The consulting company Moore Wilson & Miller (MW M) is in that never-ending budgeting phase of...

  
 
 
 

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The consulting company Moore Wilson & Miller (MW M) is in that never-ending budgeting phase of the year. Realizing that they couldn't defer a technology update any longer, the managers plan to replace all of the computers in the office. The old computers will be sold for market value. When the new computers reach the end of their useful lives, they will be sold as well. The cost of the combined new computers and annual software updates should be more than covered by efficiency gains and increased volume of sales -at least that's what the managers are expecting. Information related to this investment is as follows. Cost of new computers Salvage value of new computers at end of useful life Life of new computers (years) $25,500 $2.500 5 $1,800 $2,900 Annual operating cash inflows from efficiency gains and increased sales due to new computers $9,900 5% Market value of old computers today (equal to book value) Annual software update cost (necessary for all computers, old or new) Minimum required rate of return Applicable tax rate Determine if this investment makes sound financial sense for this company by completing the following. Click here to view the factor table 24% Calculate the NPV of this investment. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answer to 2 decimal places e.g. 5,125.36. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) NPV $ 6771.41 Based on this NPV amount, is the IRR higher or lower than 5%? The IRR higher than 5% Save for Later (b) Calculate the IRR for this investment. (Round answer to 2 decimal places, e.g. 15.25%.) IRR % Attempts: 1 of 2 used Submit Answer Attamented Determine the simple payback period using (1) before-tax cash flows and (2) after-tax cash flows. (Round answers to 2 decimal places, eg. 15.25.) Simple payback period Save for Later Before-Tax Cash Flows After-Tax Cash Flows Attempts: 0 of 2 used Submit Answer (d) Determine the discounted payback period using after-tax cash flows. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answer to 2 decimal places e.g. 5,125.36.) Discounted payback period Save for Later Attempts: 0 of 2 used Submit Answer TABLE 7.1 Future Value of 1 (Future Value of a Single Sum) Future value of a single sum (FV) = Present value (1 + R) N (n) Periods 1 2% 1.02000 2 3 1.06121 1.07689 4 1.08243 1.10381 5 1.10408 21% 3% 4% 1.02500 1.03000 1.04000 1.04040 1.05063 1.06090 1.08160 1.09273 1.12486 1.12551 1.16986 1.13141 1.15927 1.21665 5% 6% 8% 9% 10% 11% 1.05000 1.06000 1.08000 1.09000 1.10000 1.11000 1.10250 1.12360 1.16640 1.18810 1.21000 1.23210 1.15763 1.19102 1.25971 1.29503 1.33100 1.36763 1.40493 1.21551 1.26248 1.36049 1.41158 1.46410 1.51807 1.57352 1.27628 1.33823 1.46933 1.53862 1.61051 1.68506 1.76234 12% 1.12000 15% (n) Periods 1.15000 1 1.25440 1.32250 2 1.52088 3 1.74901 4 2.01136 5 6 1.12616 7 1.15969 1.19405 1.26532 1.14869 1.18869 1.22987 1.31593 8 9 10 1.17166 1.21840 1.26677 1.36857 1.19509 1.24886 1.30477 1.42331 1.21899 1.28008 1.34392 1.48024 1.34010 1.40710 1.47746 1.55133 1.62889 1.41852 1.58687 1.67710 1.77156 1.87041 1.97382 1.50363 1.71382 1.82804 1.94872 2.07616 2.21068 1.59385 1.85093 1.99256 2.14359 2.30454 2.47596 1.68948 1.99900 2.17189 2.35795 2.55803 2.77308 1.79085 2.15892 2.36736 2.59374 2.83942 3.10585 2.31306 2.66002 3.05902 3.51788 4.04556 10 67621 8 9 11 22 12 13 14 15 1.24337 1.31209 1.38423 1.53945 1.71034 1.89830 2.33164 1.26824 1.34489 1.42576 1.60103 1.79586 2.01220 2.51817 1.29361 1.37851 1.46853 1.66507 1.88565 2.13293 2.71962 1.31948 1.41297 1.51259 1.73168 1.97993 2.26090 2.93719 1.34587 1.44830 1.55797 1.80094 2.07893 2.39656 3.17217 2.58043 2.85312 3.15176 3.47855 2.81267 3.13843 3.49845 3.89598 3.06581 3.45227 3.88328 4.36349 3.34173 3.79750 4.31044 4.88711 3.64248 4.17725 4.78459 5.47357 4.65239 11 5.35025 12 6.15279 13 7.07571 14 8.13706 15 16 1.27270 1 10151 1.60171 107200 210207 2.51025 2.12501 207021 150107 521000 612020 0.25762 16 (e) (f) Find the ARR. (Round answer to 1 decimal place, e.g. 15.2%.) ARR Save for Later % Attempts: 0 of 2 used Submit Answer Calculate the profitability index for this investment. (Round answer to 2 decimal places, e.g. 15.25.) Profitability index Save for Later Attempts: 0 of 2 used Submit Answer Microsoft Edge The consulting company Moore Wilson & Miller (MW M) is in that never-ending budgeting phase of the year. Realizing that they couldn't defer a technology update any longer, the managers plan to replace all of the computers in the office. The old computers will be sold for market value. When the new computers reach the end of their useful lives, they will be sold as well. The cost of the combined new computers and annual software updates should be more than covered by efficiency gains and increased volume of sales -at least that's what the managers are expecting. Information related to this investment is as follows. Cost of new computers Salvage value of new computers at end of useful life Life of new computers (years) $25,500 $2.500 5 $1,800 $2,900 Annual operating cash inflows from efficiency gains and increased sales due to new computers $9,900 5% Market value of old computers today (equal to book value) Annual software update cost (necessary for all computers, old or new) Minimum required rate of return Applicable tax rate Determine if this investment makes sound financial sense for this company by completing the following. Click here to view the factor table 24% Calculate the NPV of this investment. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answer to 2 decimal places e.g. 5,125.36. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) NPV $ 6771.41 Based on this NPV amount, is the IRR higher or lower than 5%? The IRR higher than 5% Save for Later (b) Calculate the IRR for this investment. (Round answer to 2 decimal places, e.g. 15.25%.) IRR % Attempts: 1 of 2 used Submit Answer Attamented Determine the simple payback period using (1) before-tax cash flows and (2) after-tax cash flows. (Round answers to 2 decimal places, eg. 15.25.) Simple payback period Save for Later Before-Tax Cash Flows After-Tax Cash Flows Attempts: 0 of 2 used Submit Answer (d) Determine the discounted payback period using after-tax cash flows. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answer to 2 decimal places e.g. 5,125.36.) Discounted payback period Save for Later Attempts: 0 of 2 used Submit Answer TABLE 7.1 Future Value of 1 (Future Value of a Single Sum) Future value of a single sum (FV) = Present value (1 + R) N (n) Periods 1 2% 1.02000 2 3 1.06121 1.07689 4 1.08243 1.10381 5 1.10408 21% 3% 4% 1.02500 1.03000 1.04000 1.04040 1.05063 1.06090 1.08160 1.09273 1.12486 1.12551 1.16986 1.13141 1.15927 1.21665 5% 6% 8% 9% 10% 11% 1.05000 1.06000 1.08000 1.09000 1.10000 1.11000 1.10250 1.12360 1.16640 1.18810 1.21000 1.23210 1.15763 1.19102 1.25971 1.29503 1.33100 1.36763 1.40493 1.21551 1.26248 1.36049 1.41158 1.46410 1.51807 1.57352 1.27628 1.33823 1.46933 1.53862 1.61051 1.68506 1.76234 12% 1.12000 15% (n) Periods 1.15000 1 1.25440 1.32250 2 1.52088 3 1.74901 4 2.01136 5 6 1.12616 7 1.15969 1.19405 1.26532 1.14869 1.18869 1.22987 1.31593 8 9 10 1.17166 1.21840 1.26677 1.36857 1.19509 1.24886 1.30477 1.42331 1.21899 1.28008 1.34392 1.48024 1.34010 1.40710 1.47746 1.55133 1.62889 1.41852 1.58687 1.67710 1.77156 1.87041 1.97382 1.50363 1.71382 1.82804 1.94872 2.07616 2.21068 1.59385 1.85093 1.99256 2.14359 2.30454 2.47596 1.68948 1.99900 2.17189 2.35795 2.55803 2.77308 1.79085 2.15892 2.36736 2.59374 2.83942 3.10585 2.31306 2.66002 3.05902 3.51788 4.04556 10 67621 8 9 11 22 12 13 14 15 1.24337 1.31209 1.38423 1.53945 1.71034 1.89830 2.33164 1.26824 1.34489 1.42576 1.60103 1.79586 2.01220 2.51817 1.29361 1.37851 1.46853 1.66507 1.88565 2.13293 2.71962 1.31948 1.41297 1.51259 1.73168 1.97993 2.26090 2.93719 1.34587 1.44830 1.55797 1.80094 2.07893 2.39656 3.17217 2.58043 2.85312 3.15176 3.47855 2.81267 3.13843 3.49845 3.89598 3.06581 3.45227 3.88328 4.36349 3.34173 3.79750 4.31044 4.88711 3.64248 4.17725 4.78459 5.47357 4.65239 11 5.35025 12 6.15279 13 7.07571 14 8.13706 15 16 1.27270 1 10151 1.60171 107200 210207 2.51025 2.12501 207021 150107 521000 612020 0.25762 16 (e) (f) Find the ARR. (Round answer to 1 decimal place, e.g. 15.2%.) ARR Save for Later % Attempts: 0 of 2 used Submit Answer Calculate the profitability index for this investment. (Round answer to 2 decimal places, e.g. 15.25.) Profitability index Save for Later Attempts: 0 of 2 used Submit Answer Microsoft Edge