Question
In: Accounting
Given the following information, calculate the Payback for a capital budget proposal. Show your work. Machine...
Given the following information, calculate the Payback 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%
Solutions
Expert Solution
| 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 4 Cash flow = $515000 - 50000 = $465000 | ||
| Year 12 Cash flow = $515000 + 50000 = $565000 | ||
| Year | Cash Flow | Cumulative Cash Flow |
| 0 | -$6,070,000.00 | -$6,070,000.00 |
| 1 | $515,000.00 | -$5,555,000.00 |
| 2 | $515,000.00 | -$5,040,000.00 |
| 3 | $515,000.00 | -$4,525,000.00 |
| 4 | $465,000.00 | -$4,060,000.00 |
| 5 | $515,000.00 | -$3,545,000.00 |
| 6 | $515,000.00 | -$3,030,000.00 |
| 7 | $515,000.00 | -$2,515,000.00 |
| 8 | $515,000.00 | -$2,000,000.00 |
| 9 | $515,000.00 | -$1,485,000.00 |
| 10 | $515,000.00 | -$970,000.00 |
| 11 | $515,000.00 | -$455,000.00 |
| 12 | $565,000.00 | |
| Payback = 11 years + $455000/565000 | 11.81 | Years |
ekkarill92 answered 2 years agoRelated Solutions
Given the following information, calculate the Present Value Index for a capital budget proposal. Show your...
Given the following information, calculate the Present Value
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
life in years: 12 Overhaul costs in year 4: $50,000 Annual
operating costs: $25,000 Hurdle rate: 8%
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%
Using the following information calculate the following capital budget methods: 1. Payback 2. Accounting rate of...
Using the following information calculate the following capital
budget methods:
1. Payback
2. Accounting rate of Return
3. Net Present Value
4. Profitability Index
5.Internal Rate of Return
Cost of the Project: $750,000
Cash inflows:
Year 1 350,000
Year 2 325,000
Year 3 150,000
Year 4 180,000
The required rate of return for the investor is 8%
Given the following cash flows for a capital project, calculate its payback period and discounted payback...
Given the following cash flows for a capital project, calculate
its payback period and discounted payback period. The required rate
of return is 8 percent. Year 0 1 2 3 4 5 Cash Flows $-37500 $11250
$11250 $15000 $6000 $6000 The discounted payback period is 0.16
year longer than the payback period. 0.80 year longer than the
payback period. 1.27 years longer than the payback period. 1.85
years longer than the payback period.
Given the following cash flows for a capital project, calculate its payback period and discounted payback...
Given the following cash flows for a capital project, calculate
its payback period and discounted payback period. The required rate
of return is 8 percent.
Year
0
1
2
3
4
5
Cash Flows
$-56900
$13650
$18050
$25200
$10000
$5000
The discounted payback period is
Your company is considering three independent projects. Given the following cash flow information, calculate the payback...
Your company is considering three independent projects. Given
the following cash flow information, calculate the payback period
for each. If your company requires a three-year payback before an
investment can be accepted, which project(s) would be accepted?
Project D Project E Project F
Cost 205,000.00 179,000.00 110,000.00
Inflow year 1 53,000.00 51,000.00 25,000.00
Inflow year 2 50,000.00 87,000.00 55,000.00
Inflow year 3 48,000.00 41,000.00 21,000.00
Inflow year 4 30,000.00 52,000.00 9,000.00
Inflow year 5 24,000.00 40,000.00 35,000.00
Payback Period EXACT...
Calculate the GDP for the following two examples. Show your work. (1 point) Using the information...
Calculate the GDP for the following two examples. Show
your work.
(1 point) Using the information below,
calculate the nominal GDP.
Personal consumption
$300
New Building Construction
50
Increase in inventories
50
Equipment purchases by business
firms
35
Government purchases
125
Social Security payments to
households
50
Government welfare payments
30
Exports
60
Imports
100
(4 points) GDP is the sum of the market value
of all final goods and services produced in an
economy in a given year. In...
Given the following cash flows for a proposed capital investment project, calculate the payback period. Year...
Given the following cash flows for a proposed capital investment
project, calculate the payback period.
Year
Cash Flow
0
-$40,000
1
15,000
2
15,000
3
15,000
4
15,000
5
10,000
6
10,000
Question 4 options:
5.50 years
3.33 years
4.33 years
2.67 years
Calculate the payback period for projects X and Y. They both cost $100,000 (show your work) Year 0...
Calculate the payback period for projects X and
Y. They both cost
$100,000 (show your work)
Year 0 1 2 3
4
5
6
Project X $20m 30m
40m 20m 10m 10m
Project Y $40m 30m 30m
20m 10m 0
Given the following information about your firm’s capital structure, calculate your firm’s WACC (assume the corporate...
Given the following information about your firm’s capital
structure, calculate your firm’s WACC (assume the corporate tax
rate is 35%). Debt Number of bonds outstanding = 12,000 price per
bond = $1,165 par value per bond = $1,000 coupon rate = 6% (paid
annually) Years to maturity = 10 Common Stock Number of shares
outstanding = 1,000,000 Price per share = $25 Book value per share
= $15 Beta = 1.4 Risk free rate = 4.5% Market risk premium =...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Will iron(III) hydroxide precipitate from a pH = 1.00 solution with [Fe3+] = 1.0 x 10-5?...
- What do you believe happens during the final scene of the story between the brothers at....
- A 5.171 g sample of a solid, weak, monoprotic acid is used to make a 100.0...
- 1. Creep is one of deformation that occurred in concrete structure. Give one example that can...
- Why does a particular codon represent only one specific amino acid?
- Write a function template sort that takes two references to generic objects and switches them if...
- What 2 things happen to the melting point of a solid when an impurity is present?
ADVERTISEMENT