The following information is available concerning the purchase of a new piece of equipment: Initial investment...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
The following information is available concerning the purchase of a new piece of equipment: Initial investment Annual net cash inflows Working capital needed now Salvage value in 8 years Overhaul required in 5 years Cost of capital Life of equipment Income tax rate $240,000 $ 72,000 $ 36,000 $ 25,000 $ 43,000 9% 8 years 30% Assume the following regarding this potential investment: 1) The working capital needed now will be released at the end of the 8 years for investment elsewhere. 2) If the new equipment is purchased, a maintenance contract will need to be purchased for the first three years of ownership. The maintenance contract will cost $10,000 each year for the first three years. Calculate the net present value of the new piece of equipment. You will need to use the present value table factors posted in carmen to answer this question. To access these factors, click modules and then scroll to week 15. Click on the link labeled present value table factors. No credit will be given for this question using a means other than these posted table factors to answer this question. The following information is available concerning the purchase of a new piece of equipment: Initial investment Annual net cash inflows Working capital needed now Salvage value in 8 years Overhaul required in 5 years Cost of capital Life of equipment Income tax rate $240,000 $ 72,000 $ 36,000 $ 25,000 $ 43,000 9% 8 years 30% Assume the following regarding this potential investment: 1) The working capital needed now will be released at the end of the 8 years for investment elsewhere. 2) If the new equipment is purchased, a maintenance contract will need to be purchased for the first three years of ownership. The maintenance contract will cost $10,000 each year for the first three years. Calculate the net present value of the new piece of equipment. You will need to use the present value table factors posted in carmen to answer this question. To access these factors, click modules and then scroll to week 15. Click on the link labeled present value table factors. No credit will be given for this question using a means other than these posted table factors to answer this question.
Expert Answer:
Answer rating: 100% (QA)
Calculation of Net Present Value of the new piece of Equipment SNo Particulars Year 1 Year 2 Year ... View the full answer
Related Book For
Investment Analysis and Portfolio Management
ISBN: 978-0538482387
10th Edition
Authors: Frank K. Reilly, Keith C. Brown
Posted Date:
Students also viewed these accounting questions
-
ABC, Inc. purchased a small building by making payments of $5,000 at the beginning of each year for ten years. However, nine years passed before ABC made any payments. Use an interest rate of 8%...
-
XYZ Company is considering the purchase of a new machine. The machine will cost $200,000 and is expected to last 10 years. However, the machine will need maintenance costing $25,000 at the end of...
-
Riley wants to have $198,594 in her savings account in 4 years. Riley opened her savings account with a deposit of $17,000. Riley intends to make equal deposits into the savings account at the end of...
-
The hot dog cooker described in the chapter heats hot dogs by connecting them to 120 V household electricity. A typical hot dog has a mass of 60 g and a resistance of 150 N. How long will it take...
-
Mercy Hospital has the following balances on December 31, 2015, before any adjustments: accounts receivable = $104,000; allowance for uncollectible accounts = $3,600 (credit). Mercy estimates...
-
Beyond the examples of ethical issues mentioned in this chapter, list two more ethical issues related to the environment that you face on a regular basis.
-
Explain the importance of the idea of a "civilizing mission" to both people living under colonialism and people in the colonizing countries.
-
Daniels Consulting began operations and completed the following transactions during December 2016: Dec. 2 Stockholders contributed $20,000 cash in exchange for common stock. 2 Paid monthly office...
-
The figure below shows two lines of charge in cross- section coming out of the page. Each line of charge has a linear charge density of 8.00 nC/cm and they are separated by a distance d= 16.8 cm....
-
Design a clamper to perform the function indicated in Fig. 2.180. Silicon diodes 10 V 2.7 V vV Design -10 V
-
What is the key insight to costing for seasonal businesses? Group of answer choices Seasonal businesses should make sure the allocated overhead costs are higher for the non-peak period because the...
-
How do consumers use mobile?
-
What is the strategy behind using social media in an IMC campaign?
-
What is the strategy behind using alternative media in an IMC campaign?
-
What are the strategic uses of social media in an IMC campaign?
-
How has the Internet changed the way brands do business?
-
The Great Recession of 2007-08 occurred just as Knoop was completing his text. Describe this financial crisis and describe the effect that destabilized credit, mortgage, derivative, and insurance...
-
Given find the value of k. es 1 e kx dx = 1 4'
-
Peter and Andrea Mueller have built up their $600,000 investment portfolio over many years through regular purchases of mutual funds holding only U.S. securities. Each purchase was based on personal...
-
Consider the following information about two stocks (D and E) and two common risk factors (1 and 2): a. Assuming that the risk-free rate is 5.0%, calculate the levels of the factor risk premia that...
-
"When the yield curve is upward sloping, the fixed rate on a multiyear swap must be higher than the current level of LIBOR. With a downward-sloping yield curve, the opposite will occur." Explain what...
-
Consider the differential equation of motion for the free vibration of a damped single-degreeof-freedom system given by Show that Eq. (E.1) remains the same irrespective of the units used by...
-
Derive an expression for the time at which the response of a critically damped system will attain its maximum value. Also find the expression for the maximum response.
-
A shock absorber is to be designed to limit its overshoot to \(15 \%\) of its initial displacement when released. Find the damping ratio \(\zeta_{0}\) required. What will be the overshoot if...
Study smarter with the SolutionInn App