The blazer corporation is considering investing in a new piece of equipment that will enable them to
Question:
The blazer corporation is considering investing in a new piece of equipment that will enable them to produce a new product for a new market. Using the information provided, calculate the specified items and answer these questions:
1. What are the payback period, initial ROI, and net present value of this project?
2. Would you recommend investing in this project? What facts or factors went into your decision and why?
3. If you compare this project to another potential project with an NPV of $18,000 and 14%, which project would you invest in?
4. Now, think about risk management; what uncertainties about the future might make you feel about going ahead with this project? Why?
Cost of equipment $75,250.00
Installation cost $2,450.00
Annual maintenance cost(yearly cost) $$1,200.00
Estimated life of the equipment 5 years
Estimated Net income from sales of product the
machine makes
Dollars Present Value
Year 1 $14,000.00 $13,565.89
Year 2 $23,000.00 $21,595.76
Year 3 $27,500.00 $25,020.36
Year 4 $32,500.00 $28,652.64
Year 5 $9,000.00 $7,688.54
Total $106,000.00 $96,523.19
Blazer's weighted Average cost of capital 3.20%
Blazer's desired ROI on projects 200.00%
Annual Maintenance Contract Dollars Present Value
Year 1 0.00 0.00
Year 2 $1,200.00 $1,126.74
Year 3 $1,300.00 $1,182.78
Year 4 $1,400 $1,234.27
Year 5 $1,500.00 $1,281.42
Total $5,400 $4,825.21
On items, 2&4 please use essay or sentence form for answers, and for other, questions use an excel spreadsheet.
Statistics For Business And Economics
ISBN: 9780132745659
8th Edition
Authors: Paul Newbold, William Carlson, Betty Thorne