Blooper Industries must replace its magnoosium purification system. Quick & Dirty Systems sells a relatively cheappurification system for $20 million. The system will last 5 years. Do-It-Right sells a sturdier but more expensive systemfor $21 million; it will last for 6 years. Both systems entail $1 million in operating costs; both will be depreciated straight-line to a final value of zero over their useful lives; neither will have any salvage value at the end of its life. The firm's taxrate is 30%, and the discount rate is 13%.a. What is the equivalent annual cost of investing in the cheap system?Note: Do not round intermediate calculations. Enter your answer as a positive value. Enter your answer inmillions rounded to 2 decimal places.b. What is the equivalent annual cost of investing in the more expensive system?Note: Do not round intermediate calculations. Enter your answer as a positive value. Enter your answer inmillions rounded to 2 decimal places.c. Which system should Blooper install?X Answer is complete but not entirely correct.$$a. Equivalent annual costb. Equivalent annual costc. Which system should Blooper install?4.454.04Do-It-Rightmillionsmillions

Equivalent annual cost refers to the cost on an annual basis for asset at the time it is owned,…

Answered: Blooper Industries must replace its…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 10P

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Blooper Industries must replace its magnoosium purification system. Quick & Dirty Systems sells a relatively cheap purification system for $15 million. The system will last 5 years. Do-It-Right sells a sturdier but more expensive system for $20 million; it will last for 10 years. Both systems entail $1 million in operating costs; both will be depreciated straight-line to a final value of zero over their useful lives; neither will have any salvage value at the end of its life. The firm's tax rate is 30%, and the discount rate is 13%. a. What is the equivalent annual cost of investing in the cheap system? Note: Do not round intermediate calculations. Enter your answer as a positive value. Enter your answer in millions rounded to 2 decimal places. b. What is the equivalent annual cost of investing in the more expensive system? Note: Do not round intermediate calculations. Enter your answer as a positive value. Enter your answer in millions rounded to 2 decimal places. c. Which system…
Blooper Industries must replace its magnoosium purification system. Quick & Dirty Systems sells a relatively cheap purification system for $16 million. The system will last 4 years. Do-It-Right sells a sturdier but more expensive system for $18 million; it will last for 5 years. Both systems entail $3 million in operating costs; both will be depreciated straight-line to a final value of zero over their useful lives; neither will have any salvage value at the end of its life. The firm’s tax rate is 30%, and the discount rate is 12%. Either machine will be replaced at the end of its life. a. What is the equivalent annual cost of investing in the cheap system? (Do not round intermediate calculations. Enter your answer as a positive value. Enter your answer in millions rounded to 2 decimal places.) b. What is the equivalent annual cost of investing in the more expensive system? (Do not round intermediate calculations. Enter your answer as a positive value. Enter your answer in…
Blooper Industries must replace its magnoosium purification system. Quick & Dirty Systems sells a relatively cheap purification system for $10 million. The system will last 5 years. Do-It-Right sells a sturdier but more expensive system for $16 million; it will last for 8 years. Both systems entail $1 million in operating costs; both will be depreciated straight-line to a final value of zero over their useful lives; neither will have any salvage value at the end of its life. The firm's tax rate is 30%, and the discount rate is 15%. Either machine will be replaced at the end of its life. a. What is the equivalent annual cost of investing in the cheap system? (Do not round intermediate calculations. Enter your answer as a positive value. Enter your answer in millions rounded to 3 decimal places.) Equivalent annual cost millions b. What is the equivalent annual cost of investing in the more expensive system? (Do not round intermediate calculations. Enter your answer as a positive value.…
Blooper Industries must replace its magnoosium purification system. Quick & Dirty Systems sells a relatively cheap purification system for $12 million. The system will last 4 years. Do-It-Right sells a sturdier but more expensive system for $20 million; it will last for 8 years. Both systems entail $2 million in operating costs; both will be depreciated straight-line to a final value of zero over their useful lives; neither will have any salvage value at the end of its life. The firm's tax rate is 30%, and the discount rate is 12%. a. What is the equivalent annual cost of investing in the cheap system? Note: Do not round intermediate calculations. Enter your answer as a positive value. Enter your answer in millions rounded to 2 decimal places. b. What is the equivalent annual cost of investing in the more expensive system? Note: Do not round intermediate calculations. Enter your answer as a positive value. Enter your answer in millions rounded to 2 decimal places. c. Which system…
Blooper Industries must replace its magnoosium purification system. Quick & Dirty Systems sells a relatively cheap purification system for $10 million. The system will last 5 years. Do-It-Right sells a sturdier but more expensive system for $12 million, it will last for 8years. Both systems entail $1 million in operating costs; both will be depreciated in an asset class that has a CCA rate of 30%; neither will have any salvage value at the end of its life. The firm's tax rate is 35%, and the discount rate is 12%. Which system should blooper install? The answer should be in excel with details, please?
Blooper Industries must replace its magnoosium purification system. Quick & Dirty Systems sells a relatively cheap purification system for $10 million. The system will last 5 years. Do-It-Right sells a sturdier but more expensive system for $12 million; it will last for 8 years. Both systems entail $1 million in operating costs; both will be depreciated straight-line to a final value of zero over their useful lives; neither will have any salvage value at the end of its life. The firm's tax rate is 30%, and the discount rate is 14%. a. What is the equivalent annual cost of investing in the cheap system? Note: Do not round intermediate calculations. Enter your answer as a positive value. Enter your answer in millions rounded to 2 decimal places. b. What is the equivalent annual cost of investing in the more expensive system? Note: Do not round intermediate calculations. Enter your answer as a positive value. Enter your answer in millions rounded to 2 decimal places. c. Which system…
Sumami Ink considers replacing its old machine. The old machine’s current market value is $2 million and its current book value is $1 million. If not sold, it will have a market value at the end of 5 years of $200,000 and a book value of zero. A replacement new machine costs $3 million, and at the end of the five years it will have a market value of $500,000, and will be fully depreciated by the straight‐line method. Assume that the asset class will be closed, and the corporate tax rate is 34%. What is the total investment cash flow in year 0 and the total investment cash flow by the end of year 5? Multiple Choice -$1000K & $198K respectively. -$3000k & $500k respectively. -$1000K & $300K respectively. -$1,340k & $300k respectively. -$1,340k & $198k respectively. -$5000k & $700k respectively.
Green Company can purchase a new machine for $100,000. The new machine will have a five-year life with no salvage value. The machine should reduce labor costs by $22,000 per year. Green Company would have to scrap its existing machine, receiving no cash. The existing machine has a book value of $15,000. Should Green purchase the new machine? Yes, as the decreased labor costs are greater than the cost of the new machine. No, as the decreased labor costs are less than the cost of the new machine plus the book value of the existing machine. No, as the decreased labor costs are less than the cost of the new machine. Yes, as the decreased labor costs are greater than the cost of the new machine plus the book value of the existing machine.
X Company is considering the purchase of a new machine. The machine would reduce the amount of part-time labor, at a cost savings of $16,900 per year. In addition, the machine would enable the company to increase production and sales of one of its products by 2,300 units; contribution margin of this product is $5.50 per unit. The machine would cost $150,000, last for four years, and have zero salvage value at the end of its life. 8. Assuming a discount rate of 7%, what is the net present value of buying the new machine? Submit Answer Tries 0/4 9. If the new machine will last for six years instead of four, what is the approximate internal rate of return of buying it? [enter your answer as .XX, so 1% would be .01]
Denny Corporation is considering replacing a technologically obsolete machine with a new state-of-the-art numerically controlled machine. The new machine would cost $290,000 and have a tenericals controll nortunately, the new machine would have no salvage value. The new machine would cost $48,000 per year to operate and maintain but would save $89,000 per year in labor and other costs. The old machine can be sold now for scrap for $29,000. The simple rate of return on the new machine is closest to (Ignore income taxes.):
Trillian Ltd. is considering replacing a piece of old machinery. The machine has a book value of $80,000 and a remaining useful life of 3 years and no salvage value. A new, more efficient machine is available at a cost of $300,000 that will have a 3-year useful life with no salvage value. The new machine will lower annual variable production costs from $520,000 to $410,000 for each of the next three years. What will the net savings be over the next three years if Trillian buys the new machinery?
Benny Co Electric Enterprise, with a MARR of 10%, plans to install one of 3 rewinding machines (X, Y or Z) that provide equivalent service/same benefits). Doing nothing is not an option. The machines have zero(0) salvage values at the end of their lives. The machines are expected to have the same annual operating and maintenance (O&M) costs, although their initial costs and service lives differ, as follows:

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