Kim Inc. must install a new air conditioning unit in its main plant. Kim must install one or the other of the units; otherwise, the highly profitable plant would have to shut down. Two units are available, HCC and LCC (for high and low capital costs, respectively). HCC has a high capital cost but relatively low operating costs, while LCC has a low capital cost but higher operating costs because it uses more electricity. The costs of the units are shown here. Kim's WACC is 5%.
0 | 1 | 2 | 3 | 4 | 5 |
HCC | -$600,000 | -$55,000 | -$55,000 | -$55,000 | -$55,000 | -$55,000 |
LCC | -$100,000 | -$175,000 | -$175,000 | -$175,000 | -$175,000 | -$175,000 |
Kim Inc. must install a new air conditioning unit in its main plant. Kim must install...
Kim Inc. must install a new air conditioning unit in its main plant. Kim must install one or the other of the units; otherwise, the highly profitable plant would have to shut down. Two units are available, HCC and LCC (for high and low capital costs, respectively). HCC has a high capital cost but relatively low operating costs, while LCC has a low capital cost but higher operating costs because it uses more electricity. The costs of the units are...
Kim Inc. must install a new air conditioning unit in its main plant. Kim must install one or the other of the units; otherwise, the highly profitable plant would have to shut down. Two units are available, HCC and LCC (for high and low capital costs, respectively). HCC has a high capital cost but relatively low operating costs, while LCC has a low capital cost but higher operating costs because it uses more electricity. The costs of the units are...
Kim Inc. must install a new air conditioning unit in its main plant. Kim must install one or the other of the units; otherwise, the highly profitable plant would have to shut down. Two units are available, HCC and LCC (for high and low capital costs, respectively). HCC has a high capital cast but relatively low operating costs, while LCC has a low capital cost but higher operating costs because it uses more electricity. The costs of the units are...
OOSING MANDATORY PROJECTS ON THE BASIS OF LEAST COST m Inc. must install a new air conditioning unit in its main plant. Kim must install one or the other of the units; otherwise, the highly profitable plant ould have to shut down. Two units are available, HCC and LCC (for high and low capital costs, respectively). HCC has a high capital cost but relatively love erating costs, while LCC has a low capital cost but higher operating costs because it...
Kim Inc. must install a new air conditioning unit in its main plant. Kim must install one or the other of the units; otherwise, the highly profitable plant would have to shut down. Two units are available, HCC and LCC (for high and low capital costs, respectively). HCC has a high capital cost but relatively low operating costs, while LCC has a low capital cost but higher operating costs because it uses more electricity. The costs of the units are...
A firm with a 14% WACC is evaluating two projects for this year's capital budget. After-tax cash flows, including depreciation, are as follows: 0 1 2 3 4 5 Project M -$24,000 $8,000 $8,000 $8,000 $8,000 $8,000 Project N -$72,000 $22,400 $22,400 $22,400 $22,400 $22,400 Assuming the projects are independent, which one(s) would you recommend? -Select-Only Project M would be accepted because NPV(M) > NPV(N).Only Project N would be accepted because NPV(N) > NPV(M).Both projects would be accepted since both...
An electric utility is considering a new power plant in northern Arizona. Power from the plant would be sold in the Phoenix area, where it is badly needed. Because the firm has received a permit, the plant would be legal; but it would cause some air pollution. The company could spend an additional $40 million at Year 0 to mitigate the environmental problem, but it would not be required to do so. The plant without mitigation would cost $270.70 million,...
11.07 CAPITAL BUDGETING CRITERIA A firm with a 13% WACC is evaluating two projects for this year's capital budget. After-tax cash flows, including depreciation, are as follows: 0 1 2 3 4 5 Project M -$6,000 $2,000 $2,000 $2,000 $2,000 $2,000 Project N -$18,000 $5,600 $5,600 $5,600 $5,600 $5,600 Calculate NPV for each project. Round your answers to the nearest cent. Do not round your intermediate calculations. Project M $ Project N $ Calculate IRR for each project. Round your answers...
CAPITAL BUDGETING CRITERIA A firm with a 14% WACC is evaluating two projects for this year's capital budget. After-tax cash flows, including depreciation, are as follows: 0 1 2 5 Project M Project N - $30,000 $10,000 $10,000 $10,000 $10,000 $10,000 $90,000 $28,000 $28,000 $28,000 $28,000 $28,000 a. Calculate NPV for each project. Round your answers to the nearest cent. Do not round your intermediate calculations. Project M $ Project N $ Calculate IRR for each project. Round your answers...
2. Project S costs $10,000 and its expected cash flows would be $5,500 per year for 5 years. Mutually exclusive Project L costs $45,000 and its expected cash flows would be $10,250 per year for 5 years. If both projects have a WACC of 15%, which project would you recommend? Select the correct answer. a. Both Projects S and L, since both projects have NPV's > 0. b. Both Projects S and L, since both projects have IRR's > 0....