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user100 [1]
3 years ago
13

The Oviedo Company is considering the purchase of a new machine to replace an obsolete one. The machine being used for the opera

tion has a book value and a market value of zero. However, the machine is in good working order and will last at least another 10 years. The proposed replacement machine will perform the operation so much more efficiently that Oviedo’s engineers estimate that it will produce after-tax cash flows (labor savings) of $8,000 per year. The after-tax cost of the new machine is $45,000, and its economic life is estimated to be 10 years. It has zero salvage value. The firm’s WACC is 10%, and its marginal tax rate is 25%. Should Oviedo buy the new machine?
Business
1 answer:
Elza [17]3 years ago
6 0

Answer:

Yes it should as the net present value at the firm WACC is positive $ 4,156.54

Explanation:

we are given with the after-tax cost for the machine and after-tax cost of the labor cost savings the new machine will provide

So we should check if the present value of the savings is greater or equal than the machine cost:

C \times \frac{1-(1+r)^{-time} }{rate} = PV\\  

C $ 8,000

time 10 years

rate=WACC= 0.1

8000 \times \frac{1-(1+0.1)^{-10} }{0.1} = PV\\  

PV $49,156.5368  

Net present value:

inflow - cost

49,156.54 - 45,000 = 4,156.54

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Companies seeking good PR may host a(n) ________ to communicate new hires, new facilities, or community service projects.
Lynna [10]

Answer:

The correct answer is letter "A": press conference.

Explanation:

Press conferences allow the media to obtain information about different organizations that may be of common interest at the moment. They are also a sign that the company questioned can face the public which enhances the Public Relationships (PR) between that institution and the rest of companies within the industry.

5 0
2 years ago
Over the first four years of the company's life, the company earned the following net income (loss): S $3,000; $6,000, and ($2,0
Klio2033 [76]

Answer:

The answer is D.

Explanation:

Total earnings in 4 years

= 6000 + 3000 + 6000 - 2000

= $13,000

Ending retained earnings after 4 years

= $10,000

Total amount paid out as dividend in 4 years

= $13,000 - 10,000

= $3,000

Average amount of dividends paid per year

= $3,000/4

= $750

5 0
3 years ago
________ are voluntary collectives with the purpose of advancing their members' interests. one example of such a collective is t
Maru [420]

The answer in the space provided is the mutual benefit organizations as this is the one responsible of advancing the members’ interests in which is a voluntary collective. This is an organization or corporation that are non profited and are being established in ways that will be of benefit to the people involved.

3 0
3 years ago
Read 2 more answers
This year Erie achieved an ROE of 23.9%. Suppose the Board of Directors of Erie mandates that management take measures to increa
allochka39001 [22]

Answer:

c. Erie s ROE will remain the same

Explanation:

As the return on asset is calcualte using the asset figure it will not change with a financial leverage measurement.

As the financial leverage acts in the composition of other side of the accounting (assets = liabilitis + equity) it will change the return on equity, the debt ratio and other metric related to this side but, not the return on assets.

8 0
3 years ago
The following information is taken from Reagan Company's December 31 balance sheet: Cash and cash equivalents $ 9,619 Accounts r
abruzzese [7]

Answer:

46.07 days

Explanation:

Calculation for the firm's days' sales uncollected for the year

Using this formula

Days' Sales Uncollected Ratio = Ending Accounts Receivable/Net Sales * 365

Let plug in the formula

Days' Sales Uncollected Ratio = ($76,422/$605,500) * 365

Days' Sales Uncollected Ratio = 46.067 days

Days' Sales Uncollected Ratio = 46.07 days Approximately

Therefore the firm's days' sales uncollected for the year is: 46.07 days

5 0
2 years ago
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