1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
olya-2409 [2.1K]
3 years ago
15

Bottoms Up Diaper Service is considering the purchase of a new industrial washer. It can purchase the washer for $7,200 and sell

its old washer for $2,500. The new washer will last for 6 years and save $1,700 a year in expenses. The opportunity cost of capital is 15%, and the firm’s tax rate is 40%.
a. If the firm uses straight-line depreciation to an assumed salvage value of zero over a 6-year life, what is the annual operating cash flow of the project in years 0 to 6? The new washer will in fact have zero salvage value after 6 years, and the old washer is fully depreciated. (Negative amount should be indicated by a minus sign.)

b. What is project NPV? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)
Business
1 answer:
taurus [48]3 years ago
8 0

Answer:

  • Annual operating cash flow of the project in year 1 through 6 is $ 1,500
  • NPV of the project is - $ 23.25

Explanation:

a.

Cost of new washer = $ 7,200

After tax sales value of old washer = $ 2,500 – ($ 2,500 x 0.4)

= $ 2,500 x 0.6 = $ 1,500

Initial investment = Cost of new washer - After tax sales value of old washer

= $ 7,200 - $ 1,500 = $ 5,700

Straight line annual depreciation of washer = Purchase cost/useful life

= $ 7,200/6 = $ 1,200

Annual operating cash flow = (Revenue as cost savings) x (1 – tax rate) + (tax rate x Depreciation)

= $ 1,700 x (1 – 0.4) + (0.4 x $ 1,200)

= $ 1,700 x 0.6 + 0.4 x $ 1,200

= $ 1,020 + $ 480 = $1,500

Cash flow in year 0 is - $ 5,700.

Annual operating cash flow of the project in year 1 through 6 is $ 1,500

b.

NPV = C x PVIFA (i, n) – initial investment  

C = Annual cash flow = $ 1,500

i = Rate of interest = 15 %

n = No. of periods = 6

NPV = $ 15,000 x PVIFA (15 %, 6) - $ 5,700

= $ 15,000 x 3.7845 - $ 5,700  = $ 5,676.75 - $ 5,700

= - $ 23.25

NPV of the project is - $ 23.25

You might be interested in
What happens to price when the cost of resources rise and falls
JulijaS [17]
In any business, when the cost of resources rise, the price of buying the commodity will also be high, this is because when it cost you much to produce a commodity, you will end up charging a higher price when selling it. Failure to do so may lead to making loses. The opposite is also true, when the cost of resources fall, the pricing will also be less.
6 0
3 years ago
In order to have a high confidence level in a customer survey, what should the sample size accurately reflect?
Damm [24]

In order to have a high confidence level in a customer survey, the sample size accurately reflects the entire population.

A discrete collection of entities with identifiable characteristics, such as humans or animals, for the purposes of analysis and data collection is called a population. It consists of a group of similar species that can inhabit a specific geographical location and interbreed.

A group of people, things, events, organizations, etc. Use populations to draw conclusions. Figure 1: Population. An example of a population is the entire student body of a school. Includes all students studying at the school when the data was collected.

Learn more about population here:brainly.com/question/1437549
#SPJ4

7 0
1 year ago
If competitors can copy or match the products and services the firm offers, it will be difficult to develop a sustainable compet
balu736 [363]

Answer:

resources that are valuable, rare, costly to imitate, and non-substitutable

Explanation:

If competitors can copy or match the products and services the firm offers, it will be difficult to develop a sustainable competitive advantage through product excellence. A firm can, however, develop an advantage through product excellence with resources that are valuable, rare, costly to imitate, and non-substitutable

Apart from product excellence, Intangible assets that have no physical presence like Brand reputation, trademarks and intellectual property are all intangible assets unlike physical resources, cannot buy from the market by other competitors. They are developed within a company and constitute the source of sustainable competitive advantage.  

In particular, the resources that generate competitive advantage are those that possess the VRIO characteristics,which implies that they are  

Valuable, hence there will be no competitive disadvantage

Rare, hence there will be no competitive parity

Imitate, - are costly and difficult to imitate hence they cannot be copied

Organised to Capture Value - which means they are non-substitutable.

4 0
3 years ago
Why are financial intermediaries willing to engage in information collection activities when investors in financial instruments
d1i1m1o1n [39]

Answer:

C. Banks make private​ loans; their conclusions on who is creditworthy are not made public.

Explanation:

Investors in financial instruments who engage in information collection face a free-rider problem, which means other investors may be able to benefit from their information without paying for it.

Individual investors, therefore, have inadequate incentives to devote resources to gather information about borrowers who issue securities.

4 0
3 years ago
As of December 31, 2015, Juneau Company had total cash of $155,000, notes payable of $85,600, and common stock of $52,400. Durin
Illusion [34]

Answer:

ending RE 30,000

Explanation:

Using the acounting equation we solve for the beginning RE

<em>Assets = liab + equity</em>

155,000 = 85,600 + 52,400 + Retained Earnings

155,000 - 85,600 - 52,400 = <em>17,000</em>

beginning RE 17,000

net income

revenues 36,000 - 20,000 expenses = 16,000

dividends: 3,000

ending RE: 17,000 + 16,000 - 3,000 = 30,000

6 0
3 years ago
Other questions:
  • HELPPSPSPPSPSOSPPSSPOSJHDJWK
    10·1 answer
  • Jenny is a line manager at Maxvin Corp. She is assigned the task of understanding and gathering detailed information about the r
    13·1 answer
  • Equipment, beginning of year $ 340,000 Equipment, end of year 420,000 Accumulated depreciation, beginning of year 190,000 Accumu
    9·1 answer
  • Naomi is planning to get a job after graduating from college. Which explains why she should establish a positive credit history?
    8·1 answer
  • The Danser Corporation expects to generate sales equal to $30,000 in January, $33,000 in February, and $38,000 in March. Twenty
    12·1 answer
  • Metro Inc. has two production departments (Lamination and Molding) and three service departments (Human Resources, Technology Su
    14·1 answer
  • After creating a Staffing Management Plan, the project manager and team might create a chart that provides a visual representati
    12·2 answers
  • You purchased 1,600 shares of Barrett Golf Corp. stock at a price of $36.70 per share. While you owned the stock,you received di
    7·1 answer
  • Why do your connection requests get rejected?
    9·1 answer
  • Compared to other industrialized nations, the united states has one of the ________ rates of childhood poverty.
    11·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!