Halcrow, Inc. hopes to replace an outdated tracking system currently installed on CNC machines. The challenger system has an initial cost of $70,000, an estimated annual operating cost of $20,000, a maximum useful life of 5 years, and a salvage value of $10,000 at any time. With an interest rate of 11% per year, determine the economic life of the service and the corresponding amount for year 6. a)-35,382.8 b.)-35,482.8 c.)-35,582.8 d.)-35,282.8

Halcrow, Inc. hopes to replace an outdated tracking system currently installed on CNC machines. The challenger system has an initial cost of $70,000, an estimated annual operating cost of $20,000, a maximum useful life of 5 years, and a salvage value of $10,000 at any time. With an interest rate of 11% per year, determine the economic life of the service and the corresponding amount for year 6. a)-35,382.8 b.)-35,482.8 c.)-35,582.8 d.)-35,282.8

Name: Halcrow, Inc. hopes to replace an outdated tracking system currently i
Uploaded: 2024-03-20T06:50:59.000Z
Channel: Bartleby
Description: Halcrow, Inc. hopes to replace an outdated tracking system currently installed on CNC machines. The challenger system has an initial cost of $70,000, an estimated annual operating cost of $20,000, a maximum useful life of 5 years, and a salvage value

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 17P

See similar textbooks

Similar questions

A piece of equipment has a first cost of $165,000, a maximum useful life of 7 years, and a market (salvage) value described by the relation S = 120,000 – 23.000k, where k is the number of years since it was purchased, The salvage value cannot go below zero. The AOC series is estimated using AOC = 60,000 + 12,000k. The interest rate is 13% per year. Determine the economic service life and the respective AW. The economic service life is 4 year(s) and the AW value is $ 100,000 a
A new equipment is being considered at a local company at a cost of $250,000. The operation and maintenance costs of this equipment are estimated to be about $25,000 per year. Salvage value is expected to be $50,000 at the end of its useful life. The life of this equipment is estimated to vary anywhere from 6 to 9 years with the associated probabilities as shown in the table below. If an interest rate of 8% is used, what is the expected EUAC for this equipment? Life, Years Probability 8 0.3 0.25 0.2 0.25
A certain power plant is considering two alternatives with regards to a hydraulic equipment which it needs. The following alternatives were considered. Equipment A Equipment B First Cost: P 120,000 P 136,000 Salvage Value: P 15,000 0 Life: 6 years 8 years Annual Maintenance: P 9,000 P 7,000 Compute the difference between the equivalent present worth of the two alternatives if interest rate is 7% compounded annually. Select one: a. P 26,410 b. P 30,108 c. P 28,312 d. P 24,895
XYZ is evaluating a project that would require the purchase of a piece of equipment for $580,000 today. During year 1, the project is expected to have relevant revenue of $756,000, relevant costs of $199,000, and relevant depreciation of $136,000. XYZ would need to borrow $580,000 today to pay for the equipment and would need to make an interest payment of $30,000 to the bank in 1 year. Relevant net income for the project in year 1 is expected to be $322,000. What is the tax rate expected to be in year 1? A rate equal to or greater than 19.95% but less than 24.42% A rate equal to or greater than 28.03% but less than 37.53% A rate equal to or greater than 37.53% but less than 51.10% A rate equal to or greater than 24.42% but less than 28.03% A rate less than 19.95% or a rate greater than 51.10%
Malone Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in cash flow of $24330. The equipment will have an initial cost of $154350 and have a 5-year life. The salvage value of the equipment is estimated to be $21260 Factors to use for n-5.1-8% (DO NOT USE ANY OTHER FACTORS OR EQUATIONS) Future Value of an Annuity of $1 5.8666 Future Value of $1 1,4693 3.9927 0.6806 Present Value of an Annuity of $1 Present Value of $1 If the hurdle rate is 8%, what is the approximate not present value? Ignore income taxes
XYZ is evaluating a project that would require the purchase of a piece of equipment for $440,000 today. During year 1, the project is expected to have relevant revenue of $786,000, relevant costs of $201,000, and relevant depreciation of $132,000. XYZ would need to borrow $440,000 today to pay for the equipment and would need to make an interest payment of $33,000 to the bank in 1 year. Relevant net income for the project in year 1 is expected to be $337,000. What is the tax rate expected to be in year 1? A rate equal to or greater than 21.96% but less than 26.61% A rate less than 21.96% or a rate greater than 46.34% A rate equal to or greater than 31.02% but less than 38.39% A rate equal to or greater than 38.39% but less than 46.34% A rate equal to or greater than 26.61% but less than 31.02%
A set of Wire Bond machine costs $500,000. This amount includes freight and installation charges estimated at 10% of the original price. If the machine shall be depreciated over a period of 10 years with a salvage value of $5,000, what is the book value at the end of 7 years using SOYDM?
Striped Potato is evaluating a project that would require the purchase of a piece of equipment for $365,000 today. During year 1, the project is expected to have relevant revenue of $216,000, relevant costs of $57,000, and relevant depreciation of $84,000. Striped Potato would need to borrow $365,000 today to pay for the equipment and would need to make an interest payment of $14,000 to the bank in 1 year. Relevant net income for the project in year 1 is expected to be $44,000. What is the tax rate expected to be in year 1?
A new robot has a first cost of $380,000, and an annual operating cost of $88,000 in years 1 and 2, increasing by $10000 per year thereafter. The salvage value of the system is $25,000 regardless of when the system is retired within its maximum useful life of 5 years. Using a MARR of 14% per year, determine the ESL and the respective AW value of the system ESL: a) 1 year b) 4 years c) 5 years d) 3 years AW value of system: a) $204,860 b) $336,284 c) $97,953 d) $496,200
Consider palletizer at a bottling plant that has a first cost of $134,338, has operating and maintenance costs of $17.980 per year, and an estimated net salvage value of $37,509 at the end of 30 years. Assume an interest rate of 8%. What is the future worth of this project? Enter your answer as follow: 123456.78
Commercial Hydronics is considering replacing one of its larger control devices. A new unit sells for $28,000 (delivered). An additional $1,000 will be needed to install the device. The new device has an estimated 17-year service life. The estimated salvage value at the end of 17 years will be $1,000. The new control device will be depreciated as a 7-year MACRS asset. The existing control device (original cost = $20,000) has been in use for 10 years, and it has been fully depreciated (that is, its book value equals zero). Its scrap value is estimated to be $1,500. The existing device could be used indefinitely, assuming the firm is willing to pay for its very high maintenance costs. The firm's marginal tax rate is 40 percent. The new control device requires lower maintenance costs and frees up personnel who normally would have to monitor the system. Estimated annual cash savings from the new device will be $5,000. The firm's cost of capital is 14 percent.Evaluate the relative merits of…
The first cost of a certain piece of equipment is 35,000 OMR. It will have an annual operating cost of 15,000 OMR and a 5,000 OMR salvage value (scrap value) after its 5-year life, at an interest rate of 10% per year. Find the capitalized cost of the equipment. a) 212,113.21 OMR b) 234,139.24 OMR c) 152,110.36 OMR d) 112,210.21 OMR