× Your answer is incorrect.A university's college of engineering would like to determine how much it will cost to keep its computing equipment current. In today'sdollars, the college estimates that it will cost $190,000 to replace old computing equipment. Due to decreasing prices on computers, itestimates that this cost will decrease each of the following years by 7%. What would the present worth of computing updates for years1-5 be, assuming a required 15% real return on its investments?Click here to access the TVM Factor Table calculator.ACarry all interim calculations to 5 decimal places and then round your final answer to a whole number. The tolerance is + $10.564921.75

Finding Costs for Each Year: We start by calculating the cost for each year based on the given…

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Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

Chapter26: Capital Budgeting (capbud)

Section: Chapter Questions

Problem 5R

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A university's college of engineering would like to determine how much it will cost to keep its computing equipment current. In today's dollars, the college estimates that it will cost $110,000 to replace old computing equipment. Due to decreasing prices on computers, it estimates that this cost will decrease each of the following years by 3%. What would the present worth of computing updates for years 1-5 be, assuming a required 16% real return on its investments?
A university's college of engineering would like to determine how much it will cost to keep its computing equipment current. In today's dollars, the college estimates that it will cost $100,000 to replace old computing equipment. Due to decreasing prices on computers, it estimates that this cost will decrease each of the following years by 2%. What would the present worth of computing updates for years 1-5 be, assuming a required 10% real return on its investments? Click here to access the TVM Factor Table calculator. $ Carry all interim calculations to 5 decimal places and then round your final answer to a whole number. The tolerance is ± $10. eTextbook and Media Hint Save for Later Attempts: 0 of 1 used Submit Answer
A university's college of engineering would like to determine how much it will cost to keep its computing equipment current. In today's dollars, the college estimates that it will cost $160,000 to replace old computing equipment. Due to decreasing prices on computers, it estimates that this cost will decrease each of the following years by 4%. What would the present worth of computing updates for years 1-5 be, assuming a required 11% real return on its investments? Click here to access the TVM Factor Table calculator. $ Carry all interim calculations to 5 decimal places and then round your final answer to a whole number. The tolerance is ± $10.
Suppose that Wheaton College has decided to build a new science center. The ground breaking for the new science center occurred in 2008. Construction was expected to cost roughly $4 million.∗ The benefits of building a new science center (what do you think these would involve?) were estimated at $5.5 million. By 2010, however, prospects did not look so rosy due to worsening economic conditions and budgetary worries. The total estimated cost had also risen to $6 million of which $2 million had already been spent. (a) Had the Board of Trustees foreseen these difficulties in 2008, should they have started the project? Explain. (b) Now that it is 2010 and assuming calculated benefits have not changed, should they complete the project? Explain.
What is the simple payback on this improvement? (Ignore Discount Rate) A silicon wafer manufacturing process has a potential improvement but the total cost of the system improvement over the expected remaining service life of 5 years is unknown. The initial cost of the improvement is $7,000 and the annual maintenance cost of the improvement is $650 with a discount rate of 8%. 1. What is the total cost of the machine improvement at the present time? 2. The process improvement is expected to generate a cost savings of about $3000 per year. What is the total cost savings of the improvement at the present time?
The management of Kimco is evaluating the possibility of replacing their large mainframe computer with a modern network system that requires much less office space. The network would cost $760,000 (including installation costs) and would save $150,000 per year in net cash flows (accounting for taxes and depreciation) in Year 1-2, $160,000 in year3-4, and $120,000 in year 5 due to efficiency gains. The current mainframe has a remaining book value of $160,000 and would be immediately sold for $120,000. Kimco’s discount rate is 10%, and its tax rate is 25%. Based on NPV, should management install the network system?
Pliable Corporation is trying to decide when to purchase a new computer system for its offices. The company's opportunity cost of capital is 10 percent annually. Analysts have projected that the cost of the computer system will fall over time due to improvements in manufacturing methods. Analysts have also estimated the present value—as of the date of purchase—of Pliable's savings from purchasing the computer system. These savings increase with the length of delay in purchasing the computers because of anticipated enhancements over time in computer capacity and speed. The table below shows both sets of estimates. A. Find the optimal date for Pliable to purchase the computer system, assuming that the future cash flows are subject to geometrically increasing risk. Explain your reasoning and show your work. B. Suppose instead that Pliable faces risk that is just one-period-ahead and that the risk-free rate of return is 3 percent. Find the optimal date for Pliable to purchase the…
# 1. A theater owner is considering the installation of an air conditioning system which he believed will increase the number of theater goers by an average of l100 persons a day. The average price of ticket per person is P80.00 and the theater is in operation 360 days each year. The aircon system installation will cost P600,000.00 and it is estimated that maintenance cost is P12,000.00 per year. Based on the performance of similar systems, the daily operation cost will be P 2000.00 and the estimated life is 10 years. Taxes and insurance would be 3.5% of the first cost. For depreciation, assume that money can be invested at 12% compounded annually. If the theater is now earning a profit of 15% on its investment, would you recommend the installation of the new system? Use the rate of return method.
Consider a proposal to enhance the vision system used by a postal service to sort mail. The new system is estimated to cost $1.1 million and will incur an additiona $200,000 per year in maintenance costs. The system will produce annual savings of $500,000 each year (primarily by decreasing the percentage of misdirected mail and reducing the amount of mail that must be sorted manually). The MARR is 10% per year, and the study period is five years at which time the system will be technologically obsolete (worthless). The PW of this proposal is PW(10%) = −$1,100,000 + ($500,000 − $200,000)(P/A, 10%, 5) = $37,236. Determine how sensitive the decision to invest in the system is to the estimates of investment cost and annual savings.
A design firm is considering investing in a software suite that costs $200,000. It estimates that the software will allow it to better present its design ideas and generate an additional revenue of $70,000 per year for each of the next 4 years. At the end of those 4 years, the firm will need to upgrade its software and the software suite would have negligible salvage value. Due to changes in the economy, the design firm is reevaluating its MARR - it is not sure whether it should be 9%, 12%, or 14%. Calculate the present worth at each of these MARRS, and determine for which values of the MARR the investment will be economically justified. Click here to access the TVM Factor Table calculator. PW(9%): 2$ PW(12%): $ PW(14%): Justified when MARR is %. Carry all interim calculations to 5 decimal places and then round your final answers for the PWs to a whole number and for the IRR to 1 decimal place. The tolerance is ±20 for the PWs and ±0.2 for the IRR.
2. As information becomes increasingly available additional storage is needed for the handling of client's insurance capacities. Short Stop is looking to modernise the hardware in which they store the data. Under the proposed idea, Short Stop would purchase dedicated virtual servers and cloud storage which costs $50,000 per year, indefinitely, from the end of year 2 onward (as it takes a year to implement this change). If implemented this would result in an immediate cost saving of $500,000. Short Stop has estimated that it could invest this money elsewhere, as an alternative, at 8% p.a. From a business perspective describe the concept of time value of money in such a way that your description sheds light on how businesses come to financial investment decisions or how investments today can be valued in the future. In the discussion your manager wants a clear description on the benefits of this concept for the business (or any business).
You are in the mail-order business and you are considering upgrading your mail ordering system to make your operations more efficient and to increase sales. The computerized ordering system will cost $80,000 to install and has maintenance costs $20,000 each year. The system is expected to last five years with no salvage value at the end of the service period. The new order system will save $60,000 in operating costs each year and bring in additional sales revenue in the amount of $40,000 per year for the next five years. If your interest rate is 15%, find the present worth of the investment. A) $184,820.25 B) $188,172.41 C) $248,737.06 D) Answers A, B and C are not correct Maintenance money for a new building at a college is being solicited from potential alumni donors. You would like to make a donation to cover all future expected maintenance costs for the building. These maintenance costs are expected to be $50,000 each year for the first 25 years, $60,000 for each of years 26…

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