| Your company is deciding whether to invest in a new machine. The new machine will increase cash flow by $306,000 per year. You believe the technology used in the machine has a 10-year life; in other words, no matter when you purchase the machine, it will be obsolete 10 years from today. The machine is currently priced at $1,710,000. The cost of the machine will decline by $110,000 per year until it reaches $1,160,000, where it will remain. |
| If your required return is 12 percent, calculate the NPV if you purchase the machine today. What is the NPV if you wait to purchase the macine until each year indicated below? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) |
In: Finance
Maroon Limited is deciding whether to invest in a new machine. The new machine will increase cash flow by $250,000 per year. You believe the technology used in the machine has a 10-year life; in other words, no matter when you purchase the machine, it will be obsolete 10 years from today. The machine is currently priced at $1,700,000. The cost of the machine will decline by $165,000 per year until it reaches $1,040,000, where it will remain.
If your required return is 8 percent, which year should Maroon Limited purchase the machine?
What is the NPV if you purchase the machine in the optimal year?
In: Finance
A major car manufacturer wants to test a new engine to determine if it meets new air pollution standards. The mean emission, mu of all engines of this type must be approximately 20 parts per million of carbon. If it is higher than that, they will have to redesign parts of the engine. Ten engines are manufactured for testing purposes and the emission level of each is determined. Based on data collected over the years from a variety of engines, it seems reasonable to assume that emission levels of all new engines are roughly Normally distributed with sigma = 3. If the mean emission of all engines is, in fact, mu=22, what is the power in general and what is power of this test? (Assume 5% significance level)
In: Statistics and Probability
In: Statistics and Probability
You are the new liaison for a new health insurance company. You think this will take off and benefit people who need these services. Create a handout with information that will attract people to you health insurance.
In: Operations Management
Fed Ex has been experimenting with a new logistical service. With this new contract, there is a 30% chance that freight in shipping containers will be damaged by the contractor, resulting in a $10,000 loss of total value, on average. Otherwise, the full value of the cargo is realized, $100,000.
If Fed Ex is offered an insurance policy to protect them from loss at $4,000 per container, would should they buy the insurance?
None of these
yes, because the firm is risk averse yes, because they save $1000 of the expected loss
no, because the firm is better off gambling with the freight loss
no, because they can take the risk and be better off
In: Economics
How the elements of a new venture team effects the efficiency of your new business and identify the common errors made in putting togthera new venture team (8)
In: Finance
| Your company is deciding whether to invest in a new machine. The new machine will increase cash flow by $316,000 per year. You believe the technology used in the machine has a 10-year life; in other words, no matter when you purchase the machine, it will be obsolete 10 years from today. The machine is currently priced at $1,690,000. The cost of the machine will decline by $106,000 per year until it reaches $1,160,000, where it will remain. |
| If your required return is 13 percent, calculate the NPV if you purchase the machine today. What is the NPV if you wait to purchase the macine until each year indicated below? |
In: Finance
|
Your company is deciding whether to invest in a new machine. The new machine will increase cash flow by $250,000 per year. You believe the technology used in the machine has a 10-year life; in other words, no matter when you purchase the machine, it will be obsolete 10 years from today. The machine is currently priced at $1,600,000. The cost of the machine will decline by $190,000 per year until it reaches $840,000, where it will remain. |
|
If your required return is 16 percent, which year should you purchase the machine? |
| What is the NPV if you purchase the machine in the optimal year? |
In: Finance
One of the big Coffee chain is planning to open a new store in New York
Opening a new store - Whether to go ahead or not. Below are some details
Cost of Capital = 6.15%
Current Stores - 27000
Set up Costs: The cost of setting up a new store is $5 million right now, and this cost is expected to grow at the inflation rate in future years. The cost is depreciable, straight line, over 10 years down to a salvage value, which is 30% of the initial investment.
Note: Cash flow from investing & Financing activities are ignored
Cash flow from operations for 27000 stores = 4.174 Billion
Revenue Estimate in millions from new store opening
| Year1 | Revenues |
| 1 | 0 |
| 2 | 5 |
| 3 | 7 |
| 4 | 10 |
| 5 | 12 |
| 6 | 12 |
| 7 | 15 |
| 8 | 15 |
| 9 | 15 |
| 10 | 15 |
G&A allocation will be 5% of the revenues each year
operating expenses are assumed to be 30% of the revenues
¨The income from the investment will be taxed at marginal tax rate of 32%.
Calculate the Return on Capital (ROC) and Return on Invested Capital (ROIC) for the New Store
Estimate Accounting Earnings on Project
In: Finance