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In: Finance
"You are considering the purchase of a new machine for a project. Details of this potential...
"You are considering the purchase of a new machine for a project. Details of this potential purchase are provided below. -The project life is 3 years. The machine costs $207,000. * You will pay cash for half of this machine immediately, and will borrow the remaining half at 9.3% annual rate compounded annually over 3 years. * The machine will be depreciated using a seven year MACRS approach. Annual O&M costs (expenses) of the machine are $26,000. Annual labor savings (revenues) are $100,000. Salvage value at the end of year 3 will be $50,000. Working capital requirement is initially $34,000. Any investment in working capital will be recovered at the end of the project. Assume an income tax rate and gains tax rate of 34%. Find the NPW of this project based on a MARR of 16.5%."
Solutions
jeff jeffy answered 2 years agoRelated Solutions
"You are considering the purchase of a new machine for a project. Details of this potential...
"You are considering the purchase of a new machine for a
project. Details of this potential purchase are provided below.
-The project life is 3 years. The machine costs $206,000. * You
will pay cash for half of this machine immediately, and will borrow
the remaining half at 5.6% annual rate compounded annually over 3
years. * The machine will be depreciated using a seven year MACRS
approach. Annual O&M costs (expenses) of the machine are
$22,000. Annual labor savings...
"You are considering the purchase of a new machine for a project. Details of this potential...
"You are considering the purchase of a new machine for a
project. Details of this potential purchase are provided
below.
-The project life is 3 years.
The machine costs $238,000.
* You will pay cash for half of this machine immediately, and will
borrow the remaining half at 9.3% annual rate compounded annually
over 3 years.
* The machine will be depreciated using a seven year MACRS
approach.
Annual O&M costs (expenses) of the machine are $18,000.
Annual labor savings...
"You are considering the purchase of a new machine for a project. Details of this potential...
"You are considering the purchase of a new machine for a
project. Details of this potential purchase are provided
below.
-The project life is 3 years.
The machine costs $210,000.
* You will pay cash for half of this machine immediately, and will
borrow the remaining half at 9.4% annual rate compounded annually
over 3 years.
* The machine will be depreciated using a seven year MACRS
approach.
Annual O&M costs (expenses) of the machine are $25,000.
Annual labor savings...
"You are considering the purchase of a new machine for a project. Details of this potential...
"You are considering the purchase of a new machine for a
project. Details of this potential purchase are provided
below.
-The project life is 3 years.
The machine costs $210,000.
* You will pay cash for half of this machine immediately, and will
borrow the remaining half at 9.4% annual rate compounded annually
over 3 years.
* The machine will be depreciated using a seven year MACRS
approach.
Annual O&M costs (expenses) of the machine are $25,000.
Annual labor savings...
(New project analysis) Garcia's Truckin' Inc. is considering the purchase of a new production machine for...
(New project analysis) Garcia's
Truckin' Inc. is considering the purchase of a new production
machine for $200,000. The purchase of this machine will result in
an increase in earnings before interest and taxes of $50,000 per
year. To operate the machine properly, workers would have to go
through a brief training session that would cost $5,000 after
taxes. It would cost $5,000 to install the machine properly. Also,
because this machine is extremely efficient, its purchase would
necessitate an increase...
?(New project analysis?)? Garcia's Truckin' Inc. is considering the purchase of a new production machine for...
?(New project analysis?)? Garcia's Truckin' Inc. is considering
the purchase of a new production machine for ?$250,000. The
purchase of this machine will result in an increase in earnings
before interest and taxes of ?$40,000 per year. To operate the
machine? properly, workers would have to go through a brief
training session that would cost ?$4,000 after taxes. It would cost
?$8,000 to install the machine properly.? Also, because this
machine is extremely? efficient, its purchase would necessitate an
increase...
(New project analysis) Garcia's Truckin' Inc. is considering the purchase of a new production machine for...
(New project analysis) Garcia's Truckin' Inc. is considering
the purchase of a new production machine for $200,000.The purchase
of this machine will result in an increase in earnings before
interest and taxes of $50,000 per year. To operate the machine
properly, workers would have to go through a brief training session
that would cost $7,000 after taxes. It would cost $4,000 to
install the machine properly. Also, because this machine is
extremelyefficient, its purchase would necessitate an increase in
inventory...
Company A is considering the purchase of a new machine. The new machine is not expected...
Company A is
considering the purchase of a new machine.
The new machine is not
expected to affect revenues, but pretax operating expenses will be
reduced by $12,700 per year for 10 years.
The old machine is now
5 years old, with 10 years of its scheduled life remaining. It was
originally purchased for $61,500 and has been depreciated by the
straight-line method.
The old machine
can be sold for $20,700 today
The new machine
will be depreciated by the...
A firm is considering the purchase of a new machine at a price of $108,000. The machine...
A firm is considering the purchase of a new machine at a price
of $108,000. The machine falls into the three-year MACRS
class. If the new machine is acquired, the firm's investment in net
working capital will immediately increase by $15,000 and then
remain at that level throughout the life of the project. At the end
of 3 years, the new machine can be sold for $5,000. Earnings before
depreciation, interest and taxes (EBDIT) are expected to be as
follows with...
A company is considering the purchase of a new machine. The machine will cost $14,000, will...
A company is considering the purchase of a new machine. The
machine will cost $14,000, will result in an annual savings of
$1750 with a salvage value of $500 at the end of 12 years. For a
MARR of 7%, what is the benefit to cost ratio?
Question options:
0.63
8.25
1.36
1.01
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