Question
In: Economics
Bailey, Inc., is considering buying a new gang punch that would allow them to produce circuit...
Bailey, Inc., is considering buying a new gang punch that would allow them to produce circuit boards more efficiently. The punch has a first cost of $70,000 and a useful life of 15 years. At the end of its useful life, the punch has no salvage value. Labor costs would increase $2,500 per year using the gang punch, but raw material costs would decrease $12,500 per year. MARR is 5%/year.
What is the internal rate of return? (round final answer to one decimal place)
***Please show using Excel in detail
Solutions
Expert Solution
Using IRR function in Excel
| Year | investment | Annual savings | Annual cost | Net Cash flow |
| 0 | -70000 | -70000 | ||
| 1 | 12500 | -2500 | 10000 | |
| 2 | 12500 | -2500 | 10000 | |
| 3 | 12500 | -2500 | 10000 | |
| 4 | 12500 | -2500 | 10000 | |
| 5 | 12500 | -2500 | 10000 | |
| 6 | 12500 | -2500 | 10000 | |
| 7 | 12500 | -2500 | 10000 | |
| 8 | 12500 | -2500 | 10000 | |
| 9 | 12500 | -2500 | 10000 | |
| 10 | 12500 | -2500 | 10000 | |
| 11 | 12500 | -2500 | 10000 | |
| 12 | 12500 | -2500 | 10000 | |
| 13 | 12500 | -2500 | 10000 | |
| 14 | 12500 | -2500 | 10000 | |
| 15 | 12500 | -2500 | 10000 | |
| IRR | 11.5% |
IRR = 11.5%
As IRR > MARR, this project is acceptable
Showing formula in Excel
| Year | investment | Annual savings | Annual cost | Net Cash flow |
| 0 | -70000 | =B2+C2+D2 | ||
| 1 | 12500 | -2500 | =B3+C3+D3 | |
| 2 | 12500 | -2500 | =B4+C4+D4 | |
| 3 | 12500 | -2500 | =B5+C5+D5 | |
| 4 | 12500 | -2500 | =B6+C6+D6 | |
| 5 | 12500 | -2500 | =B7+C7+D7 | |
| 6 | 12500 | -2500 | =B8+C8+D8 | |
| 7 | 12500 | -2500 | =B9+C9+D9 | |
| 8 | 12500 | -2500 | =B10+C10+D10 | |
| 9 | 12500 | -2500 | =B11+C11+D11 | |
| 10 | 12500 | -2500 | =B12+C12+D12 | |
| 11 | 12500 | -2500 | =B13+C13+D13 | |
| 12 | 12500 | -2500 | =B14+C14+D14 | |
| 13 | 12500 | -2500 | =B15+C15+D15 | |
| 14 | 12500 | -2500 | =B16+C16+D16 | |
| 15 | 12500 | -2500 | =B17+C17+D17 | |
| IRR | =IRR(E2:E17) |
Rahul Sunny answered 2 years agoRelated Solutions
Bailey, Inc., is considering buying a new gang punch that would allow them to produce circuit...
Bailey, Inc., is considering buying a new gang punch that would
allow them to produce circuit boards more efficiently. The punch
has a first cost of $100,000 and a useful life of 15 years. At the
end of its useful life, the punch has no salvage value. Annual
labor costs would increase $5,000 using the gang punch, but annual
raw material costs would decrease $9,000. MARR is 5.0
%/year.
What is the present worth of this investment?
Bailey, Inc., is considering buying a new gang punch that would allow them to produce circuit...
Bailey, Inc., is considering buying a new gang punch that would
allow them to produce circuit boards more efficiently. The punch
has a first cost of $110,000 and a useful life of 15 years. At the
end of its useful life, the punch has no salvage value. Annual
labor costs would increase $3,000 using the gang punch, but annual
raw material costs would decrease $12,000. MARR is 4.25
%/year. What is the present worth of this investment? What is the...
Bailey, Inc., is considering buying a new gang punch that would allow them to produce circuit...
Bailey, Inc., is considering buying a new gang punch that would
allow them to produce circuit boards more efficiently. The punch
has a first cost of $160,000 and a useful life of 15 years. At the
end of its useful life, the punch has no salvage value. Labor costs
would increase $5,500 per year using the gang punch, but raw
material costs would decrease $16,500 per year. MARR is
5%/year.
What is the internal rate of return of this investment?
Eggs Inc. is considering the purchase of new equipment that will allow them to collect a...
Eggs Inc. is considering the purchase of new equipment that will
allow them to collect a loose head feathers for sale. the equipment
will cost $465,000 it will be eligible for 100% bonus depreciation
the equipment can be sold for $69,000 at the end of the project in
five years sales would be $307,000 per year with annual fix cost of
$55,000 and variable cost equals 36% of sales the project would
require an investment of $41,000 in NWC that...
Caspian Sea Drinks is considering buying the J-Mix 2000. It will allow them to make and...
Caspian Sea Drinks is considering buying the J-Mix 2000. It will
allow them to make and sell more product. The machine cost $1.29
million and create incremental cash flows of $632,693.00 each year
for the next five years. The cost of capital is 11.03%. What is the
net present value of the J-Mix 2000?
Caspian Sea Drinks is considering buying the J-Mix 2000. It will
allow them to make and sell more product. The machine cost $1.56
million and create...
Caspian Sea Drinks is considering buying the J-Mix 2000. It will allow them to make and...
Caspian Sea Drinks is considering buying the J-Mix 2000. It will
allow them to make and sell more product. The machine cost $1.94
million and create incremental cash flows of $632,011.00 each year
for the next five years. The cost of capital is 11.32%. What is the
profitability index for the J-Mix 2000?
Caspian Sea Drinks is considering buying the J-Mix 2000. It will allow them to make and...
Caspian Sea Drinks is considering buying the J-Mix 2000. It will
allow them to make and sell more product. The machine cost $1.45
million and create incremental cash flows of $746,414.00 each year
for the next five years. The cost of capital is 11.26%. What is the
net present value of the J-Mix 2000?
Answer format: Currency: Round to: 2
decimal places.
Caspian Sea Drinks is considering buying the J-Mix 2000. It will allow them to make and...
Caspian Sea Drinks is considering buying the J-Mix 2000. It will
allow them to make and sell more product. The machine cost $1.95
million and create incremental cash flows of $547,959.00 each year
for the next five years. The cost of capital is 11.75%. What is the
internal rate of return for the J-Mix 2000?
Caspian Sea Drinks is considering buying the J-Mix 2000. It will allow them to make and...
Caspian Sea Drinks is
considering buying the J-Mix 2000. It will allow them to make and
sell more product. The machine cost $1.54 million and create
incremental cash flows of $437,699.00 each year for the next five
years. The cost of capital is 9.71%. What is the internal rate of
return for the J-Mix 2000?
Caspian Sea Drinks is considering buying the J-Mix 2000. It will allow them to make and...
Caspian Sea Drinks is considering buying the J-Mix 2000. It will
allow them to make and sell more product. The machine cost $1.58
million and create incremental cash flows of $623,441.00 each year
for the next five years. The cost of capital is 10.64%. What is the
profitability index for the J-Mix 2000?
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Here is an interaction in a tic-tac-toe game, with user input in bold: >> gm =...
- LINUX/UNIX Create a script named favcolor.sh. Take 2 parameters, 1. Username, 2. Favorite color. Print any...
- When the start button is pressed, the conveyor belt is working. Products on the tape are...
- song of myself by Walt Whitman summary of the poem in my own words or version
- write a c++ program . Ask the user to enter a number less than 100. Test...
- Please do answer all four questions 11. A local college hospitality restaurant has the best meals...
- Acme, LLC produces three models of paint sprayers. A limitation of only 2,000 machine hours available...
ADVERTISEMENT