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
USPshnik [31]
3 years ago
14

South Tel Communications is considering the purchase of a new software management system. The system is called B-lmage, and it i

s expected to reduce drastically the amount of time that
company technicians spend installing new software. South Tel's technicians currently spend 6,000 hours per year on installations, which costs South Tel $25 per hour. The owners of the B-lmage system claim that their software can reduce time on task by at least 25%. The system requires an initial investment of $55,000 and an additional investment of $10,000 for technician training on the new system. Annual upgrades will cost the firm $15,000 per year. The tax treatment of software purchases sometimes calls for amortization of the initial cost over time; sometimes the cost can be expensed in the year of the purchase. Before the tax experts are consulted and for purposes of this initial analysis, South Tel has decided that it will expense the cost of the software in the year of the expenditure. South Tel faces a 3096 tax rate and uses a 9% cost of capital to evaluate projects of this type.

a. Assume that South Tel has sufficient taxable income from other projects so that it can expense the cost of the software immediately. What are the free cash flows for the project for years zero through five?
b. Calculate the NPV and IRR for the project.
Business
1 answer:
gavmur [86]3 years ago
4 0

Answer:

Explanation:

South Tel Communications is considering the purchase of a new software management system. The system is called B-image, and it is expected to drastically reduce the amount of time that company technicians spend installing new software. South Tel's technicians currently spend 6,000 hours per year on installation which cost South Tel $25 per hour. The owners of the B-image system claim that their software can reduce time on task by at least 25%. The system requires an initial investment of $55,000 and an additional investment of$10,000 for technician training on the new system. Annual upgrades will cost the firm $15,000 per year. Because the investment is comprised of software, it can be fully expensed in the year of the expenditure (no depreciation). South Tel faces a 30% tax rate and uses a 9% cost of capital to evaluate projects of this type.

A. Assuming that South Tel has sufficient taxable income from other projects so that it can immediately expense the cost of the software, what are the free cash flows for the project for years zero through five?

Total (65,000)

Cash flow year 1 - 5

Saving on installations per year 450,000

Less: Annual upgrades ( 15,000)

Total 435,000

Less: Tax (30%) (130,500);

Total project free cash flow 304,500.answer

You might be interested in
Suppose two factors are identified for the U.S. economy: the growth rate of industrial production, IP, and the inflation rate, I
mash [69]

Answer:

14.4%

Explanation:

Calculation for what will be your expected rate of return on the stock.

Expected rate of return on the stock=12% + 1(5%-4%) + .7(8%-6%)

Expected rate of return on the stock=12%+1(1%)+.7(2%)

Expected rate of return on the stock=12%+1%+1.4%

Expected rate of return on the stock=14.4%

Therefore your expected rate of return on the stock is 14.4%

7 0
3 years ago
When customer service problems occur and the culture is not customer-focused, the important question for the organization is "Ho
tigry1 [53]

Answer:

We fix it by committing to the customer and setting up an environment to support it.

7 0
3 years ago
Read 2 more answers
In Sheridan Company, the Cutting Department had beginning work in process of 9000 units, transferred out 24600 units, and had an
Tom [10]

Answer:

The 21,100 units were started through company during the month

Explanation:

The number of units were started through company during the month is computed as:

Number of units were started = Transferred out units - Ending work in progress units

where

Transferred out units is 24,600

Ending work in progress units is 3,500

Putting the values above:

Number of units were started = 24,600 - 3,500

= 21,100

Therefore, 21,1600 units were started through company during the month.

Note: The beginning work in progress will be considered as number of units in started is computing.

4 0
3 years ago
What was one benefit of the transcontinental railroad? it made cross-country travel times longer. it ended many risks of traveli
nasty-shy [4]

The benefit of the transcontinental railroad was that it ended many risks of traveling across the country.

<h3>Why was the transcontinental railroad created?</h3>

The American railroad, was created in 1869, with an important innovation through the connection between the coasts of the Atlantic and Pacific oceans, having as benefits the expansion of commercial and passenger transport routes in America.

Therefore, the transcontinental railroad was built using mechanized technology in the 19th century, increasing the safety and speed of travel.

Find out more about transcontinental railroad here:

brainly.com/question/11433327

#SPJ1

4 0
2 years ago
The chief executive officer earns $20,000 per month. as of may 31, her gross pay was $100,000. the tax rate for social security
omeli [17]

The total is $1,437.

Before June she had already paid social security on $100,000 in earnings. So, in June she only needs to pay social security on $18,500.

$18,500 x .062 = $1,147

She pays Medicare on all of June’s earnings = $20,000 x .0145 = $290

The total amount of FICA -social security withheld from this employee in June is $290 + $1,147 = $1,437

5 0
3 years ago
Read 2 more answers
Other questions:
  • Global use of cell phones grew rapidly between 1989 and 2000. below is a scatterplot of the percentage of people in the world wh
    6·1 answer
  • Bonita Industries planned to use 1 yard of plastic per unit budgeted at $101 a yard. However, the plastic actually cost $100 per
    9·1 answer
  • The following monthly data are available for Crane Company. which produces only one product: Selling price per unit, $38; Unit v
    7·1 answer
  • What might be a plausible explanation for the extra entry? give at least two possibilities
    13·1 answer
  • Fill in the blanks with given options:
    5·1 answer
  • For capital budgeting and cost of capital purposes, the firm should always consider retained earnings as the first source of cap
    10·1 answer
  • Fama and French (1992) found that the stocks of firms within the highest decile of book-to-market ratios had an average annual r
    5·1 answer
  • José is the manager of Sandy's Candy, a popular confectioner in Illinois. He is in charge of outlining future organizational goa
    9·1 answer
  • ________ is a technique used to predict future outcomes based on historical data and analytics techniques.
    6·1 answer
  • The post-closing trial balance helps to verify that: (Select all that apply.) Multiple select question. we prepared and posted c
    15·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!