A utility company is considering adding a second feedwater heater to its existing system unit to increase the efficiency of the system and thereby reduce fuel costs. The 150-MW unit will cost $1,650,000 and has a service life of 25 years. The expected salvage value of the unit is considered negligible. With the second unit installed, the efficiency of the system will improve from 55% to 56%. The fuel cost to run the feedwater is estimated at $0.05 kWh. The system unit will have a load factor of 85%, meaning that the system will run 85% of the year. Determine the equivalent annual worth of adding the second unit with an interest rate of 12%.
Q: As of today, the spot exchange rate is €1.00 = $1.25 and the rates of inflation expected to prevail…
A: Here,Spot Exchange Rate is €1.00 = $1.25Inflation Rate of US is 2%Inflation Rate of Euro is 3%
Q: Which of the following factors cannot be used to determine an insurer's limit of liability on…
A: In this question, we are required to determine the factor which cannot be used to determine an…
Q: Net income = ₹3, 00,000/- preferred dividend = ₹30,000/- during the year. In addition it also had…
A: Net Income = ni = ₹3,00,000Preferred Dividend = pd = ₹30,000Total Value of Share = tv =…
Q: You are an angel investor, and 4 entrepreneurs have approached you to build some innovative folding…
A: Net present value is a capital budgeting metric that helps analyze the project's profitability by…
Q: The winner of a lottery chooses to receive annual payments of $170,000 at the end of each year for…
A: Annual Payment = p = $170,000Time = t = 25 YearsInterest Rate = r = 4.2%
Q: (Related to Checkpoint 9.2) (Yield to maturity) The market price is $750 for a 20-year bond ($1,000…
A: Yield to maturity is defined as the anticipated return on bonds when the bonds used to be held till…
Q: Suppose you postpone consumption and invest at 9% when inflation is 3%. What is the approximate real…
A: In this question, we are given:Total return / Nominal Return = 9%Inflation rate = 3%
Q: “Efficient working Capital management leads to improve the operating performance of the business…
A: Effective management of working capital stands as a foundational element in financial strategy,…
Q: Mortgages, loans taken to purchase a property, involve regular payments at fixed intervals and are…
A: According to bartleby guidelines , if multiple questions are asked , then 1st question needs to be…
Q: The company requires a 8% return from its investments. Compute net present values using factors from…
A: The present value is the concept wherein the future cash flows are discounted at a specified…
Q: Bond Issue 1/1/2020 ● ● The company issues $550,000 of 9% bonds that mature in 5 years with…
A: Bond Face Value: $550,000Coupon Rate: 9%Semi-annual Interest PaymentsMaturity: 5 yearsIssued at 95%…
Q: O $90,000 O $105,000 O $82,500 O$99,000 ustomer paid off the account after 15 days, Sombra Corp.…
A: Discount is the amount to be paid less than stated amount and is given for early payment before due…
Q: Jaspreet received a 15 year loan of $300,000 to purchase a house. The interest rate on the loan was…
A: Monthly payment refers to an amount that is paid every month for the repayment of a loan amount…
Q: The current dividend of Best Food Org. is $2.31 and is expected to grow at 11.00% for seven years.…
A: Current dividend $2.31Growth rate for the first 7 years11%Number of years7Growth rate after 7…
Q: An all-equity firm is considering the following projects: Project W X Y Z Beta IRR .54 .91 1.09 1.83…
A: Expected return on investment is the probability of returns that is available to the investors. The…
Q: Tiger Towers, Inc. is considering an expansion of their existing business, student apartments. The…
A: Here,Value of Land $ 1,000,000.00No.of Office Suites20Revenue per Suites $…
Q: What is the beta for a firm with 40% equity and 60% debt if a similar firm with 55% equity and 45%…
A: Beta is a measure of the risk of the company It is a function of the leverage and the type of…
Q: repare an amortization schedule for the first 3 payments (in $) of a $68,000 mortgage at 5% for 30…
A: Amortization refers to the spread of payment over a certain time duration. An amortization schedule…
Q: The internal rate of return (IRR) refers to the compound annual rate of return that a project…
A: Here, YearCash Flows0 $ (1,400,000.00)1 $…
Q: Lopez Company is considering three alternative investment projects below: Project 1 5.2 years…
A: Payback Period: The time required to recover the initial investment in a project. Choose an option…
Q: You need to estimate the value of Laputa Aviation. You have the following forecasts (in millions of…
A: The company's total worth today is equivalent to the total of the cash flows along with the terminal…
Q: A company has agreed to pay a lawsuit of 3 million dollars in 4 years. How much should the company…
A: In this question, we are required to determine the amount company must deposit today to have $3…
Q: Finance companies can be independently owned. Many are subsidiaries of financial institutions or…
A: A captive finance company is a subsidiary that provides financing for the customers of the parent…
Q: Hartman Motors has $20 million in assets, which were financed with $5 million of debt and $15…
A: Unlevered beta is the beta for a company with zero debt I its capital structure. In that case, the…
Q: Beta of a project. Magellan is adding a project to the company portfolio and has the following…
A: IF CAPM holds good,Expected Return of Project = Risk-free rate + (Expected market - Risk Free…
Q: Mitsu Corporation has 100,000 shares of common stock outstanding. The stock currently sells for $50…
A: WACC is the weighted average cost of capital. It is the blended cost of capital. WACC takes into…
Q: If a person wants to get back £10,000 in an investment which pays 6.7% monthly interest after 2…
A: No. of periods=No. of years * No. of interest payments.=2years∗12times=24 Periods.Rate of interest…
Q: What are some factors that go into calculating life insurance for a client? ☐ Current life insurance…
A: Life insurance is a financial contract designed to provide a measure of financial security to the…
Q: After a S-for-1 stock split, Tyler Company paid a dividend of $0.95 per new share, which last year's…
A: Dividend per share is the amount of money that a company pays out to its shareholders for each share…
Q: Fixed costs = i
A: Fixed cost is the starting cost of business, that is when no goods are produced (q=0)C(q) when q is…
Q: Penn Corporation is analyzing the possible acquisition of Teller Company. Both firms have no debt.…
A: Answer-aCash cost=66,000,000Equity cost =…
Q: Which of the following changes would tend to increase the cost of capital for a traditional firm? O…
A: a). Increasing the amount of debt financing while reducing the amount of equity financing increases…
Q: The following table indicates the net cash flows of a capital asset: Year Net Cash Flow 0 $-159,000…
A: Cash flow in year 0 = Initial investment = -159,000 (negative sign because it is a cost)Net cash…
Q: Sand Key Development Company has a capital structure consisting of $20 million of 10% debt and $30…
A: When the earnings per share is the same when debt financing is used and when equity financing is…
Q: On December 31, 2023, Berclair Incorporated had 300 million shares of common stock and 5 million…
A: Earnings Per Share:EPS is an important indicator of a company’s profitability and is widely used by…
Q: Melissa Cutt is thinking about buying some shares of EZLawn Equipment, at $41.87 per share.. She…
A: A corporation utilizes the required return as the minimal rate of return that a project must create…
Q: Using the data below, calculate the ROI for Company A Company A Operating assets Required rate of…
A: Positive residual income shows that the person or company is making more money than the legally…
Q: D) inverted 4. Ali is saving for a downpayment to buy a house. He deposits a fixed amount every…
A: Down payment is out of pocket cash money paid for the purchase of a vehicle or home and it is a…
Q: We look at price/earnings ratios as a gauge of the appropriateness of market valuations. True or…
A: Price/Earnings (P/E) ratios are commonly used as a valuation metric to assess the appropriateness of…
Q: Builtrite Co. is looking to install new equipment that will cost $2,750,000. The cash flows expected…
A: IRR is also known as Internal rate of Return. It is a capital budgeting technique which helps in…
Q: Alpha Industries is considering a project with an initial cost of $8.4 million. The project will…
A: NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…
Q: An individual wishes to accumulate $1,700,000 in 20 years. If he wants to deposit a certain amount…
A: Future value refers to the anticipated value of an investment or asset at a future point in time,…
Q: Slow 'n Steady, Inc., has a stock price of $35, will pay a dividend next year of $3.20, and has…
A: In this question, we are required to determine the cost of equity capital.
Q: Everyone uses money, and it is important to understand what factors affect the cost of money.…
A: The scenario involves a decision regarding investment in a friend's business versus Treasury bonds,…
Q: the following information regarding Builtrite's capital structure, calculate its weighted average…
A: Weighted average cost of capital= After tax cost of debt * Weight of debt + Cost of equity * Weight…
Q: You are evaluating two different systems: System A costs $45,000, has a three year life and costs…
A: Avaiable alternatives has different life so, we need to find out the equivalent annualized cost of…
Q: Sarah Palin reportedly was paid a $11 million advance to write her book Going Rogue. The book took…
A: Variables in the question:Advance=$11 millionCash Flow=$8 millionRoyalty=$ 5 million in the 1st…
Q: Ursala, Incorporated, has a target debt-equity ratio of 1.20. Its WACC Is 8.7 percent, and the tax…
A: Debt-equity ratio=debt/equityAfter tax cost of debt= Pretax cost of debt * (1 - tax rate)Weighted…
Q: Beacon Company is considering automating its production facility. The initial investment in…
A: The payback period is a financial metric used to assess the time required to recoup an initial…
Q: You would like to buy a quarterly compounding 14-year, $1,000 par value bond. The an coupon rate on…
A: The bonds are issued by the issuers as debt units that need to be issued to raise funds for a…
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
- The Aubey Coffee Company is evaluating the within-plant distribution system for its new roasting, grinding, and packing plant. The two alternatives are (1) a conveyor system with a high initial cost but low annual operating costs and (2) several forklift trucks, which cost less but have considerably higher operating costs. The decision to construct the plant has already been made, and the choice here will have no effect on the overall revenues of the project. The cost of capital for the plant is 8%, and the projects’ expected net costs are listed in the following table: What is the IRR of each alternative? What is the present value of the costs of each alternative? Which method should be chosen?Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6 years, and an estimated salvage value of 800. The replacement machine is eligible for 100% bonus depreciation at the time of purchase- The replacement machine would permit an output expansion, so sales would rise by 1,000 per year; even so, the new machines much greater efficiency would cause operating expenses to decline by 1,500 per year The new machine would require that inventories be increased by 2,000, but accounts payable would simultaneously increase by 500. Dautens marginal federal-plus-state tax rate is 25%, and its WACC is 11%. Should it replace the old machine?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?
- The Balas Manufacturing Company is considering buying an overhead pulley system. The new system has a purchase price of $150.000, an estimated useful life and MACRS class life of five years, and an estimated salvage value of $l0,000. The system is expected to enable the company 10 economize on electric power usage, labor, and repair costs, as well as to reduce the number of defective products made. A total annual savings of $95,000 will be realized if the new pulley system is installed. 1l1e company is in the 35% marginal tax bracket. 111e initial investment will be financed with 40% equity and 60% debt. The before-tax debt interest rate. which combines both short-term and long-term financing. is 12% with the loan to be repaid in equal annual installments over the project life.(a) Determine the after-tax cash flows.(b) Evaluate this investment project by using a MARR of 20%.(c) Evaluate this investment project on the basis of the !RR criterion.The Balas Manufacturing Company is considering buying an overhead pulley system. The new system has a purchase price of $150.000, an estimated useful life and MACRS class life of five years, and an estimated salvage value of $l0,000. The system is expected to enable the company 10 economize on electric power usage, labor, and repair costs, as well as to reduce the number of defective products made. A total annual savings of $95,000 will be realized if the new pulley system is installed. 1l1e company is in the 35% marginal tax bracket. The initial investment will be financed with 40% equity and 60% debt. The before-tax debt interest rate. which combines both short-term and long-term financing. is 12% with the loan to be repaid in equal annual installments over the project life.(a) Determine the after-tax cash flows.(b) Evaluate this investment project by using an MARR of 20%.(c) Evaluate this investment project on the basis of the IRR criterion.Alliance Manufacturing Company is considering the purchase of a new automated drill press to replace an older one. The machine now in operation has a book value of zero and a salvage value of zero. However, it is in good working condition with an expected life of 10 additional years. The new drill press is more efficient than the existing one and, if installed, will provide an estimated cost savings (in labor, materials, and maintenance) of $6,000 per year. The new machine costs $25,000 delivered and installed. It has an estimated useful life of 10 years and a salvage value of $1,000 at the end of this period. The firm’s cost of capital is 14 percent, and its marginal income tax rate is 40 percent. The firm uses the straight-line depreciation method. Complete the following table to compute the net present value (NPV) of the investment. (Hint: Remember that, in Year 10, Alliances also receives the salvage value of the machine.) Year Cash Flow PV Interest Factor at 14%…
- Alliance Manufacturing Company is considering the purchase of a new automated drill press to replace an older one. The machine now in operation has a book value of zero and a salvage value of zero. However, it is in good working condition with an expected life of 10 additional years. The new drill press is more efficient than the existing one and, if installed, will provide an estimated cost savings (in labor, materials, and maintenance) of $6,000 per year. The new machine costs $25,000 delivered and installed. It has an estimated useful life of 10 years and a salvage value of $1,000 at the end of this period. The firm’s cost of capital is 14 percent, and its marginal income tax rate is 40 percent. The firm uses the straight-line depreciation method.a. What is the net cash flow in year 0 (i.e., initial outlay)?b. What are the net cash flows after taxes in each of the next 10 years?c. What is the NPV of the investment?d. Should Alliance replace its existing drill press?Dell is considering replacing one of its material handling systems. It has an annual O&M cost of $48,000, a remaining operational life of 8 years, and an estimated salvage value of $6,000 at that time. A new system can be purchased for $175,000. It will be worth $50,000 in 8 years, and it will have annual O&M costs of only $17,000 per year due to new technology. If the new system is purchased, the old system will be traded in for $55,000, even though the old system can be sold for only $45,000 on the open market. Leasing a new system will cost $31,000 per year, payable at the beginning of the year, plus operating costs of $15,000 per year payable at the end of the year. If the new system is leased, the existing material handling system will be sold for its market value of $45,000. Use a planning horizon of 8 years, an annual worth analysis, and MARR of 15% to decide which material handling system to recommend: (i) keep existing, (ii) trade in existing and purchase new, or (iii)…Sarasota Bottling Corporation is considering the purchase of a new bottling machine. The machine would cost $450,000 and has an estimated useful life of 8 years with zero salvage value. Management estimates that the new bottling machine will provide net annual cash flows of $78,750. Management also believes that the new bottling machine will save the company money because it is expected to be more reliable than other machines, and thus will reduce downtime. Click here to view PV tables. How much would the reduction in downtime have to be worth in order for the project to be acceptable? Sarasota's discount rate is 10%. (Use the above table.) (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to O decimal places, e.g. 5,275.) Reduction in downtime would have to have a present value $
- Ballard MicroBrew is considering the purchase of an automated bottling machine for $120,000. The machine would replace an old piece of equipment that costs $30,000 per year to operate. The new machine would cost $12,000 per year to operate. The old machine currently in use is fully depreciated and could be sold now for a salvage value of $40,000. The new machine would have a useful life of 10 years with no salvage value. Required: 1. What is the annual depreciation expense associated with the new bottling machine? 2. What is the annual incremental net operating income provided by the new bottling machine? 3. What is the initial investment used for calculating the machine's simple rate of return? 4. What is the simple rate of return on the new bottling machine? Note: Round your answer to 1 decimal place i.e. 0.123 should be considered as 12.3% 1. Depreciation expense 2. Incremental net operating income 3. Initial investment 4. Simple rate of return $ $ 12,000 80,000Apricot Computers is considering replacing its material handling system and either purchasing or leasing a new system. The old system has an annual operating and maintenance cost of $35,000, a remaining life of 8 years, and an estimated salvage value of $5,100 at that time. A new system can be purchased for $286,000; it will be worth $26,000 in 8 years; and it will have annual operating and maintenance costs of $18,000/year . If the new system is purchased, the old system can be traded in for $18,000. Leasing a new system will cost $27,000/year , payable at the beginning of the year, plus operating costs of $9,100/year , payable at the end of the year. If the new system is leased, the old system will be sold for $10,000. MARR is 14%. Compare the annual worths of keeping the old system, buying a new system, and leasing a new system based upon a planning horizon of 8 years. What is the EUAC of the best option using the cash flow approach?The management of Ballard MicroBrew is considering the purchase of an automated bottling machine for $55,000. The machine would replace an old piece of equipment that costs $14,000 per year to operate. The new machine would cost $6,000 per year to operate. The old machine currently in use could be sold now for a salvage value of $20,000. The new machine would have a useful life of 10 years with no salvage value. Required: 1. What is the annual depreciation expense associated with the new bottling machine? 2. What is the annual incremental net operating income provided by the new bottling machine? 3. What is the amount of the initial investment associated with this project that should be used for calculating the simple rate of return? 4. What is the simple rate of return on the new bottling machine? (Round your answer to 1 decimal place i.e. 0.123 should be considered as 12.3%.)