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8090 [49]
3 years ago
5

Lamping, Inc., is considering the purchase of a machine that would cost $520,000 and would last for 7 years, at the end of which

, the machine would have a salvage value of $52,000. The machine would reduce labor and other costs by $112,000 per year. Additional working capital of $6,000 would be needed immediately, all of which would be recovered at the end of 7 years. The company requires a minimum pretax return of 14% on all investment projects. (Ignore income taxes).
Required:
Determine the net present value of the project.
Business
1 answer:
balu736 [363]3 years ago
3 0

Answer:

Lamping, Inc.

The net present value of the project is:

= ($22,544)

Explanation:

a) Data and Calculations:

Cost of machine = $520,000

Useful life of machine = 7 years

Salvage value = $52,000

Cost savings = $112,000 per year

Initial working capital $6,000

Recovered working capital = $6,000

Minimum required pretax return = 14%

PV of initial costs = $526,000 ($520,000 + $6,000)

PV of costing savings (annuity) = $480,256 ($112,000 * 4.288)

PV of salvage and recovered working capital = $23,200 ($58,000 * 0.400)

Total savings/benefits = $503,456 ($480,256 + $23,200)

NPV = ($22,544)

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ziro4ka [17]
739,000 - 219,000 = 520,000

The net assets are assets minus liabilities, so it is $520,000 in this case.
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Marcy's mother, sue, did not want her to date until she was older. she also wanted marcy to attend law school. just before marcy
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Erik is a sales representative for an established building materials manufacturer. Business is good, but he is concerned that th
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Without new products, Erik can market his current products only to his current market the same products to similar customers

<h3><u>Explanation:</u></h3>

New product development involves a lot of research work. This plays a vital role in making the newly developed product to be more successful. The research team must first identify the areas that can be improved with the requirements and feedback from their loyal customers.

But in the given example, Erick’s company is already successful with the developed product for more than five years. Hence, it is recommended for marketing the current products to the current customers and market the same products to similar customers.

3 0
3 years ago
Gutierrez Company reported net income of $225,000 for 2017. Gutierrez also reported depreciation expense of $45,000 and a loss o
Anestetic [448]

Answer:

                        Gutierrez Company

                       Cash Flow statement

                          for the year 2017

                                                                     $

Net Income                                              225,000                

+ Depreciation                                            45,000

+ Decrease in receivable                           15,000

+ Increase in payable                                  17,000

+ Decrease in prepaid expenses            <u>  4,000 </u>

Net cash flow from operating activities  <u>306,000</u>  

Explanation:

Depreciation is an non cash expense so it will be added to the net profit for the calculation of cash flow from operating activities. Decrease in receivable, Increase in payable  and decrease in prepaid expenses result in the inflow of cash. So, they are all added in the operating income value.

4 0
2 years ago
The company can choose to buy a back-up machine for Step C for an additional $20,000. The back up would also have a reliability
Goshia [24]

The complete question is:

A certain company produces 10,000 tables per year in a three-step process. The three steps in the process employ machines with the reliabilities listed here:

Step A - 0.987 Step B – 0.979 Step C – 0.915

Answer:

New reliability= 0.9593 ~ 0.959

Explanation:

Reliability is used in manufacturing process to ensure that a process produces the same level of output consistently. A process is reliable if it achieves the same results everytime.

Reliability can be applied to individuals, data, processes, and products.

In this instance we are to calculate the new reliability of the backup system.

Reliability of step C is 0.915

New reliability= 1 - (1- 0.915)^2

New reliability= 0.992775

Multiply this value by the reliability in step A and B to get system reliability

System reliability= 0.992775 * 0.987 * 0.979

System reliability= 0.9593

7 0
2 years ago
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