ZuoTi.Pro
Question

The Johnson Research Organization, a nonprofit organization that does not pay taxes, is considering buying laboratory...

The Johnson Research Organization, a nonprofit organization that does not pay taxes, is considering buying laboratory equipment with an estimated life of seven years so it will not have to use outsiders' laboratories for certain types of work. The following are all of the cash flows affected by the decision: Use Exhibit A.8.

Investment (outflow at time 0) $ 6,050,000
Periodic operating cash flows:
Annual cash savings because outside laboratories are not used 1,480,000
Additional cash outflow for people and supplies to operate the equipment 280,000
Salvage value after seven years, which is the estimated life of this project 480,000
Discount rate 10 %

Required:

Calculate the net present value of this decision. (Round PV factor to 3 decimal places.)

Net present value   
business   accounting   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

0 0
Add a comment
Know the answer?
Add Answer to:
The Johnson Research Organization, a nonprofit organization that does not pay taxes, is considering buying laboratory...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • The Johnson Research Organization, a nonprofit organization that does not pay taxes, is considering buying laboratory...

    The Johnson Research Organization, a nonprofit organization that does not pay taxes, is considering buying laboratory equipment with an estimated life of seven years so it will not have to use outsiders' laboratories for certain types of work. The following are all of the cash flows affected by the decision: Use Exhibit A.8. Investment (outflow at time 0) Periodic operating cash flows: Annual cash savings because outside laboratories are not used Additional cash outflow for people and supplies to operate...

  • The Johnson Research Organization, a nonprofit organization that does not pay taxes, is considering buying laboratory...

    The Johnson Research Organization, a nonprofit organization that does not pay taxes, is considering buying laboratory equipment with an estimated life of seven years so it will not have to use outsiders' laboratories for certain types of work. The following are all of the cash flows affected by the decision: Use Exhibit A.8. Investment (outflow at time 0) $ 6,430,000 Periodic operating cash flows: Annual cash savings because outside laboratories are not used 1,410,000 Additional cash outflow for people and...

  • Community Challenges, a nonprofit organization for physically and mentally challenged people, manufactures a variety of products...

    Community Challenges, a nonprofit organization for physically and mentally challenged people, manufactures a variety of products in four plants located in California. The company is currently purchasing an electronic igniter from an outside supplier for $31 per unit. Because of supplier reliability problems, the company is considering producing the igniters internally in a currently idle manufacturing plant. Annual volume over the next five years is expected to total 580,000 units at variable manufacturing costs of $30 per unit. Management must...

  • Expected value analysis: San Lucas Corporation San Lucas Corporation is considering investment in robotic machinery based...

    Expected value analysis: San Lucas Corporation San Lucas Corporation is considering investment in robotic machinery based upon the following estimates: Cost of robotic machinery $4,000,000 Residual value 300,000 Useful life 10 years Assume San Lucas Corporation assigns the following probabilities to the estimated annual net cash flows: Annual Net Cash Flow Probability of Occurring $900,000                    0.10 700,000                    0.50 500,000                    0.40             Total 1.00 a. Compute the expected value of the annual net cash flows. Annual Net Cash Flow Expected Value $900,000...

  • Broadway Industries is considering whether to automate one phase of its production line. The automation equipment...

    Broadway Industries is considering whether to automate one phase of its production line. The automation equipment has a six - year life with no residual and will cost $890,000. Projected net cash flows are as follows: Year 1 $ 250,000 Year 2 240,000 Year 3 210,000 Year 4 205,000 Year 5 200,000 Year 6 180,000 Requirement 1 : Compute this project’s Net Present Value (NPV) using Broadway’s 10% hurdle (required) rate. Should Broadway invest in the automation e quipment? Year...

  • 19. Monty Company is considering buying a machine for $340000 with an estimated life of 10...

    19. Monty Company is considering buying a machine for $340000 with an estimated life of 10 years and no salvage value. The straight-line method of depreciation will be used. The machine is expected to generate net income of $6000 each year. The cash payback period on this investment is 28.33 years. 5.67 years. 8.50 years. 10.00 years. 20. Use the following table, Present Value of an Annuity of 1 Period 8% 9% 10% 1 0.926 0.917 0.909 2 1.783 1.759...

  • Broadway Industries is considering whether to automate one phase of its production line. The automation equipment...

    Broadway Industries is considering whether to automate one phase of its production line. The automation equipment has a six year life with no residual and will cost $890,000. Projected net cash flows are as follows: Year 1     $ 250,000 Year 2      240,000 Year 3     210,000 Year 4   205,000 Year 5   200,000 Year 6 180,000 Requirement 1 : Compute this project’s Net Present Value (NPV) using Broadway’s 10% hurdle (required) rate. Should Broadway invest in the automation equipment? Year                  Net Cash...

  • Johnson Manufacturing is considering investing $80,000 in a new piece of machinery that will generate net annual cash fl...

    Johnson Manufacturing is considering investing $80,000 in a new piece of machinery that will generate net annual cash flows of $30,000 each year for the next 7 years. The machine has a salvage value of $10,000 at the end of its 7 year useful life. Johnson's cost of capital and discount rate is 8%. What is the dollar amount that we would multiply the factor by when using the PV of an Annuity table?

  • Differential Analysis Report Involving Opportunity Costs Five Star is considering leasing a building and buying the...

    Differential Analysis Report Involving Opportunity Costs Five Star is considering leasing a building and buying the necessary equipment to operate a public warehouse. Alternatively, the company could use the funds to invest in $149,400 of 6% U.S. Treasury bonds that mature in 16 years. The bonds could be purchased at face value. The following data have been assembled: Cost of equipment $149,400 Life of equipment 16 years Estimated residual value of equipment $27,200 Yearly costs to operate the warehouse, excluding...

  • Thunder Corporation, an amusement park, is considering a capital investment in a new exhibit. The exhibit...

    Thunder Corporation, an amusement park, is considering a capital investment in a new exhibit. The exhibit would cost $221,476 and have an estimated useful life of 12 years. It can be sold for $61,600 at the end of that time. (Amusement parks need to rotate exhibits to keep people interested.) It is expected to increase net annual cash flows by $29,100. The company's borrowing rate is 8%. Its cost of capital is 10%. Click here to view PV table. Calculate...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT