Question
In: Finance
Debby’s Dance Studios is considering the purchase of new sound equipment that will enhance the popularity...
Debby’s Dance Studios is considering the purchase of new sound equipment that will enhance the popularity of its aerobics dancing. The equipment will cost $20,900. Debby is not sure how many members the new equipment will attract, but she estimates that her increased annual cash flows for each of the next five years will have the following probability distribution. Debby’s cost of capital is 15 percent. Probability Cash flow 0.1 $4,570 0.3 5,550 0.4 7,400 0.2 9,930 a. What is the expected cash flow? Expected cash flow $ b. What is the expected NPV? (Round "PV Factor" to 3 decimal places. Do not round intermediate calculations. Round the final answer to the nearest whole dollar.) NPV $ c. Should Debby buy the new equipment? Yes No
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Debby’s Dance Studios is considering the purchase of new sound equipment that will enhance the popularity...
Debby’s Dance Studios is considering the purchase of new sound
equipment that will enhance the popularity of its aerobics dancing.
The equipment will cost $24,400. Debby is not sure how many members
the new equipment will attract, but she estimates that her
increased annual cash flows for each of the next five years will
have the following probability distribution. Debby’s cost of
capital is 14 percent. Use Appendix D for an approximate answer but
calculate your final answers using the...
Debby’s Dance Studios is considering the purchase of new sound equipment that will enhance the popularity...
Debby’s Dance Studios is considering the purchase of new sound
equipment that will enhance the popularity of its aerobics dancing.
The equipment will cost $33,600. Debby is not sure how many members
the new equipment will attract, but she estimates that her
increased annual cash flows for each of the next five years will
have the following probability distribution. Debby’s cost of
capital is 11 percent. Use Appendix D for an approximate answer but
calculate your final answers using the...
Herrera Music is considering the sale of a new sound board used in recording studios. The new...
Herrera Music is considering the sale of a new sound board used
in recording studios. The new board would sell for
$25,500 and the company expects to sell 1,400 per
year. The company currently sells 1,900 units of its
existing model per year. If the new model is introduced,
sales of the existing model will fall to 1,720 units per
year. The old board retails for
$21,400. Variable costs are 55 percent of sales,
depreciation on the equipment to produce the new board will be...
Cusic Music Company is considering the sale of a new sound board used in recording studios....
Cusic Music Company is considering the sale of a new sound board
used in recording studios. The new board would sell for $24,300,
and the company expects to sell 1,600 per year. The company
currently sells 1,950 units of its existing model per year. If the
new model is introduced, sales of the existing model will fall to
1,620 units per year. The old board retails for $22,700. Variable
costs are 55 percent of sales, depreciation on the equipment to...
Cusic Music Company is considering the sale of a new sound board used in recording studios....
Cusic Music Company is considering the sale of a new sound board
used in recording studios. The new board would sell for $23,700,
and the company expects to sell 1,540 per year. The company
currently sells 1,890 units of its existing model per year. If the
new model is introduced, sales of the existing model will fall to
1,560 units per year. The old board retails for $22,100. Variable
costs are 55 percent of sales, depreciation on the equipment to...
Cusic Music Company is considering the sale of a new sound board used in recording studios....
Cusic Music Company is considering the sale of a new sound board
used in recording studios. The new board would sell for $24,600,
and the company expects to sell 1,630 per year. The company
currently sells 1,980 units of its existing model per year. If the
new model is introduced, sales of the existing model will fall to
1,650 units per year. The old board retails for $23,000. Variable
costs are 52 percent of sales, depreciation on the equipment to...
A company is considering purchasing new equipment. The purchase of the equipment is expected to...
A company is considering purchasing new equipment. The purchase
of the equipment is
expected to generate after tax
savings of $12,600 each year for 8 years. The company can
borrow money at 6%. Assume annual
compounding.
Determine the present value of
the future cash inflows.
Hint: the $12,600 are your annuity payments
HT Tool Co is considering the purchase of a new CNC milling machine to enhance the...
HT Tool Co is considering the purchase of a new CNC milling
machine to enhance the quality of its custom fabrication services.
This project is not expected to change sales, but should save the
firm in labor costs. The annual labor savings is expected to be
$74,350 (before tax) but the machine will use more electrical
power, which is expect to cost $2,400 each year. The machine costs
$145,000. It will require $21,000 in modifications to support the
needs of...
FITCO is considering the purchase of new equipment. The equipment costs $337000, and an additional $114000...
FITCO is considering the purchase of new equipment. The equipment
costs $337000, and an additional $114000 is needed to install it.
The equipment will be depreciated straight-line to zero over a
5-year life. The equipment will generate additional annual revenues
of $260000, and it will have annual cash operating expenses of
$85000. The equipment will be sold for $85000 after 5 years. An
inventory investment of $71000 is required during the life of the
investment. FITCO is in the 40...
FITCO is considering the purchase of new equipment. The equipment costs $354000, and an additional $104000...
FITCO is considering the purchase of new equipment. The
equipment costs $354000, and an additional $104000 is needed to
install it. The equipment will be depreciated straight-line to zero
over a 5-year life. The equipment will generate additional annual
revenues of $266000, and it will have annual cash operating
expenses of $82000. The equipment will be sold for $84000 after 5
years. An inventory investment of $71000 is required during the
life of the investment. FITCO is in the 40...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- A rescue helicopter lifts a 70.6-kg person straight up by means of a cable. The person...
- Dolomite, [CaMg(CO3)2] is found in a soil sample. A geochemist titrates 24.65 g of soil with...
- 4) Cost per equivalent unit of direct materials and conversion (4 marks) The cost per equivalent...
- We usually write numbers in decimal form (or base 10), meaning numbers are composed using 10...
- Consider a saturated solution of the salt MX3, which M is a metal cation with a...
- Energyshot is a new energy drink that is about to be introduced into the global market....
- Problem 1: During the month, EKM Enterprise purchased $100,000 in raw material on account, used $150,000...
ADVERTISEMENT