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
erastova [34]
3 years ago
7

Major Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annu

al increase in cash flow of $130,000. The equipment will have an initial cost of $665,000 and have an 8-year life. The equipment has no salvage value. The hurdle rate is 8%. Ignore income taxes. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.)
a. What is the net present value?
b. What would the net present value be with a 12% hurdle rate? (Negative amounts should be indicated by a minus sign.)
c. Based on the NPV calculations, in what range would the equipment’s internal rate of return fall? (Round your answer to 2 decimal places.)
Business
1 answer:
Annette [7]3 years ago
3 0

Answer:

a. $ 82, 063

b. - $ 19,206

c.  11.24%

Explanation:

Net Present Value is calculated by taking the Present Day (Discounted) value of all future Net Cash flows based on the company`s Cost of Capital and subtracting the Initial Cost of the Investment.

<em>Using a Financial Calculation</em>

a.

Cash flow Amount

Cf0 = ($665,000)

Cf1  = $130,000

Cf2 = $130,000

Cf3 = $130,000

Cf4 = $130,000

Cf5 = $130,000

Cf6 = $130,000

Cf7 = $130,000

Cf8 = $130,000

i = 8%

NPV = $ 82, 063

b.

Cash flow Amount

Cf0 = ($665,000)

Cf1  = $130,000

Cf2 = $130,000

Cf3 = $130,000

Cf4 = $130,000

Cf5 = $130,000

Cf6 = $130,000

Cf7 = $130,000

Cf8 = $130,000

i = 12%

NPV = - $ 19,206

c.

Internal Rate of Return = P  + ((N-P)×p/(p+n))

                                      = 8% + ((12%-8%)×$ 82, 063/($ 82, 063+ $ 19,206))

                                      = 11.24%

You might be interested in
Health-Tech Materials is a firm that manufactures medical equipment purchased by hospitals and clinics. The firm employs over 2,
arlik [135]

Answer:

Correct Answer: The least likely question to be included in the ethic test is:

A) What Health-Tech employees will be affected by my actions?

Explanation:

This is because, it does not have a direct implication to the code of conduct expected by the Health-Tech's company when compared with others. <em>For example, seeing a fraud going on in the company, it is expected that the staff should report to the appropriate management staff irrespective of whether the action would affect the staff's friend or not.</em>

4 0
3 years ago
Which famous person was known as the original dollar ​
creativ13 [48]
George Washington: Washington has been called the "Father of His Country" for his manifold leadership in the formative days of the new nation.
4 0
3 years ago
When you lease a car, you never have to worry about the number of miles you drive
vivado [14]

Answer:

False

Explanation:

Generally, a lease limits the number of miles allowable to drive in a year, which is between 12,000 and 15,000 miles. Exceeding the lease limit will result in large charges that may be up to several thousands of dollars

Therefore, it is important to be cautious on the amount of driving done when a car is leased and if needed, more miles can be pre-purchased before the lease agreement is signed

6 0
2 years ago
A 5-year corporate bond yields 10.70%. A 5-year municipal bond of equal risk yields 6.50%. Assume that the state tax rate is zer
Ksenya-84 [330]

Answer:

The multiple choices are as follows:

a.

25.40%

b.

29.03%

c.

39.25%

d.

33.98%

e.

27.38%

The correct option is C,39.25% federal tax rate

Explanation:

In determining the federal tax that one would be indifferent in choosing between the two bonds, we equate the yield of the two bonds as follows with tax element being deducted from corporate bond yield:

6.50%=10.70%*(1-t)

The t is the tax rate which is the unknown

divide both sides by 10.70%

6.50%/10.70%=1-t

0.607476636 =1-t

t=1-0.607476636

t=0.392523364 =39.25%

4 0
3 years ago
Producer surplus is A. the difference between the lowest price a firm would be willing to accept and the price it actually recei
Art [367]
Producer surplus is the difference between how much a person would be willing to accept for given quantity of a good versus how much they can receive by selling the good at the market price. The difference or surplus amount is the benefit the producer receives for selling the good in the market.
4 0
2 years ago
Other questions:
  • : In 2021, Garret Market remained fully open while conducting inventory, but in 2022 Garrett closed during inventory. In 2023, G
    14·2 answers
  • kala and leah partners in best designs have capital balances of $40,000 and $60,000 respectively. adam joins the partnership by
    5·2 answers
  • On January 1, Year 1, Marino Moving Company paid $48,000 cash to purchase a truck. The truck was expected to have a four year us
    13·1 answer
  • Mrs. Smith operates a business in a competitive market. The current market price is $7.50. At her profit-maximizing level of pro
    12·1 answer
  • On January 1, 2016, American Corporation purchased 25% of the outstanding voting shares of Short Supplies common stock for $232,
    13·1 answer
  • Farris Billiard Supply sells all types of billiard equipment, and is considering manufacturing their own brand of pool cues. Mys
    8·1 answer
  • Do you think Bitcoin should be regulated?
    12·1 answer
  • What is one risk of being an entrepreneur?
    14·2 answers
  • . You use the utility company’s budget plan for paying your home heating bills. You pay $75 per month for 9 months. Your actual
    10·1 answer
  • Which are examples of a person changing careers? Check all that apply.
    10·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!