Calculate IRR in excel using the formula: =IRR(value0...value30)
That is,
=IRR(-8000,400,400.......,400)
Upon entering, this gives IRR = 2.84%
Since IRR less than MARR, the project is not advisable
New windows are expected to save $400 per year in energy costs over their 30-year life...
Two machines are under consideration and only one can be bought. MARR is 10%. Use the following information and find out which option should be purchased. Use an annual worth comparison. Initial cost Annual savings Annual maintenance cost Life Salvage value Machine A $280,000 $40,000 $2000 for year 1, increasing by 5% each year thereafter 15 years $19,250 Machine B $185,000 $32,000 $1000 for year 1, increasing by $350 each year thereafter 10 years $14,800 3(a) Advertisements suggest that a...
A new line of sneakers is expected to sell 8000 pairs a year at $102 each. The new line is expected to have a 4 year life. It requires labor costs of $30.50 and material costs of $24.72 per pair. Fixed costs per year is $74,040. New equipment for production is needed, and requires an investment of $950,000. This equipment will be depreciated straight-line to zero over the life of the project, after which time it will have a market...
13. A new hog investment requires an initial outlay of $120,000 and is expected to yield annual net cash flows of $ 21,500 over the investment's 10-year planning horizon. Assuming no salvage value, no taxes, and a 8 percent discount rate A. Should the investment be made if you use NPV analysis? Should the investment be made if you use IRR analysis? Use a required rate of return of 10.5% to determine if the investment is worthwhile. B.
13. A...
Q- A new street seeping equipment can be purchased for $ 75000. Its expected useful life is eight years, at which time its market value will be zero. Annual receipts less expenses will approximately $ 20000 per year over eight year study period. Use the PW method and MARR of %15 to determine whether this is good investment ? Use hand calculations to solve it!
Notational Inc. is considering installing a new server. The machine costs $100,000 and is expected to have a useful economic life of 8 years, after which it will have a book value of $0. In addition to the equipment costs, management expects installation costs of $10,000 and an initial outlay for net working capital of $12,000. The new server is expected to generate an additional $10,000 per year in earnings after tax over its useful life, but an additional $5,000...
A company is considering buying a new piece of machinery that costs $30,000 and has a salvage value of $8,000 at the end of its 5-year useful life. The machinery nets $5,000 per year in annual revenues. MARR = 8%. The internal rate of return (IRR) on this investment is between A. 2%-3%. B. 11%-12% C. 6%-7% D. 13%-14% E. 4%-5%
(Ignore income taxes in this problem.) Allen Company's required rate of return is 14%. The company is considering the purchase of a new machine that will save $10,000 per year in cash operating costs. The machine will cost $40,000 and will have an 8-year useful life with zero salvage value.Required:i) Compute the machine's internal rate of return to the nearest whole percent. Would you recommend purchase of the machine? Explain.ii) The company would like to use NPV to evaluate the project...
You are faced with a decision on an investment proposal. Specially, the estimated additional income from the investment is $180,000 per year; the initial investment costs are $640,000; and the estimated annual costs are $44,000, which begin decreasing by $4,000 per year starting at the end of third year. Assume an 8-year analysis period, no salvage value, and MARR = 15% (4.3, 4.6)a. What is PW of this proposal?b. What is IRR of this proposal?
Summer Tyme, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $4.698 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which time it will be worthless. The project is estimated to generate $4,176,000 in annual sales, with costs of $1,670,400. Required: If the tax rate is 35 percent, what is the OCF for this project? rev: 09_18_2012 $2,176,740 $610,740 $2,505,600 $2,067,903 $2,285,577 Dog Up! Franks...
Considering a new project to retrofit a pump. The initial cost of the project is $100,000, and will save the company $25,000 per year in utility costs (income to the company). The salvage value of the pump after the 5 year life is $20,000. Use NPV at 8% interest rate to determine if this is a good investment. What is the payback?