Homework Answers
| Net present value is used to evaluate investments. | |||||||
| Net present value | Present value of cash inflow - Present value of cash outflow | ||||||
| Calculation of NPV is shown below | |||||||
| Year | 0 | 1 | 2 | 3 | 4 | 5 | |
| Sales revenue | $100,000 | $100,000 | $100,000 | $100,000 | $100,000 | ||
| Cost | -$60,000 | -$60,000 | -$60,000 | -$60,000 | -$60,000 | ||
| Depreciation (50000/5) | -$10,000 | -$10,000 | -$10,000 | -$10,000 | -$10,000 | ||
| Income before taxes | $30,000 | $30,000 | $30,000 | $30,000 | $30,000 | ||
| Taxes @ 34% | -$10,200 | -$10,200 | -$10,200 | -$10,200 | -$10,200 | ||
| Net income | $19,800 | $19,800 | $19,800 | $19,800 | $19,800 | ||
| Depreciation | $10,000 | $10,000 | $10,000 | $10,000 | $10,000 | ||
| Operating cash flow | $29,800 | $29,800 | $29,800 | $29,800 | $29,800 | ||
| After tax salvage value (3100*(1-0.34)) | $2,046 | ||||||
| Purchase of new wood saw | -$50,000 | ||||||
| Net cash flow | -$50,000 | $29,800 | $29,800 | $29,800 | $29,800 | $31,846 | |
| Discount factor @ 17.50% | 1 | 0.85106383 | 0.72430964 | 0.61643374 | 0.524624458 | 0.4464889 | |
| Present value | -$50,000 | $25,362 | $21,584 | $18,370 | $15,634 | $14,219 | |
| Net present value | $45,169 | ||||||
| Net present value is $45,169 | |||||||
| Yes, Since the NPV is positive, company should purchase the saw | |||||||
Add Answer to:
Crane Lumber, Inc., is considering purchasing a new wood saw that costs $50,000. The saw will...
Crane Lumber, Inc., is considering purchasing a new wood saw that costs $65,000. The saw will...
Crane Lumber, Inc., is considering purchasing a new wood saw that costs $65,000. The saw will generate revenues of $100,000 per year for five years. The cost of materials and labor needed to generate these revenues will total $60,000 per year, and other cash expenses will be $10,000 per year. The machine is expected to sell for $3,500 at the end of its five-year life and will be depreciated on a straight-line basis over five years to zero. Crane’s tax...
Crane Lumber, Inc., is considering purchasing a new wood saw that costs $65,000. The saw will...
Crane Lumber, Inc., is considering purchasing a new wood saw that costs $65,000. The saw will generate revenues of $100,000 per year for five years. The cost of materials and labor needed to generate these revenues will total $60,000 per year, and other cash expenses will be $10,000 per year. The machine is expected to sell for $4,500 at the end of its five-year life and will be depreciated on a straight-line basis over five years to zero. Crane's tax...
Your answer is partially correct. Crane Lumber, Inc., is considering purchasing a new wood saw that...
Your answer is partially correct. Crane Lumber, Inc., is considering purchasing a new wood saw that costs $55,000. The saw will generate revenues of $100,000 per year for five years. The cost of materials and labor needed to generate these revenues will total $60,000 per year, and other cash expenses will be $10,000 per year. The machine is expected to sell for $4,800 at the end of its five-year life and will be depreciated ona straight-line basis over five years...
Current Alem III Progress Cranc Lumber, Inc., is considering purchasing a new wood saw that costs...
Current Alem III Progress Cranc Lumber, Inc., is considering purchasing a new wood saw that costs $50.000. The saw will generate revenues of $100,000 per year for five ycars. The cost of materials and labor needed to generate these revenues will total $60,000 per year, and other cash expenses will be $10,000 per year. The machine is expected to sell for $2,900 at the end of its five-year life and will be depreciated on a straight-line basis over five years...
Crane Lumber, Inc., is considering purchasing a new wood saw that costs $50,000. The saw will...
Crane Lumber, Inc., is considering purchasing a new wood saw that costs $50,000. The saw will generate revenues of $100,000 per year for five years. The cost of materials and labor needed to generate these revenues will total $60,000 per year, and other cash expenses will be $10,000 per year. The machine is expected to sell for $3,100 at the end of its five-year life and will be depreciated on a straight-line basis over five years to zero. Crane’s tax...
Crane Lumber, Inc., is considering purchasing a new wood saw that costs $55,000. The saw will...
Crane Lumber, Inc., is considering purchasing a new wood saw that costs $55,000. The saw will generate revenues of $100,000 per year for five years. The cost of materials and labor needed to generate these revenues will total $60,000 per year, and other cash expenses will be $10,000 per year. The machine is expected to sell for $4,800 at the end of its five-year life and will be depreciated on a straight-line basis over five years to zero. Crane’s tax...
Crane Lumber, Inc., is considering purchasing a new wood saw that costs $65,000. The saw will...
Crane Lumber, Inc., is considering purchasing a new wood saw that costs $65,000. The saw will generate revenues of $100,000 per year for five years. The cost of materials and labor needed to generate these revenues will total $60,000 per year, and other cash expenses will be $10,000 per year. The machine is expected to sell for $3,000 at the end of its five-year life and will be depreciated on a straight-line basis over five years to zero. Crane's tax...
Crane Lumber, Inc., is considering purchasing a new wood saw that costs $55,000. The saw will generate revenues of $100,...
Crane Lumber, Inc., is considering purchasing a new wood saw that costs $55,000. The saw will generate revenues of $100,000 per year for five years. The cost of materials and labor needed to generate these revenues will total $60,000 per year, and other cash expenses will be $10,000 per year. The machine is expected to sell for $3,300 at the end of its five-year life and will be depreciated on a straight-line basis over five years to zero. Crane’s tax...
fmodule jtemid-703249 Question 6 0/1 View Policies Show Attempt History Current Attempt in Progress x Your...
fmodule jtemid-703249 Question 6 0/1 View Policies Show Attempt History Current Attempt in Progress x Your answer is incorrect Crane Lumber, Inc, is considering purchasing a new wood saw that costs $80,000. The saw will generate revenues of $100,000 per year for five years. The cost of materials and labor needed to generate these revenues will total $60,000 per year, and other cash expenses will be $10,000 per year. The machine is expected to sell for $2.400 at the end...
Can you Please answer Both problems? Question 15 0/1 View Policies Show Attempt History Current Attempt...
Can you Please answer Both problems?
Question 15 0/1 View Policies Show Attempt History Current Attempt in Progress X Your answer is incorrect. A beauty product company is developing a new fragrance named Happy Forever. There is a probability of 0.49 that consumers will love Happy Forever, and in this case, annual sales will be 1.09 million bottles; a probability of 0.37 that consumers will find the smell acceptable and annual sales will be 170,000 bottles; and a probability of...
Crane Lumber, Inc., is considering purchasing a new wood saw that costs $65,000. The saw will generate revenues of $100,000 per year for five years. The cost of materials and labor needed to generate these revenues will total $60,000 per year, and other cash expenses will be $10,000 per year. The machine is expected to sell for $4,500 at the end of its five-year life and will be depreciated on a straight-line basis over five years to zero. Crane's tax...
Your answer is partially correct. Crane Lumber, Inc., is considering purchasing a new wood saw that costs $55,000. The saw will generate revenues of $100,000 per year for five years. The cost of materials and labor needed to generate these revenues will total $60,000 per year, and other cash expenses will be $10,000 per year. The machine is expected to sell for $4,800 at the end of its five-year life and will be depreciated ona straight-line basis over five years...
Current Alem III Progress Cranc Lumber, Inc., is considering purchasing a new wood saw that costs $50.000. The saw will generate revenues of $100,000 per year for five ycars. The cost of materials and labor needed to generate these revenues will total $60,000 per year, and other cash expenses will be $10,000 per year. The machine is expected to sell for $2,900 at the end of its five-year life and will be depreciated on a straight-line basis over five years...
Crane Lumber, Inc., is considering purchasing a new wood saw that costs $65,000. The saw will generate revenues of $100,000 per year for five years. The cost of materials and labor needed to generate these revenues will total $60,000 per year, and other cash expenses will be $10,000 per year. The machine is expected to sell for $3,000 at the end of its five-year life and will be depreciated on a straight-line basis over five years to zero. Crane's tax...
fmodule jtemid-703249 Question 6 0/1 View Policies Show Attempt History Current Attempt in Progress x Your answer is incorrect Crane Lumber, Inc, is considering purchasing a new wood saw that costs $80,000. The saw will generate revenues of $100,000 per year for five years. The cost of materials and labor needed to generate these revenues will total $60,000 per year, and other cash expenses will be $10,000 per year. The machine is expected to sell for $2.400 at the end...
Can you Please answer Both problems?
Question 15 0/1 View Policies Show Attempt History Current Attempt in Progress X Your answer is incorrect. A beauty product company is developing a new fragrance named Happy Forever. There is a probability of 0.49 that consumers will love Happy Forever, and in this case, annual sales will be 1.09 million bottles; a probability of 0.37 that consumers will find the smell acceptable and annual sales will be 170,000 bottles; and a probability of...
Most questions answered within 3 hours.
-
In recent years, 80% of those accused of Driving Under the
Influence (DUI) get convicted (includes...
asked 8 minutes ago -
Why does Max Weber distinguish between "power," "authority," and
different types of authority? What is he...
asked 8 minutes ago -
What would the solow growth model look like if there was a
production function which had...
asked 13 minutes ago -
A company project has an initial cost of $40,000, expected net
cash flows of $9,000 per...
asked 15 minutes ago -
How do you use strategy in your current position or how does
your current position align...
asked 17 minutes ago -
a person's ability to be properly diagnosed with a
disease/condition can be affected by the person;s...
asked 16 minutes ago -
John needs 40 Eternal Light flashlights. Each Eternal Light
flashlight requires 3 bulbs, and each bulb...
asked 24 minutes ago -
1) If Nominal GDP is $16,000 billion and the GDP deflator is 50,
then Real GDP...
asked 30 minutes ago -
D. A student completed 20 courses in the School of Arts and
Sciences. Her grades in...
asked 2 hours ago -
teo
pucks moving on a frictionless air table are about to collide. the
1.5 kg puck...
asked 2 hours ago -
Problem #1
The area between Z = 0 and Z = 2.50
The area between Z...
asked 3 hours ago -
1. What is the meaning of the term communication style?
2. What are the benefits to...
asked 3 hours ago