Question
In: Accounting
Net Present Value and Competing Projects For discount factors use Exhibit 12B.1 and Exhibit 12B.2. Spiro...
-
Net Present Value and Competing Projects
For discount factors use Exhibit 12B.1 and Exhibit 12B.2.
Spiro Hospital is investigating the possibility of investing in new dialysis equipment. Two local manufacturers of this equipment are being considered as sources of the equipment. After-tax cash inflows for the two competing projects are as follows:
Year Puro Equipment Briggs Equipment 1 $320,000 $120,000 2 280,000 120,000 3 240,000 320,000 4 160,000 400,000 5 120,000 440,000 Both projects require an initial investment of $560,000. In both cases, assume that the equipment has a life of 5 years with no salvage value.
Required:
Round present value calculations and your final answers to the nearest dollar.1. Assuming a discount rate of 10%, compute the net present value of each piece of equipment.
Puro equipment: $ Briggs equipment: $ 2. A third option has surfaced for equipment purchased from an out-of-state supplier. The cost is also $560,000, but this equipment will produce even cash flows over its 5-year life. What must the annual cash flow be for this equipment to be selected over the other two? Assume a 10% discount rate.
$ per year
Solutions
ekkarill92 answered 3 months agoRelated Solutions
Net Present Value and Competing Projects For discount factors use Exhibit 12B.1 and Exhibit 12B.2. Spiro...
Net Present Value and Competing Projects
For discount factors use Exhibit 12B.1 and Exhibit 12B.2.
Spiro Hospital is investigating the possibility of investing in
new dialysis equipment. Two local manufacturers of this equipment
are being considered as sources of the equipment. After-tax cash
inflows for the two competing projects are as follows:
Year
Puro Equipment
Briggs Equipment
1
$320,000
$120,000
2
280,000
120,000
3
240,000
320,000
4
160,000
400,000
5
120,000
440,000
Required:
Round present value calculations and your final...
Net Present Value and Competing Projects For discount factors use Exhibit 12B.1 and Exhibit 12B.2. Spiro...
Net Present Value and Competing Projects
For discount factors use Exhibit 12B.1 and Exhibit 12B.2.
Spiro Hospital is investigating the possibility of investing in
new dialysis equipment. Two local manufacturers of this equipment
are being considered as sources of the equipment. After-tax cash
inflows for the two competing projects are as follows:
Year
Puro Equipment
Briggs Equipment
1
$320,000
$120,000
2
280,000
120,000
3
240,000
320,000
4
160,000
400,000
5
120,000
440,000
Both projects require an initial investment of $560,000....
Net Present Value and Competing Projects For discount factors use Exhibit 12B.1 and Exhibit 12B.2. Spiro...
Net Present Value and Competing Projects For discount factors
use Exhibit 12B.1 and Exhibit 12B.2. Spiro Hospital is
investigating the possibility of investing in new dialysis
equipment. Two local manufacturers of this equipment are being
considered as sources of the equipment. After-tax cash inflows for
the two competing projects are as follows:
Year
Puro Equipment
Briggs Equipment
1
$320,000
$120,000
2
280,000
120,000
3
240,000
320,000
4
160,000
400,000
5
120,000
440,000
Both projects require an initial investment of $560,000....
Net Present Value and Competing Projects For discount factors use Exhibit 12B.1 and Exhibit 12B.2. Spiro...
Net Present Value and Competing Projects
For discount factors use Exhibit 12B.1 and Exhibit 12B.2.
Spiro Hospital is investigating the possibility of investing in
new dialysis equipment. Two local manufacturers of this equipment
are being considered as sources of the equipment. After-tax cash
inflows for the two competing projects are as follows:
Year
Puro Equipment
Briggs Equipment
1
$320,000
$120,000
2
280,000
120,000
3
240,000
320,000
4
160,000
400,000
5
120,000
440,000
Both projects require an initial investment of $560,000....
Net Present Value For discount factors use Exhibit 12B-1 and Exhibit 12B-2. Talmage Inc. has just...
Net Present Value
For discount factors use Exhibit 12B-1 and Exhibit 12B-2.
Talmage Inc. has just completed development of a new printer.
The new product is expected to produce annual revenues of
$2,700,000. Producing the printer requires an investment in new
equipment costing $2,880,000. The printer has a projected life
cycle of 5 years. After 5 years, the equipment can be sold for
$360,000. Working capital is also expected to decrease by $360,000,
which Talmage will recover by the end...
Net Present Value Use Exhibit 12B.1 and Exhibit 12B.2 to locate the present value of an...
Net Present Value Use Exhibit 12B.1 and Exhibit 12B.2 to locate
the present value of an annuity of $1, which is the amount to be
multiplied times the future annual cash flow amount.
Each of the following scenarios is independent. Assume that all
cash flows are after-tax cash flows.
Campbell Manufacturing is considering the purchase of a new
welding system. The cash benefits will be $480,000 per year. The
system costs $1,450,000 and will last 10 years.
Evee Cardenas is...
Net Present Value Use Exhibit 12B.1 and Exhibit 12B.2 to locate the present value of an...
Net Present Value Use Exhibit 12B.1 and Exhibit 12B.2 to locate
the present value of an annuity of $1, which is the amount to be
multiplied times the future annual cash flow amount.
Each of the following scenarios is independent. Assume that all
cash flows are after-tax cash flows.
Campbell Manufacturing is considering the purchase of a new
welding system. The cash benefits will be $480,000 per year. The
system costs $2,750,000 and will last 10 years.
Evee Cardenas is...
Net Present Value Use Exhibit 12B.1 and Exhibit 12B.2 to locate the present value of an...
Net Present Value
Use Exhibit 12B.1 and Exhibit 12B.2 to locate the present value
of an annuity of $1, which is the amount to be multiplied times the
future annual cash flow amount.
Each of the following scenarios is independent. Assume that all
cash flows are after-tax cash flows.
Campbell Manufacturing is considering the purchase of a new
welding system. The cash benefits will be $480,000 per year. The
system costs $2,150,000 and will last 10 years.
Evee Cardenas is...
Net Present Value Use Exhibit 12B.1 and Exhibit 12B.2 to locate the present value of an...
Net Present Value
Use Exhibit 12B.1 and Exhibit 12B.2 to locate the present value
of an annuity of $1, which is the amount to be multiplied times the
future annual cash flow amount.
Each of the following scenarios is independent. Assume that all
cash flows are after-tax cash flows.
Campbell Manufacturing is considering the purchase of a new
welding system. The cash benefits will be $480,000 per year. The
system costs $2,950,000 and will last 10 years.
Evee Cardenas is...
Net Present Value Use Exhibit 12B.1 and Exhibit 12B.2 to locate the present value of an...
Net Present Value
Use Exhibit 12B.1 and Exhibit 12B.2 to locate the present value
of an annuity of $1, which is the amount to be multiplied times the
future annual cash flow amount.
Each of the following scenarios is independent. Assume that all
cash flows are after-tax cash flows.
Campbell Manufacturing is considering the purchase of a new
welding system. The cash benefits will be $480,000 per year. The
system costs $2,850,000 and will last 10 years.
Evee Cardenas is...
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