Question
In: Economics
Company XYZ is currently examining the possibility of buying a machine that will improve productivity. The...
Company XYZ is currently examining the possibility of buying a machine that will improve productivity. The machine will have an initial cost of $36792.09. The company expects to get benefits of $17,000 per year and the machine will cost $7,555 per year to operate and maintain. The expected useful life of this equipment is 11 years. At the end of the machine's useful life, the firm intends to sell the machine for $2,000. The interest rate is 11%. Compute the net present value of this machine.
Solutions
Rahul Sunny answered 4 months agoRelated Solutions
XYZ is a company located in Italy, the company manufactures machine parts. It is currently involved...
XYZ is a company located in Italy, the company manufactures
machine parts. It is currently involved in making a decision
concerning the acquisition of new machining tool. Two different
versions of the tool are available: X AND Y. The forecasted cash
flows of the two alternative are listed below; XYZ normally uses
payback with a 3-year criterion. NET CASH FLOWS ($000s) Tool X Year
0 -1000, Year 1 +400, Year 2 +600, Year 3 +187, Tool Y Year 0 -450,...
Company XYZ is considering investing in a new machine that will cost $15,000. The machine will...
Company XYZ is considering investing in a new machine that will
cost $15,000. The machine will allow the firm to generate sales of
$50,000 per year. The machine will have a life of 3 years. The
operating expenses of XYZ are projected to be 70% of total sales.
The machine will be depreciated on a straight-line basis to a zero
salvage value. The market value of the machine in three years is
estimated to be $5,000. The marginal tax rate...
Murray’s Machine Shop is considering a five year project to improve its production efficiency. Buying a...
Murray’s Machine Shop is considering a five year project to
improve its production efficiency. Buying a new machine press for
$850,000 is expected to result in annual pre-tax cost saving of
$310,000. No additional sales are expected from this project. The
machine press will be depreciated straight-line to zero over its
five year life. After that it is expected to be obsolete and
therefore worthless. The company will be able to reduce net working
capital (NWC) by $75,000 at the...
Massey Machine Shop is considering a four year project to improve its production efficiency. Buying a...
Massey Machine Shop is considering a four year project to
improve its production efficiency. Buying a new machine press for
$730,000 is estimated to result in $220,000 in annual pretax cost
savings. The press falls in the MACRS five year class, and it will
have a salvage value at the end of the project of $89,000. The
press also requires an initial investment in spare parts inventory
of $26,000, along with an additional $3,000 in inventory for each
succeeding year...
Massey Machine Shop is considering a four year project to improve its production efficiency. Buying a...
Massey Machine Shop is considering a four year project to
improve its production efficiency.
Buying a new machine press for $730,000 is estimated to result
in $220,000 in annual pretax
cost savings. The press falls in the MACRS five year class, and
it will have a salvage value
at the end of the project of $89,000. The press also requires an
initial investment in spare parts
inventory of $26,000, along with an additional $3,000 in
inventory for each succeeding year...
A company is considering buying an automatic machine for a certain process. The machine has an...
A company is considering buying an automatic machine for a
certain process. The machine has an initial cost of 23,000, a
residual value of 4,000 and a useful life of 10 years. The
production of this machine is 8 tons per hour. You need an operator
that makes $ 12.00 per hour. The annual cost of operation and
maintenance is 3,500
As a second alternative you can buy a small machine for 8,000
that has a residual value of 0...
A construction company plans to invest in new equipment to improve their productivity. The planned investment...
A construction company plans to invest in new equipment to
improve their productivity. The planned investment is $500,000 now
and $100,000 in year 1. The gross income for year 1 is
$175,000, year 2 is $300,000, and year 3 is $600,000. Taxes related
to the investment are $50,000 in year 1, $75,000 in year 2 and
$100,000 in year 3.
Determine:
The before tax rate of return for the investment
The after-tax rate of return for the investment
How does...
A construction company plans to invest in new equipment to improve their productivity. The planned investment...
A construction company plans to invest in new equipment to
improve their productivity. The planned investment is $500,000 now
and $100,000 in year 1. The gross income for year 1 is $175,000,
year 2 is $300,000, and year 3 is $600,000. Taxes related to the
investment are $50,000 in year 1, $75,000 in year 2 and $100,000 in
year 3.
Determine:
a) The before tax rate of return for the investment
b) The after-tax rate of return for the investment...
The XYZ Company purchased a specialized machine three years ago for $25,000. This machine is not...
The XYZ Company purchased a specialized machine three years ago
for $25,000. This machine is not readily resalable and thus assumed
to have a salvage value of $0. Operating costs are expected to be
$10,000 next year and to increase by $800 per year thereafter (the
‘G’ term). The company has an opportunity to replace this machine
with another specialized one for a cost of $12,000. This machine
also has no salvage value, a useful life of 10 years, and...
CMS Machine Shop is considering a four-year project to improve its production efficiency. Buying a new...
CMS Machine Shop is considering a four-year project to improve
its production efficiency. Buying a new machine press for $545,000
is estimated to result in $97,000 in annual pretax cost savings.
The press falls in the MACRS five-year class, and it will have a
salvage value of $70,000. The press also requires an initial
working capital of $21,000, along with an additional $3,000 in
working capital for each succeeding years of project. The tax rate
is 34%, and the company's...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- The Facts: Ann and Bill decided to start a coffee shop. They agreed Bill would provide...
- MARGI sells different types of wine. Customers place orders to the most popular “Summer Wine” at...
- A firm's bonds have a maturity of 8 years with a $1,000 face value, have an...
- Naive reasoning suggests that a string theory vacuum with cosmological constant Lambda1 is always unstable as...
- I. Design and code a class Rectangle that has the following properties: Two private members double...
- A bond has a $1,000 par value, 10 years to maturity, and an 8% annual coupon...
- The following are the monthly rates of return for Madison Cookies and for Sophie Electric during...
ADVERTISEMENT