Question

In: Accounting

Joanette, Inc., is considering the purchase of a machine that would cost $600,000 and would last...

Joanette, Inc., is considering the purchase of a machine that would cost $600,000 and would last for 6 years, at the end of which, the machine would have a salvage value of $50,000. The machine would reduce labor and other costs by $110,000 per year. Additional working capital of $4,000 would be needed immediately, all of which would be recovered at the end of 6 years. The company requires a minimum pretax return of 10% on all investment projects. (Ignore income taxes.)

Click here to view Exhibit 13B-1 and Exhibit 13B-2 to determine the appropriate discount factor(s) using the tables provided.

Required:

Determine the net present value of the project. (Negative amount should be indicated by a minus sign. Round your intermediate calculations and final answer to the nearest whole dollar amount.)

Solutions

Expert Solution

Statement showing calculation of net present value of the proposed project
Particulars Year cashflows Dis, Fcat.@10% PV Amount
Cash out flow 0           6,00,000 1             6,00,000
Working capital 0                4,000 1                  4,000
            6,04,000
Cash in flow 1--6           1,10,000 4.3553             4,79,079
Salvage value 6th              50,000 0.5645                28,224
Working capital Recover 6th                4,000 0.5645                  2,258
PV of cash inflows             5,09,560
Net Present Value of the project               -94,440

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

Parrish, Inc. is considering the purchase of a machine that would cost $240,000 and would last...
Parrish, Inc. is considering the purchase of a machine that would cost $240,000 and would last for 5 years, at the end of which, the machine would have a salvage value of $48,000. The machine would reduce labor and other costs by $62,000 per year. Additional working capital of $7,000 would be needed immediately, all of which would be recovered at the end of 5 years. The company’s discount rate is 17% Compute the net present value of the proposed...
Janes, Inc. is considering the purchase of a machine that would cost $620,000 and would last...
Janes, Inc. is considering the purchase of a machine that would cost $620,000 and would last for 10 years, at the end of which, the machine would have a salvage value of $62,000. The machine would reduce labor and other costs by $122,000 per year. Additional working capital of $8,000 would be needed immediately, all of which would be recovered at the end of 10 years. The company requires a minimum pretax return of 16% on all investment projects. (Ignore...
Clairmont Corporation is considering the purchase of a machine that would cost $140,000 and would last...
Clairmont Corporation is considering the purchase of a machine that would cost $140,000 and would last for 5 years. At the end of 5 years, the machine would have a salvage value of $18,000. By reducing labor and other operating costs, the machine would provide annual cost savings of $30,000. The company requires a minimum pretax return of 7% on all investment projects. (Ignore income taxes in this problem.)
management is considering the purchase of a machine that would cost $360,000, would last for 7...
management is considering the purchase of a machine that would cost $360,000, would last for 7 years, and would have no salvage value. The machine would reduce labor and other costs by $78,000 per year. The company requires a minimum pretax return of 11% on all investment projects. The net present value of the proposed project is what?
Almendarez Corporation is considering the purchase of a machine that would cost $170,000 and would last...
Almendarez Corporation is considering the purchase of a machine that would cost $170,000 and would last for 5 years. At the end of 5 years, the machine would have a salvage value of $19,000. By reducing labor and other operating costs, the machine would provide annual cost savings of $41,000. The company requires a minimum pretax return of 11% on all investment projects. (Ignore income taxes.) Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount...
Quinn Industries is considering the purchase of a machine that would cost $400,000 and would last...
Quinn Industries is considering the purchase of a machine that would cost $400,000 and would last for 8 years. At the end of 8 years, the machine would have a salvage value of $95,000. The machine would reduce labor and other costs by $82,000 per year. The company requires a minimum pretax return of 11% on all investment projects. (Ignore income taxes.) Required: Provide your Excel input and the final net present value amount you calculated. Input the required variables...
Quinn Industries is considering the purchase of a machine that would cost $380,000 and would last...
Quinn Industries is considering the purchase of a machine that would cost $380,000 and would last for 9 years. At the end of 9 years, the machine would have a salvage value of $95,500. The machine would reduce labor and other costs by $76,000 per year. The company requires a minimum pretax return of 14% on all investment projects. (Ignore income taxes.) Required: Provide your Excel input and the final net present value amount you calculated. Required: Input the required...
Quinn Industries is considering the purchase of a machine that would cost $380,000 and would last...
Quinn Industries is considering the purchase of a machine that would cost $380,000 and would last for 9 years. At the end of 9 years, the machine would have a salvage value of $93,000. The machine would reduce labor and other costs by $73,000 per year. The company requires a minimum pretax return of 16% on all investment projects. (Ignore income taxes.) Required: Provide your Excel input and the final net present value amount you calculated. (If a variable is...
For example, Adelphi, Inc., is considering the purchase of a machine that would cost $370,000 now,...
For example, Adelphi, Inc., is considering the purchase of a machine that would cost $370,000 now, and would last for 8 years. At the end of 8 years, the machine would have a salvage (disposal) value of $50,000. The machine would reduce labor and other costs by $60,000 per year. All cost savings are assumed to occur at the end of each year. Additional working capital of $5,000 would be needed immediately. All of this working capital would be recovered...
Curtis industries is considering the purchase of a new machine. It will cost $80,000, last for...
Curtis industries is considering the purchase of a new machine. It will cost $80,000, last for 8 years, and have a residual value of $10,000. If purchased, the machine is expected to increase cash inflows by $80,000 per 8 years, with $64,000 per year for 8 years in additional cash outlays required to operate the machine. The company uses the straight-line method of depreciation, and desires a 12% minimum rate of return. The present value factors of $1 due eight...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT