A Moving to another question will save this response.Question 14A project to replace an old machine with a new one is under consideration. The new machine costs $1500 and requires an additional working ca$750 salvage value. Calculate the Initial Outlay of this replacement project assuming the book value of the old asset is $1500. The firm's marginaO $1,912.50O $337.50O $1,837.50O $1,087.50O None of the listed choices is correctA Moving to another question will save this response.MacBook Airsc88 FAF1F2F3F5F6@#$&3.4567QWTYSDCVoptioncommand Question 14 of 17 >6 pointsSave Answernsideration. The new machine costs $1500 and requires an additional working capital investment of $750. The old machine is expected to have aent project assuming the book value of the old asset is $1500. The firm's marginal tax rate is 55%.« < Question 14 of 17 > »Close WindowMacBook AirF4トトF6F9F12F7F8F10F11&*+589{Y1Kвcommandoption.. ..

Marginal tax rate 55% Book value of old asset 1500 Salvage value of old machine 750 Loss on…

sideration. The new machine costs $1500 and requires an additional working capital investment of $750. The old machine is expected to have a ent project assuming the book value of the old asset is $1500. The firm's marginal tax rate is 55%.

sideration. The new machine costs $1500 and requires an additional working capital investment of $750. The old machine is expected to have a ent project assuming the book value of the old asset is $1500. The firm's marginal tax rate is 55%.

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter10: The Basics Of Capital Budgeting: Evaluating Cash Flows

Section: Chapter Questions

Problem 19P

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Perit Industries has $155,000 to invest in one of the following two projects: Cost of equipment required Working capital investment required Annual cash inflows Salvage value of equipment in six years Life of the project Project A $ 155,000 $ 25,000 $ 8,600 6 1. Net present value project A 2. Net present value project B 3. Which investment alternative (if either) would you recommend that the company accept? X Answer is complete but not entirely correct. Project B $0 $ 155,000 $ 40,000 years The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries' discount rate is 14%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net present value of Project A. Note: Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount. 2. Compute the net present value of Project B. $(53,971) 70,527 X Project B $0…
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A company is looking at five different potential projects, but it can only do one of them. Which project should the company select? For this question, use the following information: Project A B D E Initial Investment -3,300 -6,500 -5,300 -7,000 -5,500 Annual Benefit 650 1,200 950 1,250 1,000 Salvage Value 150 425 300 1,000 200 Useful life 10 10 10 10 10 IRR 14.99% 13.51% 12.74% 13.26% 12.93% E-A C-A В-А D-A D-B Delta IRR 9.68% 8.88% 11.97% 11.78% 10.90% C-E B-E D-E В-С D-C Delta IRR 18.90% 16.44% 14.29% 16.79% 14.71% Which project should be selected if MARR is 10% (mutually exclusive)? D OA Oc OB
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Flounder Manufacturing Company is considering three new projects, each requiring an equipment investment of $23,800. Each project will last for 3 years and produce the following cash flows. Year 1 2 3 Total AA $7,600 $10,300 9,600 15,600 (a) $32,800 BB Payback period 10,300 Click here to view PV tables. 10,300 Most desirable $30,900 The salvage value for each of the projects is zero. Flounder uses straight-line depreciation. Flounder will not accept any project with a payback period over 2.2 years. Flounder's minimum required rate of return is 12%. Least desirable CC $11,600 10,600 9,600 Compute each project's payback period. (Round answers to 2 decimal places, e.g. 52.75.) $31,800 AA years BB Indicating the most desirable project and the least desirable project using this method. years CC years
Moving to another question will save this response. uestion 8 Question of 10N XYZ is evaluating a project that would require the purchase of a piece of equipment for $520,000 today. During year 1, the project is expected to have relevant revenue of $762,000, relevant costs of $190,000. and relevant depreciation of $135,000. XYZ would need to borrow $520,000 today to pay for the equipment and would need to make an interest payment of $37,000 to the bank in 1 year. Relevant net income for the project in year 1 is expected to be $337,000. What is the tax rate expected to be in year 1? OA rate equal to or greater than 18.65% but less than 23.94% OA rate equal to or greater than 23.94% but less than 27.34% O A rate less than 18.65% or a rate greater than 49.14% OA rate equal to or greater than 36.16% but less than 49.14% O A rate equal to or greater than 27.34% but less than 36.16%
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Egyptat Telecom is considering two projects for expansion of a well-known system. Both alternatives are summarized below. Egyptsat's MARR is 0.08 per year for such projects, and repeatability may be assumed. Expansion Project A B Capital Investment 1001000 1250000 Annual Revenue 761400 580700 Annual Expenses 500200 359900 Useful Life 5 8 Salvage Value 100000 150000 a) what is the LCM? b) Calculate AW(A) = ) Calculate AW(B) = d) which alternative should you recommend to Egyptsat Telecom? (1 or 2)
3. Analysis of a replacement project At times firms will need to decide if they want to continue to use their current equipment or replace the equipment with newer equipment. The company will need to do replacement analysis to determine which option is the best financial decision for the company. Price Co. is considering replacing an existing piece of equipment. The project involves the following: • The new equipment will have a cost of $1,800,000, and it will be depreciated on a straight-line basis over a period of six years (years 1–6). • The old machine is also being depreciated on a straight-line basis. It has a book value of $200,000 (at year 0) and four more years of depreciation left ($50,000 per year). • The new equipment will have a salvage value of $0 at the end of the project's life (year 6). The old machine has a current salvage value (at year 0) of $300,000. • Replacing the old machine will require an investment in net working capital (NOWC) of $50,000…