Question

33)

The timeline shown here describes the useful We of a bor saving machine CAPITAL EXPENDITURE ANALYSIS FOR A LABOR-SAVING MACHINE Initial Investment or Cost of Equipment Cost: $ 300,000 Net Cash Benefits (Net Cash Flows) 1 ANNUAL.. $60,000 2 $60,000 3 $10,000 $10,000 $60,000 $60,000 Salvage Value $20,000 Savings The cost of the machine is $300.000. It has a useful le of years. saves us $60.000 annually in labor costs. We estimate e value of $20,000. Our cost of capital discount Based on these facts, use your BA Plus calculator to calculate the machine NPV Net Present Vale) On this problem, use ANNUAL COMPOUNDING (Thus, your P-1). Round only your answer the NPV of the machine to the nearest do amount. Do not round any other amount in the problem 54,961>- a negative number 1139 541781 $109,139

34)

25)

Answer 1

Answer 34

Year	Cash Flow	PV Factor @ 6%	Present Value
0	$ (300,000.00)	1.000000	$ (300,000.00)
1	$      60,000.00	0.943396	$      56,603.77
2	$      60,000.00	0.889996	$      53,399.79
3	$      60,000.00	0.839619	$      50,377.16
4	$      60,000.00	0.792094	$      47,525.62
5	$      60,000.00	0.747258	$      44,835.49
6	$      80,000.00	0.704961	$      56,396.84
NPV	$        9,138.67

NPV = $ 9,139.00

Answer = B

Answer 33

Calculation of IRR

To calculate IRR, what we need to calculate NPV at 6% & 7%

Year	Cash Flow	6.00%	7.00%
PV Factor @ 6%	Present Value	PV Factor @ 7%	Present Value
0	$ (300,000.00)	1.000000	$ (300,000.00)	1.000000	$ (300,000.00)
1	$      60,000.00	0.943396	$      56,603.77	0.934579	$      56,074.77
2	$      60,000.00	0.889996	$      53,399.79	0.873439	$      52,406.32
3	$      60,000.00	0.839619	$      50,377.16	0.816298	$      48,977.87
4	$      60,000.00	0.792094	$      47,525.62	0.762895	$      45,773.71
5	$      60,000.00	0.747258	$      44,835.49	0.712986	$      42,779.17
6	$      80,000.00	0.704961	$      56,396.84	0.666342	$      53,307.38
NPV	$        9,138.67		$          (680.78)

IRR = 6 % + [ NPV at 6% / Change in NPV * Change in Interest Rate]

= 6 % + [$ 9,138.67 / ($9,138.67 + $ 680.78) * 1%]

= 6 % + 0.93%

IRR = 6.93%

Answer = C

Answer 25

The Income of Corporation (Regular "C" Corporation) taxed twice

once as Corporate Tax and Another time when the same income is distributed to its member or shareholders

Hence, Answer is D