Homework Answers
Requirement A:
| Net present value | ($14,177) |
Calculations:
| Present value of cash inflows | $112,059 |
| [$19,500 x 5.7466 PV annuity factor (8%, 7 years)] | |
| Present value of salvage value | $7,564 |
| [$14,000 x 0.5403 PV factor (8%, 7 years)] | |
| Total present value of cash flows | $119,623 |
| (Less): Initial investment | ($133,800) |
| Net present value | ($14,177) |
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Co boy Recording Studio s considering the investment o $133.000 in a new ecording equipment. It end of its life. Cowboys s tinancial managers estimate that the firm's cost of capital is 10%. Use a e estimated that the new equipment will generate additional cash now o $19.500 per yea for each year o its 7-year life and wil have a salvage value o $14,500 at the 4 and ab e 5 use appropriate facto s trom the tables provided....
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Lakeside Inc. is considering replacing old production equipment
with state-of-the-art technology that will allow production cost
savings of $10,000 per month. The new equipment will have a
five-year life and cost $390,000, with an estimated salvage value
of $40,000. Lakeside’s cost of capital is 10%. Table 6-4 and Table
6-5. (Use appropriate factor(s) from the
tables provided. Round the PV factors to 4
decimals.)
Required:
Calculate the present value ratio of the new production equipment.
(Round your answer to 2...
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additional productive facilities. The new machinery is expected to
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is by the straight-line method. During the life of the investment,
annual net income and net annual cash flows are expected to be
$18,468 and $45,000, respectively. Vilas has a 12% cost of capital
rate, which is the required rate of return on the investment.
Click here to view...
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