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8 and 9. If a sensitivity analysis...
Problem 11-04 (Replacement Analysis) Question 5 of 9 Check My Work (1 remaining) eBook Replacement Analysis...
Problem 11-04 (Replacement Analysis) Question 5 of 9 Check My Work (1 remaining) eBook Replacement Analysis Although the Chen Company's milling machine is old, it is still in relatively good working order and would last for another 10 years. It is inefficient compared to modern standards, though, and so the company is considering replacing it. The new milling machine, at a cost of $114,000 delivered and installed, would also last for 10 years and would produce after-tax cash flows (labor...
QUESTION 2 – SENSITIVITY ANALYSIS (25 POINTS) Consider a project to supply Detroit with 40,000 tons...
QUESTION 2 – SENSITIVITY ANALYSIS (25 POINTS) Consider a project to supply Detroit with 40,000 tons of machine screws annually for automobile production. You will need an initial $5,600,000 investment in threading equipment to get the project started; the project will last for 6 years. The accounting department estimates that annual fixed costs will be $600,000 and that variable costs should be $250 per ton. Further, the accounting department will depreciate the initial fixed asset investment straight-line to zero over...
6. You are considering a herd improvement that will cost $7,000, but yield year-end cash returns...
6. You are considering a herd improvement that will cost $7,000, but yield year-end cash returns of: $2,000, $2,500, and $3,000 in the following three years. Assuming a 7% required- rate-of-return, would you make this investment? a. NPV = b. IRR = c. Accept investment Yes No 7. Norma and Fred Buvalot are buying a new combine. They have narrowed their options to two combines and must purchase one. Each combine will provide the same cash inflows, but differ in...
Please round the numbers to 3 decimal places Problem 9-20 Sensitivity Analysis [LO 3] We are...
Please round the numbers to 3 decimal places
Problem 9-20 Sensitivity Analysis [LO 3] We are evaluating a project that costs $2,130,000, has a 8-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project Sales are projected at 90,600 units per year. Price per unit is $38.85, variable cost per unit is $23.95, and fixed costs are $860,000 per year. The tax rate is 25 percent, and we require a...
Problem 5-1 (Algo) Analysis of alternatives (LO5-3, 5-8) Esquire Company needs to acquire a molding machine...
Problem 5-1 (Algo) Analysis of alternatives (LO5-3, 5-8) Esquire Company needs to acquire a molding machine to be used in its manufacturing process. Two types of machines that would be appropriate are presently on the market. The company has determined the following: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Machine A could be purchased for $55,000. It will last 10 years...
Please use a sensitivity analysis to solve this! thanks! 1) Your old pump has annual operating...
Please use a sensitivity analysis to solve
this! thanks!
1) Your old pump has annual operating costs of $40,000, which you consider excessive. You are thinking about buying a new pump, which would have operating costs of only $20,000 per year. Either option could last for three years, with no salvage value. Your minimum acceptable rate of return is 12% per year. Determine whether the decision of whether to replace your old pump is sensitive to the cost of the...
3 Problem 11-5 Sensitivity Analysis and Break-Even [LO1, 3] We are evaluating a project that costs...
3 Problem 11-5 Sensitivity Analysis and Break-Even [LO1, 3] We are evaluating a project that costs $691,200, has an eight-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 85,000 units per year. Price per unit is $50, variable cost per unit is $35, and fixed costs are $740,000 per year. The tax rate is 24 percent, and we require a return of 10 percent on...
Problem 7-1 Sensitivity Analysis and Break-Even Point We are evaluating a project that costs $1,160,000, has...
Problem 7-1 Sensitivity Analysis and Break-Even Point We are evaluating a project that costs $1,160,000, has a ten-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 44,000 units per year. Price per unit is $45, variable cost per unit is $20, and fixed costs are $645,000 per year. The tax rate is 35 percent, and we require a return of 20 percent on this project....
Ch. 8 - Problems Problem 8-11 Cost-Cutting Proposals 10 points Blue Line Machine Shop is considering...
Ch. 8 - Problems Problem 8-11 Cost-Cutting Proposals 10 points Blue Line Machine Shop is considering a four year project to improve its production efficiency Buying a new machine press for $490,000 is estimated to result in $200,000 in annual pretax cost savings. The press falls in the MACRS five-year class, and it will have a salvage value at the end of the project of $82,000. The press also requires an initial investment in spare parts inventory of $22,000, along...
6. (3 points) (Ignore income taxes in this problem) The management of Favreau Corporation is considering...
6. (3 points) (Ignore income taxes in this problem) The management of Favreau Corporation is considering the purchase of a machine that would cost $310,464 and would have a useful life of 5 years. The machine would have no salvage value. The machine would reduce labor and other operating costs by $84,000 per year. The internal rate of return on the investment in the new machine is closest to:
Problem 11-04 (Replacement Analysis) Question 5 of 9 Check My Work (1 remaining) eBook Replacement Analysis Although the Chen Company's milling machine is old, it is still in relatively good working order and would last for another 10 years. It is inefficient compared to modern standards, though, and so the company is considering replacing it. The new milling machine, at a cost of $114,000 delivered and installed, would also last for 10 years and would produce after-tax cash flows (labor...
6. You are considering a herd improvement that will cost $7,000, but yield year-end cash returns of: $2,000, $2,500, and $3,000 in the following three years. Assuming a 7% required- rate-of-return, would you make this investment? a. NPV = b. IRR = c. Accept investment Yes No 7. Norma and Fred Buvalot are buying a new combine. They have narrowed their options to two combines and must purchase one. Each combine will provide the same cash inflows, but differ in...
Please round the numbers to 3 decimal places
Problem 9-20 Sensitivity Analysis [LO 3] We are evaluating a project that costs $2,130,000, has a 8-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project Sales are projected at 90,600 units per year. Price per unit is $38.85, variable cost per unit is $23.95, and fixed costs are $860,000 per year. The tax rate is 25 percent, and we require a...
Problem 5-1 (Algo) Analysis of alternatives (LO5-3, 5-8) Esquire Company needs to acquire a molding machine to be used in its manufacturing process. Two types of machines that would be appropriate are presently on the market. The company has determined the following: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Machine A could be purchased for $55,000. It will last 10 years...
Please use a sensitivity analysis to solve
this! thanks!
1) Your old pump has annual operating costs of $40,000, which you consider excessive. You are thinking about buying a new pump, which would have operating costs of only $20,000 per year. Either option could last for three years, with no salvage value. Your minimum acceptable rate of return is 12% per year. Determine whether the decision of whether to replace your old pump is sensitive to the cost of the...
3 Problem 11-5 Sensitivity Analysis and Break-Even [LO1, 3] We are evaluating a project that costs $691,200, has an eight-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 85,000 units per year. Price per unit is $50, variable cost per unit is $35, and fixed costs are $740,000 per year. The tax rate is 24 percent, and we require a return of 10 percent on...
Problem 7-1 Sensitivity Analysis and Break-Even Point We are evaluating a project that costs $1,160,000, has a ten-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 44,000 units per year. Price per unit is $45, variable cost per unit is $20, and fixed costs are $645,000 per year. The tax rate is 35 percent, and we require a return of 20 percent on this project....
Ch. 8 - Problems Problem 8-11 Cost-Cutting Proposals 10 points Blue Line Machine Shop is considering a four year project to improve its production efficiency Buying a new machine press for $490,000 is estimated to result in $200,000 in annual pretax cost savings. The press falls in the MACRS five-year class, and it will have a salvage value at the end of the project of $82,000. The press also requires an initial investment in spare parts inventory of $22,000, along...
6. (3 points) (Ignore income taxes in this problem) The management of Favreau Corporation is considering the purchase of a machine that would cost $310,464 and would have a useful life of 5 years. The machine would have no salvage value. The machine would reduce labor and other operating costs by $84,000 per year. The internal rate of return on the investment in the new machine is closest to:
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