Oriole Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company tobid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided here.Original costEstimated lifeSalvage valueEstimated annual cash inflowsEstimated annual cash outflowsClick here to view PV table.Net present valueProfitability indexMachine AWhich machine should be purchased?Machine A$76,7008 years$20,100$4,910Machine A0Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative,use either a negative sign preceding the number eg -45 or parentheses eg (45). Round answer for present value to O decimal places, e.g. 125 andprofitability index to 2 decimal places, e.g. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)0should be purchased.6478Machine B1.08$188,0008 years0$40,200$10,130Machine B(10409)0..94

A financial term called net present value (NPV) is used to assess how profitable a project or…

Oriole Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided here. Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Click here to view PV table. Net present value Machine A $76,700 8 years 0 Profitability index $20,100 $4,910 Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round answer for present value to 0 decimal places, e.g. 125 and profitability index to 2 decimal places, e.g. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Machine A Which machine should be purchased? Machine A should be purchased. 6478 Machine B $188,000 8 years 0 1.08 $40,200 $10,130 Machine B (10409) 0..94

Oriole Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided here. Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Click here to view PV table. Net present value Machine A $76,700 8 years 0 Profitability index $20,100 $4,910 Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round answer for present value to 0 decimal places, e.g. 125 and profitability index to 2 decimal places, e.g. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Machine A Which machine should be purchased? Machine A should be purchased. 6478 Machine B $188,000 8 years 0 1.08 $40,200 $10,130 Machine B (10409) 0..94

Essentials of Business Analytics (MindTap Course List)

2nd Edition

ISBN:9781305627734

Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Chapter15: Decision Analysis

Section: Chapter Questions

Problem 5P: Hudson Corporation is considering three options for managing its data warehouse: continuing with its...

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An auto repair company needs a new machine that will check for defective sensors. The machine has an Initial investment of $224,000. Incremental revenues, including cost savings, are $120,000, and Incremental expenses, including depreciation, are $50,000. There is no salvage value. What is the accounting rate of return (ARR)?
Hudson Corporation is considering three options for managing its data warehouse: continuing with its own staff, hiring an outside vendor to do the managing, or using a combination of its own staff and an outside vendor. The cost of the operation depends on future demand. The annual cost of each option (in thousands of dollars) depends on demand as follows: If the demand probabilities are 0.2, 0.5, and 0.3, which decision alternative will minimize the expected cost of the data warehouse? What is the expected annual cost associated with that recommendation? Construct a risk profile for the optimal decision in part (a). What is the probability of the cost exceeding $700,000?
Covington Pharmacies has decided to automate its insurance claims process. Two networked computer systems are being considered. The systems have an expected life of two years. The net cash flows associated with the systems are as follows. The cash benefits represent the savings created by switching from a manual to an automated system. The companys cost of capital is 10 percent. Required: 1. Compute the NPV and the IRR for each investment. 2. Show that the project with the larger NPV is the correct choice for the company.
Please answer correct with good presentation using commas and dollar sign in each figure Opportunity Costs A new project requires the use of an existing machine that would otherwise be sold. Information concerning the machine is as follows: Original purchase price $20,000 Current net book value (NBV) $5,000 Estimated current sales value $4,000. Required: What is the relevant cost (if any) if using the machine in the project?
Calculate the NPV if cost savings value deviate by minus 20%. $ c. Suppose the CFO wants you to do a scenario analysis with different values for the cost savings, the machine's salvage value, and the working capital (WC) requirement. She asks you to use the following probabilities and values in the scenario analysis: Scenario Worst case Base case Best case Probability Cost Savings Salvage Value 0.35 $ 88,000 $28,000 0.35 0.30 110,000 132,000 33,000 38,000 WC $40,000 35,000 30,000 Calculate the project's expected NPV, its standard deviation, and its coefficient of variation. Do not round intermediate calculations. Round the monetary values to the nearest dollar and a coefficient of variation to two decimal places. Negative values, if any, should be indicated by a minus sign. The project's expected NPV: $ Standard deviation: $ Coefficient of variation:
The management of East Manufacturing needs a new high tech sorting machine and has two different proposals under consideration. They require a rate of return of 10% (discount rate) and the Accounting Department has prepared the following information: Initial Investment Useful Life of Equipment Net Annual Cash Flow Salvage Value Investment B: Click to open:↓ Ⓡ Clearly label and show calculations for full credit! No calculations = No credit. 1) Calculate the Payback Period for each option: Investment A: 2) Calculate the Net Present Value of each option: Investment A: $ 3,700,000 7 years $ 900,000 $0 Investment B: A $3,400,000 7 years $800,000 $90,000 B
Engineering Economy Compute the Future Worth. Compare the results. Don't use excel Two stamping machines are under consideration for purchase by a metal recycling company. The manual model will cost P1,250,000 to buy with an eight-year life and a P250,000 salvage value. Its annual operating costs will be P800,000. A computer-controlled model will cost P4,750,000 to buy and it will have a twelve-year life if upgraded at the end of year six for 750,000. Its terminal salvage value will be P1,150,000, with annual operating costs of P375,500 for labor and P125,000 for maintenance. The company's minimum attractive rate of return is 18%.
Maps News -mework i t a Interstate Manufacturing is considering either overhauling an old machine or replacing it with a new machine. Information about the two alternatives follows. Management requires a 8% rate of return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Alternative 1: Keep the old machine and have it overhauled. This requires an initial investment of $146,000 and results in $40,000 of net cash flows in each of the next five years. After five years, it can be sold for a $23,000 salvage value. Alternative 2: Sell the old machine for $40,000 and buy a new one. The new machine requires an initial investment of $295,000 and can be sold for a $11,000 salvage value in five years. It would yield cost savings and higher sales, resulting in net cash flows of $49,000 in each of the next five years. Required: 1. Determine the net present value of alternative 1. 2. Determine the net present value of alternative…
Payback, Accounting Rate of Return, Net Present valde, Internal Rate of Retum Follow the format shown in Exhibit 12B.1 and Exhibit 12B.2 as you complete the requirements below. Woodard Company wants to buy a numerically controlled (NC) machine to be used in producing specially machined parts for manufacturers of tractors. The outlay required is $460,800. The NC equipment will last 5 years with no expected salvage value. The expected after-tax cash flows associated with the project follow: Year 1 2 3 4 5 Required: Cash Revenues $612,000 612,000 612,000 612,000 612,000 Cash Expenses $432,000 432,000 432,000 432,000 432,000 1. Compute the payback period for the NC equipment. Round your answer to two decimal places. 2.56 ✓ years Check My Work 2. Compute the NC equipment's ARR. Round the percentage to one decimal place. Assume straight-line depreciation. 19.1 ✓ % 3. Compute the investment's NPV, assuming required rate of return of 10%. Round present value calculations and your final answer…
Advanced Technology, Payback, NPV, IRR, Sensitivity Analysis Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided manufacturing system. The annual net cash benefits and savings associated with the system are described as follows: Decreased waste $300,000 Increased quality 400,000 Decrease in operating costs 600,000 Increase in on-time deliveries 200,000 The system will cost $9,000,000 and last 10 years. The company's cost of capital is 12 percent. The present value tables provided in Exhibit 19B.1 and Exhibit 19B.2 must be used to solve the following problems. Required: 1. Calculate the payback period for the system.fill in the blank 1 years Assume that the company has a policy of only accepting projects with a payback of five years or less. Would the system be acquired? 2. Calculate the NPV and IRR for the project. Round your IRR answers to the nearest whole percentage value (for example, 15.6% rounds to 16% and should be entered as…
Payback, Accounting Rate of Return, Net Present Value, Internal Rate of Return Follow the format shown in Exhibit 12B.1 and Exhibit 12B.2 as you complete the requirement below. Blaylock Company wants to buy a numerically controlled (NC) machine to be used in producing specially machined parts for manufacturers of trenching machines. The outlay required is $730,671. The NC equipment will last five years with no expected salvage value. The expected after-tax cash flows associated with the project follow: Year Cash Revenues Cash Expenses 1 $1,300,000 $1,000,000 1,300,000 1,000,000 1,000,000 1,000,000 1,000,000 2 3 4 5 1,300,000 1,300,000 1,300,000 Required: Compute the Investment's Internal Rate of return. Enter as a percent. If required, round your answer to the nearest whole percent. IRR = %
Question1: A company is planning to purchase a new machine to expand the range of its products. There are two brands available in the market: A and B. Both machines are costing 70,000 OMR. The cash inflows given in the table are expected to be generated by both machines. Based on NPV and IPP, identify the better machine if the discounting rate is 7.5% and write aconclusion. Year Machine A Machine B 1 12000 13100 2 14200 13900 3 16100 15800 4 19000 18600 5 21700 20000 6 22200 22800