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
Jerry understands that expected click-through rate is one of three main factors that determine the quality score of an ad. What
Leni [432]

Answer: Ad relevance and Ad landing page experience

Explanation:

7 0
3 years ago
Input costs that require an outlay of money by the firm are called _______ costs while input costs that do not require an outlay
kolbaska11 [484]

Answer: Explicit costs , Implicit cost.

Explicit Costs is an Input costs that require an outlay of money by the firm. e.g (Paying for supplies, paying workers).

Implicit Costs is an Input costs that do not require outlay of money by the firm. e.g (Could be working somewhere else and making money but giving up the money you could be making because of where you work now).

3 0
3 years ago
In 1-2 sentences, explain how wage discrimination results in unequal pay.
oksian1 [2.3K]
Wage discrimination 
when somebody is paid less than somebody else based upon a physical characteristic
5 0
3 years ago
BigFive Inc. has been known for its excellent customer service since its start more than 40 years ago. The company carefully sel
Angelina_Jolie [31]

Answer: The correct answer is "E. BigFive's employees not only know how to do their work but also are enthusiastic and committed.".

Explanation: The BigFive Inc company, when selecting employees carefully emphasizing the search for skills and above all commitment to the values of customer service and quality of the company, in the long term it was highly benefited since its employees are trained according to the culture Organizational of the company and they not only know how to do their job, but they are also excited and committed.

8 0
3 years ago
A bachelors degree in which of the following areas is a good choice for an arts an communication manager?
Alenkasestr [34]
Answer: A) Business.

I hope this helped :)
5 0
2 years ago
Other questions:
  • Match each of the following characteristics or scenarios with either the term negative externality or the term positive external
    15·1 answer
  • The document that lists the steps of the budget process is the
    12·1 answer
  • Barb works in a local factory. She receives 92 cents for each of the first 100 units she produces and $1.01 for each unit over 1
    5·1 answer
  • Many institutional investors are aggressive in protecting and enhancing their investments. They are shifting from _________ to o
    12·1 answer
  • If the marginal propensity to consume is 0.6, the marginal propensity to save is 0.4, and government spending increases by $2 bi
    6·2 answers
  • The bullet points beneath a one-line mission statement often serve as
    14·2 answers
  • Since the colonial period, the census has revealed
    13·1 answer
  • Original, creative work of an artist or inventor is called intellectual property.
    11·1 answer
  • Suppose that in 2014, currency in circulation was $950 billion, required reserves were $60 billion, and excess reserves were $84
    13·1 answer
  • Janet needs an elevator seat attached to her stairs since she has a medical condition that makes her unable to climb the stairs
    14·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!