Compare the two scenarios for acquiring a machine for a project for 22 years expected operations,...

Compare the two scenarios for acquiring a machine for a project for 22 years expected operations, at a company with an internal rate of return of i = 16%. Using PW, find which scenario is better. Scenario 1. Buy an initial small machine at $13,000, it cost $2,400/year to run for the first 12 years, buy a second larger machine at $26,000 and run it for 10 years at a cost of $4,000/year. There is no salvage value at the end of service for either machine. Scenario 2. Buy a large machine for $36,000 and run it for 22 years at a cost of $1,000/year. At the end of the 22 years, the machine is assumed to have a salvage value of $5,000.

Solutions

Expert Solution

ekkarill92 answered 1 month ago

Next > < Previous

Related Solutions

22. A project will not produce any cash flows for two years. Starting in the third...

22. A project will not produce any cash flows for two years. Starting in the third year, it will produce annual cash flows of $11,900 a year for two years. The project initially costs $43,600. In Year 6, the project will be closed and as a result should produce a final cash inflow of $50,500. What is the net present value of this project if the required rate of return is 8.7 percent? $5,474.76 $3,935.56 $5,447.76 $7,465.95 $4,802.57

What is the EAC of two projects: project A, which costs $150 and is expected to last two years, and project B, which costs $190 and is expected to last three years?

Q2. What is the EAC of two projects: project A, which costs $150 and is expected to last two years, and project B, which costs $190 and is expected to last three years? The cost of capital is 12%. (1 mark) Answer: Q3. A company pays annual dividends of $10.40 with no possibility of it changing in the next several years. If the firm’s stock is currently selling at $80, what is the required rate of return? (1 mark)...

5. A project requires an investment of $100m in two years. It is expected to yield...

5. A project requires an investment of $100m in two years. It is expected to yield $25m after the third year, $25m after the fourth year; in the fifth year it will yield $7m, which will grow at 1% per year over the next five years. What is the project’s NPV at a cost of capital of 15%?

A stock is expected to grow at a rate of 22% for the next three years....

A stock is expected to grow at a rate of 22% for the next three years. A recent dividend paid was $1.35 per share. After three years, the stock is expected to grow at a constant rate of 12% per year. If the minimum acceptable rate of return is 14%, what is the current expected price? Show all work.

Davis Industries is considering two alternative machines. Machine A has an expected life of 4 years,...

Davis Industries is considering two alternative machines. Machine A has an expected life of 4 years, will cost $10 million, and will produce net cash flows of $3 million per year. Machine B has a life of 10 years, will cost $13 million, and will produce net cash flows of $2.5 million per year. Inflation in operation costs, machine costs is expected to be zero, and the company’s cost of capital is 10. Which machine should Davis Industries select?

Davis Industries is considering two alternative machines. Machine A has an expected life of 4 years,...

Consider the following two scenarios for the economy and the expected returns in each scenario for...

Consider the following two scenarios for the economy and the expected returns in each scenario for the market portfolio, an aggressive stock A, and a defensive stock D. Rate of Return Scenario Market Aggressive Stock A Defensive Stock D Bust –8 % –13 % –6 % Boom 26 35 19 Required: a. Find the beta of each stock. b. If each scenario is equally likely, find the expected rate of return on the market portfolio and on each stock. c....

onsider the following two scenarios for the economy and the expected returns in each scenario for...

onsider the following two scenarios for the economy and the expected returns in each scenario for the market portfolio, an aggressive stock A, and a defensive stock D. Rate of Return Scenario Market Aggressive Stock A Defensive Stock D Bust –7 % –10 % –5 % Boom 19 25 15 a. Find the beta of each stock. (Round your answers to 2 decimal places.) b. If each scenario is equally likely, find the expected rate of return on the market...

Consider the following two scenarios for the economy and the expected returns in each scenario for...

Consider the following two scenarios for the economy and the expected returns in each scenario for the market portfolio, an aggressive stock A, and a defensive stock D. Rate of Return Scenario Market Aggressive Stock A Defensive Stock D Bust –8 % –10 % –5 % Boom 30 40 22 Required: a. Find the beta of each stock. b. If each scenario is equally likely, find the expected rate of return on the market portfolio and on each stock. c....

Consider the following two scenarios for the economy and the expected returns in each scenario for...

Consider the following two scenarios for the economy and the expected returns in each scenario for the market portfolio, an aggressive stock A, and a defensive stock D. Rate of Return Scenario Market Aggressive Stock A Defensive Stock D Bust –6 % –12 % –4 % Boom 15 36 10 a. Find the beta of each stock. (Round your answers to 2 decimal places.) b. If each scenario is equally likely, find the expected rate of return on the market...

Subjects