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In: Accounting
Given the following information, calculate the Net Present Value for a capital budget proposal? Show your...
Given the following information, calculate the Net Present Value for a capital budget proposal? Show your work. Machine Cost: $6,000,000 Salvage Value: $50,000 Setup Costs: $45,000 Training Costs: $25,000 Annual maintenance costs: $45,000 Anticipated annual savings: $560,000 Annual labor savings: $25,000 Expected useful life in years: 12 Overhaul costs in year 4: $50,000 Annual operating costs: $25,000 Hurdle rate: 8%
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Expert Solution
| NPV | |||
| Initial Investment | |||
| Machine Cost | $6,000,000.00 | ||
| Setup Cost | $45,000.00 | ||
| Training Cost | $25,000.00 | ||
| Initial Investment | $6,070,000.00 | ||
| Anticipated annual savings | $560,000.00 | ||
| Annual labor savings | $25,000.00 | ||
| Less: | |||
| Annual maintenance costs | -$45,000.00 | ||
| Annual operating costs | -$25,000.00 | ||
| Net Annual Savings | $515,000.00 | ||
| Year | Cash Flow | PV @ 8% | PV |
| 0 | -$6,070,000.00 | 1.0000 | -$6,070,000.00 |
| 1 | $515,000.00 | 0.9259 | $476,851.85 |
| 2 | $515,000.00 | 0.8573 | $441,529.49 |
| 3 | $515,000.00 | 0.7938 | $408,823.60 |
| 4 | $465,000.00 | 0.7350 | $341,788.88 |
| 5 | $515,000.00 | 0.6806 | $350,500.35 |
| 6 | $515,000.00 | 0.6302 | $324,537.36 |
| 7 | $515,000.00 | 0.5835 | $300,497.55 |
| 8 | $515,000.00 | 0.5403 | $278,238.48 |
| 9 | $515,000.00 | 0.5002 | $257,628.22 |
| 10 | $515,000.00 | 0.4632 | $238,544.65 |
| 11 | $515,000.00 | 0.4289 | $220,874.67 |
| 12 | $565,000.00 | 0.3971 | $224,369.27 |
| NPV | -$2,205,815.63 | ||
| Year 4 Cash flow = $515000 - 50000 = $465000 | |||
| Year 12 Cash flow = $515000 + 50000 = $565000 |
ekkarill92 answered 2 years agoRelated Solutions
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Index for a capital budget proposal. Show your work. Machine Cost:
$6,000,000 Salvage Value: $50,000 Setup Costs: $45,000 Training
Costs: $25,000 Annual maintenance costs: $45,000 Anticipated annual
savings: $560,000 Annual labor savings: $25,000 Expected useful
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(CF
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(CF Subscript
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$311,000
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Project C
Project D
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$500,000
$170,000
$950,000
$80,000
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Cash inflows
1
$4,000
$100,000
$20,000
$230,000
$ 0
2
4,000
120,000
19,000
230,000
0
3
4,000
140,000
18,000
230,000
0
4
4,000
160,000
17,000
230,000
20,000
5
4,000...
Net present value. Independent projects Using a 14% cost of capital, calculate the net present value...
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capital, calculate the net present value for each of the
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Project A
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Project C
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$80,000
Year
Cash inflows
1
$4,000
$100,000
$20,000
$230,000
$ 0
2
4,000
120,000
19,000
230,000
0
3
4,000
140,000
18,000
230,000
0
4
4,000
160,000
17,000
230,000
20,000
5
4,000...
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(CF 0CF0)
negative $−$1149
Year
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Cash inflows
(CF Subscript tCFt)
in thousands
1
$8080
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$130
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$189
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$280
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$102
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(t)
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(CF Subscript tCFt)
in thousands
1
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2
$130
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$312
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$376
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Please show all work and what inputs would be in a financial
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