchase of Machine A The new me Organizing cash flows, NIV, IRRI A company chine would cost $120,000 and would be deprecated for tax purposes using the straight-line method over an estimated Den er lite to its expected salvage value of $20,000. The new machine would require an addition of $10,000 to working capital In each yek of Machine A's life, the mpany would reduce its pre-tax costs by $10.000. The company has a 12 cost Lay the incremental cash flows from convert aluate this investment's net present value ( NPV case this investment's internal rate of retur Shad the company convert to Machine B? Why narizing cash flows, NPV, IRR) This problem As Problem 14. It is now four years later. The many did buy Machine X, but just today Machine Emple Machine X. If acquired, Machine Y would Yome on the market Machine Y could be purchased and $750,000 and would be depreciated for tax pur using the straight-line method over an est mated three-year life to its expected salvage value of SSC Machine Ywould require $160,000 of work in capital but would add an additional $300,000 per to prax receipts. Machine X's salvage value te mais $125.000, but it could be sold today for SAM Identify the incremental cash flows from convert mg to Machine y why not? Claslate this investment's net present value (NPV) Calculate this investments internal rate of return 4. Should the company convert to Machine Y? Why (TRR or why not? Adjusting the cost of capital for risk) A company with a 13% cost of capital is evaluating four indepen dent potential capital budgeting proposals with the iollowing forecasted internal rates of return TRRS) and betas: of capital and pays taxes at a 215 rate. 2. Identify the incremental cash flows from investing in Machine A b. Calculate the investment's net present value (NPV) c. Calculate the investments internal rate of retum (IRR) a should the company purchase Machine A? Why or 14. (Organizing cash flows, NPV, IRR) A company is evaluating the purchase of Machine X to improve product quality. The new machine would cost $1,000,000 and would be depreciated for tax purposes using the straight-line method over an estimated seven-year life to its expected salvage value of $125,000. The new machine would require an addi- tion of $100,000 to working capital. In each year of Machine X's life, the company would increase its pre tax receipts by $400,000. The company has an 11% cost of capital and pays taxes at a 21% rate. a. Identify the incremental cash flows from investing in Machine X b. Calculate the investment's net present value (NPV). c Calculate the investment's internal rate of retum (IRR) dShould the company purchase Machine X? Why or why not? 5. Organizing cash flows, NPV, IRR) This problem follows Problem 13. It is now five years later. The company did buy Machine A, but just this week Ma chine B came on the market Machine B could be pur chased to replace Machine A. If acquired, Machine B would cost $80,000 and would be depreciated for tax purposes using the straight-line method over an timated five-year life to its expected salvage value of $20,000, Machine B would also require 531,000 of working capital but would save an additional $22.000 per year in pre-tax operating costs. Machine A's sal vage value remains $20,000, but it could be sold today for $40,000 d. Why or why not? F. (Organizing cash flows, NPV, IRR) This problem follows Problem 13. It is now five years later. The company did buy Machine A, but just this week Ma- chine B came on the market; Machine B could be pur- chased to replace Machine A. If acquired, Machine B would cost $80,000 and would be depreciated for tax purposes using the straight-line method over an es- timated five-year life to its expected salvage value of $20,000. Machine B would also require $30,000 of working capital but would save an additional $20,000 per year in pre-tax operating costs. Machine A's sal- vage value remains $20,000, but it could be sold today for $40,000. a. Identify the incremental cash flows from convert- ing to Machine B. b. Calculate this investment's net present value (NPV). Calculate this investment's internal rate of return (IRR). The risk- d. Should the company convert to Machine B? Why or why not? \ This problem a. C. this proposed investment? d. What is the value added to the firm if it accepts 13. (Organizing cash flows, NPV, IRR) A company is evaluating the purchase of Machine A. The new ma- chine would cost $120,000 and would be depreciated for tax purposes using the straight-line method over an estimated ten-year life to its expected salvage value of $20,000. The new machine would require an addition of $30,000 to working capital. In each year of Machine A's life, the company would reduce its pre-tax costs by $40,000. The company has a 12% cost of capital and pays taxes at a 21% rate. a. Identify the incremental cash flows from investing in Machine A. b. Calculate the investment's net present value (NPV). c. Calculate the investment's internal rate of return (IRR). d. Should the company purchase Machine A? Why or why not? . any is Machine V tal cash flows from convert Chestne present a NTV this stment's nemal rate of tum She the company convert to Machine B? Why dining cash flows NTV, IRR) This problem shohim 14. It is now four years later. The e did buy Machine X, but just today Machine Yon the market Machine Y could be purchased e Machine Xl acquired, Machine Y would SEU and would be depreciated for tax pur- in the strugght-line method over an est- the year life to its expected salvage value of SOS Machine Y would require S160.000 of work mal but would add an additional $300.000 per per op Machine X's salvage value 5125.000, but it could be sold today for Soy the incremental cash flows from convert to Machine y Citate this investment's net present value (NPV) calculate this investment's internal rate of return Sheld the company convert to Machine Y? Why Calculate the proces present Calculate the project's intematon Should the firm accept or the pe d. What is the value added to the form this proposed investment 13 Organizing cash flow, NPV, IRR) Norge chine would cost $120,000 and would be de evaluating the purchase of Machine The for tax purposessing the straight line an estimated ten-year life to po value of $20,000 The new machine would addition of $30,000 to working capital head of Machine A's life, the company w won pre-tex costs by 540.000. The company has of capital and pay taxes at a 215 rate 2. Identify the incremental cash flows from in Machine A b. Calculate the investment's net presenta Calculate the investments internal (IRR) Should the company purchase Machine Why why not? 14. Organizing cash flows, NPV, IRRI A.com evaluating the purchase of Machine X to product quality. The new machine would $1.000.000 and would be depreciated for the using the straight-line method over an et seven-year life to its expected salvage vald $125.000. The new machine would require and tion of $100,000 to working capital. In each you Machine X's life, the company would increase tax receipts by $100,000. The company has an is cost of capital and pays taxes at a 215 rate Identify the incremental cash flows from investing In Machine X b. Calculate the investment's net present value c. Calculate the investment's internal rate of an CIRR) d. Should the company purchase Machine X2 Why why not? 15. Organizing cash flows, NPV, IRR) This pellen follows Problem 13. It is now five years later. The company did buy Machine A, but just this chine B came on the market: Machine B could be per chased to replace Machine A. If acquired. Machine would cost $80,000 and would be deprecated for to purposes using the straight-line method over timated five-year life to its expected salg af $20,000. Machine B would also require SU working capital but would save an additional per year in pre-tax operating costs Machine A vage value remains $20,000, but it could be soldandy Adjusting the cost of capital for risk) A company ha 135 cost of capital is evaluating four indepen best polential capital budgeting proposals with the being borecasted intemal rates of return for $40,000 b. Calculate the project's internal rate of a. Calculate the project's presenta c Should the firm accept or reject the project d. What is the value added to the limit ding to Machine cap ving this proposed investment? 13 Organiring cash flows, NPV, IRR) AGO evaluating the purchase of Machine A. The two or why not? chine would cost $120,000 and would be de for tax purposes using the straight-line med ant estimated ten-year life to its expected value of $20,000. The new machine would require addition of $30,000 to working capital in each yes of Machine A's life, the company would reduce pre-tax costs by $40,000. The company has a 12 of capital and pays taxes at a 2176 rate. a. Identify the incremental cash flows from mig in Machine A. b. Calculate the investment's net present value Calculate the investment's internal rate of dum (IRR) d. Should the company purchase Machine A? Who why not? 14. (Organizing cash flow, NPV, IRR) Acos evaluating the purchase of Machine X to pro product quality. The new machine would con $1,000,000 and would be depreciated for tax purposes using the straight-line method over an estimated $125,000. The new machine would require an add ly the incremental cash flows from convert Ce this investment's net present value NPV) Cate this investment's internal rate of retum should the company convert to Machine B? Why Organizing cash flows, NPV, IRR) This problem w Pmblem 14. it is now four years later. The un did buy Machine X, but just today Machine ople Machine X. If acquired, Machine Y would Yaame on the market Machine Y could be purchased cost and would be depreciated for tax par Ane using the straight-line method over an esti med her life to its expected salvage value of SILOOL Machine Y would require $160,000 of work napral but would add an additional $300,000 per min $12000, but it could be sold today for your to pre-tax receipts. Machine X's salvage value re SIMO Identify the incremental cash flows from convert ing to Machine y & Calculate this investment's net present value (NPV) calculate this investment's internal rate of return GORRI or why not? d. Should the company convert to Machine Y? Why (Adjusting the cost of capital for risk) A company with a 13% cost of capital is evaluating four indepen- dient potential capital budgeting proposals with the following forecasted internal rates of return IRR) and betas: seven-year life to its expected salvage value of tion of $100.000 to working capital. In each year of Machine X's life, the company would increase its pre tax receipts by $400,000. The company has an 19 cost of capital and pays taxes at a 219 rate. a. Identify the incremental cash flows from investing in Machine X b. Calculate the investment's net present value (NPV) c Calculate the investment's internal rate of retum (IRR). d. Should the company purchase Machine X? Why ar why not? 15. (Organizing cash flows, NPV, IRR) This problem follows Problem 13. It is now five years later. The company did buy Machine A, but just this week M chine B came on the market: Machine B could be pur chased to replace Machine A. If acquired, Machine would cost $80,000 and would be depreciated for tax purposes using the straight-line method over an e timated five-year life to its expected salvage value of $20,000. Machine B would also require $30,000 of working capital but would save an additional $20,000 per year in pre-tax operating costs. Machine Assal vage value remains $20,000, but it could be sold today for $10,000 te IRRA the proposed ? of why not? Calculate the proper represent value Calculate the proces intemal rate of tim. Should their accept or reject the project? What is the value added to the firm fit acts evaluating the purchase of Machine A The new me Organizing cash flows, NIV, IRRI A company chine would cost $120,000 and would be deprecated for tax purposes using the straight-line method over an estimated Den er lite to its expected salvage value of $20,000. The new machine would require an addition of $10,000 to working capital In each yek of Machine A's life, the mpany would reduce its pre-tax costs by $10.000. The company has a 12 cost Lay the incremental cash flows from convert aluate this investment's net present value ( NPV case this investment's internal rate of retur Shad the company convert to Machine B? Why narizing cash flows, NPV, IRR) This problem As Problem 14. It is now four years later. The many did buy Machine X, but just today Machine Emple Machine X. If acquired, Machine Y would Yome on the market Machine Y could be purchased and $750,000 and would be depreciated for tax pur using the straight-line method over an est mated three-year life to its expected salvage value of SSC Machine Ywould require $160,000 of work in capital but would add an additional $300,000 per to prax receipts. Machine X's salvage value te mais $125.000, but it could be sold today for SAM Identify the incremental cash flows from convert mg to Machine y why not? Claslate this investment's net present value (NPV) Calculate this investments internal rate of return 4. Should the company convert to Machine Y? Why (TRR or why not? Adjusting the cost of capital for risk) A company with a 13% cost of capital is evaluating four indepen dent potential capital budgeting proposals with the iollowing forecasted internal rates of return TRRS) and betas: of capital and pays taxes at a 215 rate. 2. Identify the incremental cash flows from investing in Machine A b. Calculate the investment's net present value (NPV) c. Calculate the investments internal rate of retum (IRR) a should the company purchase Machine A? Why or 14. (Organizing cash flows, NPV, IRR) A company is evaluating the purchase of Machine X to improve product quality. The new machine would cost $1,000,000 and would be depreciated for tax purposes using the straight-line method over an estimated seven-year life to its expected salvage value of $125,000. The new machine would require an addi- tion of $100,000 to working capital. In each year of Machine X's life, the company would increase its pre tax receipts by $400,000. The company has an 11% cost of capital and pays taxes at a 21% rate. a. Identify the incremental cash flows from investing in Machine X b. Calculate the investment's net present value (NPV). c Calculate the investment's internal rate of retum (IRR) dShould the company purchase Machine X? Why or why not? 5. Organizing cash flows, NPV, IRR) This problem follows Problem 13. It is now five years later. The company did buy Machine A, but just this week Ma chine B came on the market Machine B could be pur chased to replace Machine A. If acquired, Machine B would cost $80,000 and would be depreciated for tax purposes using the straight-line method over an timated five-year life to its expected salvage value of $20,000, Machine B would also require 531,000 of working capital but would save an additional $22.000 per year in pre-tax operating costs. Machine A's sal vage value remains $20,000, but it could be sold today for $40,000 d. Why or why not? F. (Organizing cash flows, NPV, IRR) This problem follows Problem 13. It is now five years later. The company did buy Machine A, but just this week Ma- chine B came on the market; Machine B could be pur- chased to replace Machine A. If acquired, Machine B would cost $80,000 and would be depreciated for tax purposes using the straight-line method over an es- timated five-year life to its expected salvage value of $20,000. Machine B would also require $30,000 of working capital but would save an additional $20,000 per year in pre-tax operating costs. Machine A's sal- vage value remains $20,000, but it could be sold today for $40,000. a. Identify the incremental cash flows from convert- ing to Machine B. b. Calculate this investment's net present value (NPV). Calculate this investment's internal rate of return (IRR). The risk- d. Should the company convert to Machine B? Why or why not? \ This problem a. C. this proposed investment? d. What is the value added to the firm if it accepts 13. (Organizing cash flows, NPV, IRR) A company is evaluating the purchase of Machine A. The new ma- chine would cost $120,000 and would be depreciated for tax purposes using the straight-line method over an estimated ten-year life to its expected salvage value of $20,000. The new machine would require an addition of $30,000 to working capital. In each year of Machine A's life, the company would reduce its pre-tax costs by $40,000. The company has a 12% cost of capital and pays taxes at a 21% rate. a. Identify the incremental cash flows from investing in Machine A. b. Calculate the investment's net present value (NPV). c. Calculate the investment's internal rate of return (IRR). d. Should the company purchase Machine A? Why or why not? . any is