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kkurt [141]
3 years ago
9

ABC Company is considering the acquisition of a new piece of equipment to replace an old, outdated machine currently used in its

business operations. The new equipment would cost $135,000 and is expected to last 9 years. The new equipment would require a repair of $25,000 in year four and another repair costing $80,000 in year eight. Purchasing this new equipment would
require an immediate investment of $30,000 in working capital which would
be released for investment elsewhere at the end of the 9 years. The new
equipment is expected to have a $10,000 salvage value at the end of nine
years. The new equipment is expected to generate a cost savings of $60,000
per year. ABC Company has a cost of capital of 16% and an income tax rate
of 40%.
Required:
Calculate the net present value (NPV) of the new equipment.

Business
1 answer:
Paraphin [41]3 years ago
7 0

Answer:

NPV is -$12,960

Explanation:

Net present value is the Net value all cash inflows and outflows in present value term. All the cash flows are discounted using a required rate of return.

In this question all the expenses are cash outflows and The cost saving is the cash inflow from the new machine investment.  

Working for the NPV is attached with the answer please find it.

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4 years ago
The following statements accurately describe the difference between saving and investing EXCEPT…
vagabundo [1.1K]

Answer:

Saving can only be done in person. Investing can be done both in-person and online.

Explanation:

Saving refers to keeping some funds aside for use during emergencies. Individuals and institutions also save as a way of accumulating funds for a specific intention. Banks and other deposit-taking institutions offer saving services to pool funds and lend them for investment and consumption.

Saving will attract lower interest rates, sometimes below the inflation rate. Banks offer lower rates on saving and charges a higher interest rate to borrowers to make profits. Because saving offer lower returns, they are suitable for short-term periods. Savings are relatively safer than investment.

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8 0
4 years ago
The reduction in deposit funds cost to an individual bank brought about by government insurance is an example of the
anastassius [24]

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A private benefit to DIs is that the cost of deposit funds has been reduced because the Government now insures the deposits directly so banks do not have to significantly account for such anymore.

5 0
3 years ago
If the price elasticity of demand for a product is |-2|, this implies that Group of answer choices if the price increases by 2 p
AleksandrR [38]

Answer:

if the price increases by 1 percent, the quantity demanded will decrease by 2 percent.

Explanation:

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7 0
4 years ago
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Y_Kistochka [10]

Answer:

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7 0
3 years ago
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