ZuoTi.Pro
Question

Einstein Inc. is evaluating different equipment. Machine A costs $55,000 per year has a five year life, and costs $15,00...

Einstein Inc. is evaluating different equipment. Machine A costs $55,000 per year has a five year life, and costs $15,000 pear year to operate. The machine will be depreciated using straight line and the relevant discount rate is 10%. The machine will have a salvage value of $8,500 at the end of the projects life. The firm has a tax rate of 21%.

a.) What is the operating cash flow in year 1? (Enter a negative value)

b.) What is the NPV of the project? (Enter a negative value and round to 2 decimals)

c.) What is the EAC for the project? (Enter a positive value and round to 2 decimals)

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

1.
=(-15000-55000/5)*(1-21%)+55000/5=-9540

2.
=-55000+((-15000-55000/5)*(1-21%)+55000/5)/10%*(1-1/1.1^5)+8500*(1-21%)/1.1^5=-86994.6190958144

3.
=-(-55000+((-15000-55000/5)*(1-21%)+55000/5)/10%*(1-1/1.1^5)+8500*(1-21%)/1.1^5)*10%/(1-1/1.1^5)=22948.9613601743

0 0
Add a comment
Know the answer?
Add Answer to:
Einstein Inc. is evaluating different equipment. Machine A costs $55,000 per year has a five year life, and costs $15,00...
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

  • Simon Co. is evaluating different equipment. Machine A costs $55,000 per year has a five year...

    Simon Co. is evaluating different equipment. Machine A costs $55,000 per year has a five year life, and costs $15,000 pear year to operate. The machine will be depreciated using straight line and the relevant discount rate is 10%. The machine will have a salvage value of $8,500 at the end of the projects life. The firm has a tax rate of 21%. Calculate the operating cash flow in year 1. (Enter a negative value)

  • SGS Golf Academy is evaluating different golf practice equipment. The "Dimple-Max" equipment costs $106,000, has a 4-yea...

    SGS Golf Academy is evaluating different golf practice equipment. The "Dimple-Max" equipment costs $106,000, has a 4-year life, and costs $9,800 per year to operate. The relevant discount rate is 10 percent. Assume that the straight-line depreciation method is used and that the equipment is fully depreciated to zero. Furthermore, assume the equipment has a salvage value of $24,000 at the end of the project’s life. The relevant tax rate is 39 percent. All cash flows occur at the end...

  • Bridgton Golf Academy is evaluating new golf practice equipment. The "Dimple-Max" equipment costs $128,000, has a...

    Bridgton Golf Academy is evaluating new golf practice equipment. The "Dimple-Max" equipment costs $128,000, has a 4-year life, and costs $11,600 per year to operate. The relevant discount rate is 10 percent. Assume that the straight-line depreciation method is used and that the equipment is fully depreciated to zero. Furthermore, assume the equipment has a salvage value of $9,500 at the end of the project’s life. The relevant tax rate is 25 percent. All cash flows occur at the end...

  • We are evaluating a project that costs $788,400, has a nine-year life, and has no salvage...

    We are evaluating a project that costs $788,400, has a nine-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 75,000 units per year. Price per unit is $52, variable cost per unit is $36, and fixed costs are $750,000 per year. The tax rate is 21 percent, and we require a return of 12 percent on this project. Suppose the projections given for price, quantity,...

  • We are evaluating a project that costs $690,000, has a five-year life, and has no salvage...

    We are evaluating a project that costs $690,000, has a five-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 71,000 units per year. Price per unit is $75, variable cost per unit is $50, and fixed costs are $790,000 per year. The tax rate is 35 percent, and we require a return of 15 percent on this project. a. Calculate the accounting break-even point. (Do...

  • You are evaluating two different cookie-baking ovens. The Pillbury 707 costs $59,500, has a 5-year life,...

    You are evaluating two different cookie-baking ovens. The Pillbury 707 costs $59,500, has a 5-year life, and has an annual OCF (aft tax) of -$10.500 per year. The Keebler CookieMunster costs $92,500, has a 7-year life, and has an annual OCF (after-tax) of -$8,500 per year. er- If your discount rate is 13 percent, what is each machine's EAC? (Negative amounts should be indicated by a minus sign. Round y answers to 2 decimal places.) EAC Pillsbury 707 Keebler CookieMunster

  • You are evaluating two different milling machines to replace your current aging machine. Machine A costs...

    You are evaluating two different milling machines to replace your current aging machine. Machine A costs $265,135, has a three-year life, and has pretax operating costs of $62,168 per year. Machine B costs $429,251, has a five-year life, and has pretax operating costs of $33,588 per year. For both milling machines, use straight-line depreciation to zero over the project’s life and assume a salvage value of $35,488. Your tax rate is 34 % and your discount rate is 10 %....

  • We are evaluating a project that costs $1,180,000, has a five-year life, and has no salvage...

    We are evaluating a project that costs $1,180,000, has a five-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 88,100 units per year. Price per unit is $34.80, variable cost per unit is $21.05, and fixed costs are $761,000 per year. The tax rate is 40 percent, and we require a return of 10 percent on this project Calculate the base-case operating cash flow and...

  • We are evaluating a project that costs $2,070,000, has a 7-year life, and has no salvage...

    We are evaluating a project that costs $2,070,000, has a 7-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 93,400 units per year. Price per unit is $38.73, variable cost per unit is $23.85, and fixed costs are $854,000 per year. The tax rate is 23 percent and we require a return of 12 percent on this project. Suppose the projections given for price, quantity,...

  • We are evaluating a project that costs $2,010,000, has a 7-year life, and has no salvage...

    We are evaluating a project that costs $2,010,000, has a 7-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 89,400 units per year. Price per unit is $38.61, variable cost per unit is $23.75, and fixed costs are $848,000 per year. The tax rate is 21 percent and we require a return of 12 percent on this project. Suppose the projections given for price, quantity,...

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