Kolby’s Korndogs is looking at a new sausage system with an installed cost of $655,000. This cost will be depreciated straight-line to zero over the project’s five-year life, at the end of which the sausage system can be scrapped for $107,000. The sausage system will save the firm $195,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $53,000.

What is the aftertax salvage value of the equipment?

Aftertax salvage value $ What is the annual operating cash flow?

OCF $ If the tax rate is 34 percent and the discount rate is 8 percent, what is the NPV of this project?

1. A new operating system for an existing machine is expected to cost $680,000 and have a useful life of six years. The system yields an incremental after-tax income of $155,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $26,000.
2. A machine costs $530,000, has a $24,200 salvage value, is expected to last eight years, and will generate an after-tax income of $76,000 per year after straight-line depreciation.

Assume the company requires a 10% rate of return on its investments. Compute the net present value of each potential investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

A new operating system for an existing machine is expected to cost $680,000 and have a useful life of six years. The system yields an incremental after-tax income of $155,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $26,000. (Round your answers to the nearest whole dollar.)

A machine costs $530,000, has a $24,200 salvage value, is expected to last eight years, and will generate an after-tax income of $76,000 per year after straight-line depreciation. (Round your answers to the nearest whole dollar.)

What is the NPV for the following project if its cost of capital is 15 percent and its initial after tax cost is $5,000,000 and it is expected to provide after-tax operating cash inflows of $2,000,000 in year 1, $2,000,000 in year 2, $2,000,000 in year 3 and $1,410,000 in year 4?

a. 1,700,000

b. 372622

c.-137,053

d. none of the above

You are planning to buy a new car. The cost of the car is $50,000. You have been offered two payment plans:

• A 10 percent discount on the sales price of the car, followed by 60 monthly payments financed at 9 percent per year.

• No discount on the sales price of the car, followed by 60 monthly payments financed at 2 percent per year.

If you believe your annual cost of capital is 9 percent, which payment plan is a better deal? Assume all payments occur at the end of the month.

Can you demonstrate these in EXCEL?

1. A new operating system for an existing machine is expected to cost $760,000 and have a useful life of six years. The system yields an incremental after-tax income of $265,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $25,400.
2. A machine costs $420,000, has a $35,900 salvage value, is expected to last eight years, and will generate an after-tax income of $68,000 per year after straight-line depreciation.

Assume the company requires a 10% rate of return on its investments. Compute the net present value of each potential investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

Complete this question by entering your answers in the tabs below.

• Required A
• Required B

A new operating system for an existing machine is expected to cost $760,000 and have a useful life of six years. The system yields an incremental after-tax income of $265,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $25,400. (Round your answers to the nearest whole dollar.)

• Complete this question by entering your answers in the tabs below.

• Required A
• Required B

• A machine costs $420,000, has a $35,900 salvage value, is expected to last eight years, and will generate an after-tax income of $68,000 per year after straight-line depreciation. (Round your answers to the nearest whole dollar.)

  	Cash Flow Select Chart Amount x PV Factor = Present Value Annual cash flow = $0 Residual value = 0 Net present value

Acme Tools is considering the purchase of a new machine. The total cost of the new machine is $48,000 and it has a 9-year service life with no salvage value at the end of nine years. The annual cash inflow will be 16% of the cost of the machine. If the appropriate cost of capital is 6.0 percent, what is the discounted payback period?
A. less than 8.0 years
B. more than 8.0 years but less than 8.3 years
C. more than 8.3 years but less than 8.6 years
D. more than 8.6 years but less than 8.9 years
E. more than 8.9 years

A firm is evaluating an investment proposal which has an initial investment of $23,500, a cash inflow in year 1 that is presently valued at $9,000, a cash inflow in year 2 that is presently valued at $7,500. a cash inflow in year 3 that is presently valued at $6,000 and a cash inflow in year 4 that is presently valued at $5,500. The appropriate cost of capital is 5.0 percent. The net present value of the investment is:
A. less than $100
B. more than $100 but less than $1,600
C. more than $1,600 but less than $3,100
D. more than $3,100 but less than $4,600
E. more than $4,600

Cost of Units Completed and in Process

The charges to Work in Process—Assembly Department for a period, together with information concerning production, are as follows. All direct materials are placed in process at the beginning of production.

a. Based on the above data, determine the different costs listed below.

Briefly describe the purpose of an Independent Technical Assessment and an Independent Cost Estimate.

1. A new operating system for an existing machine is expected to cost $760,000 and have a useful life of six years. The system yields an incremental after-tax income of $265,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $25,400.
2. A machine costs $420,000, has a $35,900 salvage value, is expected to last eight years, and will generate an after-tax income of $68,000 per year after straight-line depreciation.

Assume the company requires a 10% rate of return on its investments. Compute the net present value of each potential investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided)

Complete this question by entering your answers in the tabs below.

• Required A
• Required B

A new operating system for an existing machine is expected to cost $760,000 and have a useful life of six years. The system yields an incremental after-tax income of $265,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $25,400. (Round your answers to the nearest whole dollar.)

Complete this question by entering your answers in the tabs below.

• Required A
• Required B

A machine costs $420,000, has a $35,900 salvage value, is expected to last eight years, and will generate an after-tax income of $68,000 per year after straight-line depreciation. (Round your answers to the nearest whole dollar.)