Answer:
In order to find the rate of return we will equate the pw to zero.
pw = implementation cost + aoc(p/a,i,n) + increase in aoc(p/g,i,n) + savings(p/a,i,n) + salvage value(p/f,i,n)
0 = -300,000 - 40,000(p/a,i,10) - 5,000(p/g,i,10) + 100,000(p/a,i,10) + 50,000(p/f,i,10)
300,000 + 40,000(p/a,i,10) + 5,000(p/g,i,10) = 100,000(p/a,i,10) + 50,000(p/f,i,10)
solving via trial and error we get that i is between 7% and 8% as at 7% , the pw is above zero and at 8% it is below zero and solving further we get that i is 7.66%
so the rate of return is 7.66%
3) A Firm is considering adopting a new technology to improve its production process. The implementation...
3) A Firm is considering adopting a new technology to improve its production process. The implementation cost would be $ 300,000. The initial annual operating cost of $ 40,000 will increase by $5,000 per year after the first year. The new technology would produce yearly savings of $ 100,000. The time span before the technology becomes obsolete and needs to be replaced is estimated in 10 years. At the time of replacement, the salvage value of the obsolete equipment is...
a firm is considering adopting a new technology to improve its production process. the implementation cost would be $300,000. The initial annual operating cost of $40,000 will increase by $5,000 per year after the first year. The new technology would produce yearly savings of $100,000. The time span before the technology becomes obsolete and needs to be replaced is estimated in 10 years. at the time of replacements, the salvage value of the obsolete equipment is estimated to be $...
1) (25 points) A firm is considering adopting a new pollution abatement technology. Assume that its current marginal abatement cost function with its existing technology is If it adopts the new technology, its new marginal abatement cost function will be MACN-4-0.5E a) Imagine the government imposes a $2 tax on emissions. What level of emissions does the firm choose if it does not adopt the new technology? How much does the firm pay in taxes? What are the firm's total...
Lakeside Inc. is considering replacing old production equipment
with state-of-the-art technology that will allow production cost
savings of $10,000 per month. The new equipment will have a
five-year life and cost $390,000, with an estimated salvage value
of $40,000. Lakeside’s cost of capital is 10%. Table 6-4 and Table
6-5. (Use appropriate factor(s) from the
tables provided. Round the PV factors to 4
decimals.)
Required:
Calculate the present value ratio of the new production equipment.
(Round your answer to 2...
CSM Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $405,000 is estimated to result in $149,000 in annual pretax cost savings. The press is eligible for 100 percent bonus depreciation and it will have a salvage value at the end of the project of $50,000. The press also requires an initial investment in spare parts inventory of $15,500, along with an additional $2,500 in inventory for each succeeding year of...
CSM Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $405,000 is estimated to result in $149,000 in annual pretax cost savings. The press is eligible for 100 percent bonus depreciation and it will have a salvage value at the end of the project of $50,000. The press also requires an initial investment in spare parts inventory of $15,500, along with an additional $2,500 in inventory for each succeeding year of...
CSM Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $405,000 is estimated to result in $149,000 in annual pretax cost savings. The press is eligible for 100 percent bonus depreciation and it will have a salvage value at the end of the project of $50,000. The press also requires an initial investment in spare parts inventory of $15,500, along with an additional $2,500 in inventory for each succeeding year of...
Lakeside, Inc., is considering replacing old production equipment with state-of-the-art technology that will allow production cost savings of $5,000 per month. The new equipment will have a five-year life and cost $210,000, with an estimated salvage value of $30,000, Lakeside's cost of capital is 9%. Required: Calculate the payback period and the accounting rate of return for the new production equipment. (Round your answers to 2 decimal places.) Payback period Accounting rate of return yoars
CSM Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $405,000 is estimated to result in $149,000 in annual pretax cost savings. The press falls in the MACRS five-year class (MACRS Table) and it will have a salvage value at the end of the project of $50,000. The press also requires an initial investment in spare parts inventory of $15,500, along with an additional $2,500 in inventory for each succeeding year...
A company is considering building a new and improved production facility for one of its existing products. It would be built on a piece of vacant land that the firm owns. This land was acquired four years ago at a cost of $500,000; it has a current market value of $800,000. The building can be erected for $600,000. Machinery (equipment) worth $120,000 needs to be bought. The company will finance the construction of the building and the purchase of the...