Blooper Industries must replace its magnoosium purification system. Quick & Dirty Systems sells a relatively cheap purification systemfor $10 million. The system will last 5 years. Do-It-Right sells a sturdier but more expensive system for $16 million; it will last for 8 years.Both systems entail $1 million in operating costs; both will be depreciated straight-line to a final value of zero over their useful lives;neither will have any salvage value at the end of its life. The firm's tax rate is 30%, and the discount rate is 15%. Either machine will bereplaced at the end of its life.a. What is the equivalent annual cost of investing in the cheap system? (Do not round intermediate calculations. Enter your answeras a positive value. Enter your answer in millions rounded to 3 decimal places.)Equivalent annual costmillionsb. What is the equivalent annual cost of investing in the more expensive system? (Do not round intermediate calculations. Enter youranswer as a positive value. Enter your answer in millions rounded to 3 decimal places.)Equivalent annual costmillions

Equivalent Annual Cost (EAC) is widely used by businesses to assess the economic feasibility of…

a. What is the equivalent annual cost of investing in the cheap system? (Do not round intermediate calculations. Enter your answer as a positive value. Enter your answer in millions rounded to 3 decimal places.) Equivalent annual cost millions b. What is the equivalent annual cost of investing in the more expensive system? (Do not round intermediate calculations. Enter your answer as a positive value. Enter your answer in millions rounded to 3 decimal places.)

a. What is the equivalent annual cost of investing in the cheap system? (Do not round intermediate calculations. Enter your answer as a positive value. Enter your answer in millions rounded to 3 decimal places.) Equivalent annual cost millions b. What is the equivalent annual cost of investing in the more expensive system? (Do not round intermediate calculations. Enter your answer as a positive value. Enter your answer in millions rounded to 3 decimal places.)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 10P

See similar textbooks

Similar questions

Although the Chen Company’s milling machine is old, it is still in relatively good working order and would last for another 10 years. It is inefficient compared to modern standards, though, and so the company is considering replacing it. The new milling machine, at a cost of $110,000 delivered and installed, would also last for 10 years and would produce after-tax cash flows (labor savings and depreciation tax savings) of $19,000 per year. It would have zero salvage value at the end of its life. The project cost of capital is 10%, and its marginal tax rate is 25%. Should Chen buy the new machine?
Blooper Industries must replace its magnoosium purification system. Quick & Dirty Systems sells a relatively cheap purification system for $20 million. The system will last 5 years. Do-It-Right sells a sturdier but more expensive system for $21 million; it will last for 6 years. Both systems entail $1 million in operating costs; both will be depreciated straight- line to a final value of zero over their useful lives; neither will have any salvage value at the end of its life. The firm's tax rate is 30%, and the discount rate is 13%. a. What is the equivalent annual cost of investing in the cheap system? Note: Do not round intermediate calculations. Enter your answer as a positive value. Enter your answer in millions rounded to 2 decimal places. b. What is the equivalent annual cost of investing in the more expensive system? Note: Do not round intermediate calculations. Enter your answer as a positive value. Enter your answer in millions rounded to 2 decimal places. c. Which system…
Blooper Industries must replace its magnoosium purification system. Quick & Dirty Systems sells a relatively cheap purification system for $16 million. The system will last 4 years. Do-It-Right sells a sturdier but more expensive system for $18 million; it will last for 5 years. Both systems entail $3 million in operating costs; both will be depreciated straight-line to a final value of zero over their useful lives; neither will have any salvage value at the end of its life. The firm’s tax rate is 30%, and the discount rate is 12%. Either machine will be replaced at the end of its life. a. What is the equivalent annual cost of investing in the cheap system? (Do not round intermediate calculations. Enter your answer as a positive value. Enter your answer in millions rounded to 2 decimal places.) b. What is the equivalent annual cost of investing in the more expensive system? (Do not round intermediate calculations. Enter your answer as a positive value. Enter your answer in…
Blooper Industries must replace its magnoosium purification system. Quick & Dirty Systems sells a relatively cheap purification system for $10 million. The system will last 5 years. Do-It-Right sells a sturdier but more expensive system for $12 million; it will last for 8 years. Both systems entail $1 million in operating costs; both will be depreciated straight-line to a final value of zero over their useful lives; neither will have any salvage value at the end of its life. The firm's tax rate is 30%, and the discount rate is 14%. a. What is the equivalent annual cost of investing in the cheap system? Note: Do not round intermediate calculations. Enter your answer as a positive value. Enter your answer in millions rounded to 2 decimal places. b. What is the equivalent annual cost of investing in the more expensive system? Note: Do not round intermediate calculations. Enter your answer as a positive value. Enter your answer in millions rounded to 2 decimal places. c. Which system…
Blooper Industries must replace its magnoosium purification system. Quick & Dirty Systems sells a relatively cheap purification system for $15 million. The system will last 5 years. Do-It-Right sells a sturdier but more expensive system for $20 million; it will last for 10 years. Both systems entail $1 million in operating costs; both will be depreciated straight-line to a final value of zero over their useful lives; neither will have any salvage value at the end of its life. The firm's tax rate is 30%, and the discount rate is 13%. a. What is the equivalent annual cost of investing in the cheap system? Note: Do not round intermediate calculations. Enter your answer as a positive value. Enter your answer in millions rounded to 2 decimal places. b. What is the equivalent annual cost of investing in the more expensive system? Note: Do not round intermediate calculations. Enter your answer as a positive value. Enter your answer in millions rounded to 2 decimal places. c. Which system…
Blooper Industries must replace its magnoosium purification system. Quick & Dirty Systems sells a relatively cheap purification system for $12 million. The system will last 4 years. Do-It-Right sells a sturdier but more expensive system for $20 million; it will last for 8 years. Both systems entail $2 million in operating costs; both will be depreciated straight-line to a final value of zero over their useful lives; neither will have any salvage value at the end of its life. The firm's tax rate is 30%, and the discount rate is 12%. a. What is the equivalent annual cost of investing in the cheap system? Note: Do not round intermediate calculations. Enter your answer as a positive value. Enter your answer in millions rounded to 2 decimal places. b. What is the equivalent annual cost of investing in the more expensive system? Note: Do not round intermediate calculations. Enter your answer as a positive value. Enter your answer in millions rounded to 2 decimal places. c. Which system…
Blooper Industries must replace its magnoosium purification system. Quick & Dirty Systems sells a relatively cheap purification system for $10 million. The system will last 5 years. Do-It-Right sells a sturdier but more expensive system for $12 million, it will last for 8years. Both systems entail $1 million in operating costs; both will be depreciated in an asset class that has a CCA rate of 30%; neither will have any salvage value at the end of its life. The firm's tax rate is 35%, and the discount rate is 12%. Which system should blooper install? The answer should be in excel with details, please?
Sumami Ink considers replacing its old machine. The old machine’s current market value is $2 million and its current book value is $1 million. If not sold, it will have a market value at the end of 5 years of $200,000 and a book value of zero. A replacement new machine costs $3 million, and at the end of the five years it will have a market value of $500,000, and will be fully depreciated by the straight‐line method. Assume that the asset class will be closed, and the corporate tax rate is 34%. What is the total investment cash flow in year 0 and the total investment cash flow by the end of year 5? Multiple Choice -$1000K & $198K respectively. -$3000k & $500k respectively. -$1000K & $300K respectively. -$1,340k & $300k respectively. -$1,340k & $198k respectively. -$5000k & $700k respectively.
Green Company can purchase a new machine for $100,000. The new machine will have a five-year life with no salvage value. The machine should reduce labor costs by $22,000 per year. Green Company would have to scrap its existing machine, receiving no cash. The existing machine has a book value of $15,000. Should Green purchase the new machine? Yes, as the decreased labor costs are greater than the cost of the new machine. No, as the decreased labor costs are less than the cost of the new machine plus the book value of the existing machine. No, as the decreased labor costs are less than the cost of the new machine. Yes, as the decreased labor costs are greater than the cost of the new machine plus the book value of the existing machine.
X Company is considering the purchase of a new machine. The machine would reduce the amount of part-time labor, at a cost savings of $16,900 per year. In addition, the machine would enable the company to increase production and sales of one of its products by 2,300 units; contribution margin of this product is $5.50 per unit. The machine would cost $150,000, last for four years, and have zero salvage value at the end of its life. 8. Assuming a discount rate of 7%, what is the net present value of buying the new machine? Submit Answer Tries 0/4 9. If the new machine will last for six years instead of four, what is the approximate internal rate of return of buying it? [enter your answer as .XX, so 1% would be .01]
NUBD Co. has an opportunity to acquire a new machine to replace one of its present machines. The new machine would cost P90,000, have a five year life, and no estimated salvage value. Variable operating costs would be P100,000 per year. The present machine has a book value of P50,000 and a remaining life of five years. Its disposal value now is P5,000, but it would be zero after five years. Variable operating costs would be P125,000 per year. Ignore present value calculations and income taxes. Considering the five years in total, what would be the difference in profit before income taxes by acquiring the new machine as opposed to retaining the present one?
Denny Corporation is considering replacing a technologically obsolete machine with a new state-of-the-art numerically controlled machine. The new machine would cost $290,000 and have a tenericals controll nortunately, the new machine would have no salvage value. The new machine would cost $48,000 per year to operate and maintain but would save $89,000 per year in labor and other costs. The old machine can be sold now for scrap for $29,000. The simple rate of return on the new machine is closest to (Ignore income taxes.):