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Sauron [17]
3 years ago
12

ABC Corporation is considering the purchase of a machine that would cost $110,000 and would last for 4 years. At the end of 4 ye

ars, the machine would have a salvage value of $16,000. By reducing labor and other operating costs, the machine would provide annual cost savings of $30,000. The company requires a minimum pretax return of 12% on all investment projects. (Ignore income taxes.) Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided. The net present value of the proposed project is closest to:
Business
1 answer:
Ahat [919]3 years ago
5 0

Answer:

-$8,705

Explanation:

The computation of the Net present value is shown below

= Present value of all yearly cash inflows after applying discount factor + salvage value - initial investment

where,

The Initial investment is $110,000

All yearly cash flows would be

= Annual cost savings × PVIFA for 4 years at 12%

= $30,000 × 3.0373

= $91,119

Refer to the PVIFA table

And, the salvage value would be

= Salvage value × pvif for 4 years at 12%

= $16,000 × 0.636

= $10,176

The discount factor should be computed by

= 1 ÷ (1 + rate) ^ years

Now put these values to the above formula  

So, the value would equal to

= $91,119 + $10,176 - $110,000

= -$8,705

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Two mutually exclusive projects have 3-year lives and a required rate of return of 10.5 percent. Project A costs $75,000 and has
Norma-Jean [14]

Answer:

Both projects should be rejected

Explanation:

The internal rate of return is the discount rate that equates the after tax cash flows from an investment to the amount invested.

IRR can be calculated using a financial calculator:

For project A,

Cash flow in year zero = $75,000

Cash flow in year one = $18,500

Cash flow in year two = $42,900

Cash flow in year three = $28,600

IRR = 9.12%

For project B,

Cash flow in year zero = $-72,000

Cash flow in year one = $22,000

Cash flow in year two = $38,000

Cash flow in year three = $26,500

IRR = 9.48%

The decision rule on if to invest or not is if IRR > r

For both investments IRR is less than rate of return

9.12% < 10.50%

9.48% < 10.50%

To find the IRR using a financial calacutor:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the IRR button, and the compute button.

I hope my answer helps you

8 0
3 years ago
In 1970 Professor Fellswoop earned $12,000; in 1980 he earned $24,000; and in 1990 he earned $36,000. If the CPI was 40 in 1970,
Arte-miy333 [17]

Answer:

In 1980

Explanation:

Year        Salary        Percentage Salary Increase        CPI Increase

1970       $12,000     -                                                      -

1980       $24,000    100                                                 50

1990       $36,000    50                                                   83.3

As can be seen in the table, the Professor's salary increase from 1970 to 1980 was twice as much as the CPI increase during the same period.

On the contrary, his salary increase from 1980 to 1990 was significantly less than the CPI increase during the same period.

Therefore, the professor's salary was highest in 1980.

4 0
3 years ago
In the case of a negative shock to aggregate demand, the central bank should: increase the rate of growth of the money supply to
nekit [7.7K]

Answer: increase the rate of growth of the money supply to restore spending growth.

Explanation:an increase in money supply growth. If the Federal Reserve offsets a negative shock to aggregate demand with increased money growth: both inflation and real GDP growth will rise.

3 0
3 years ago
A nation's long-run growth rate is equal to the sum of: Group of answer choices labor force growth and capital growth. growth in
jonny [76]

Answer:

labor force growth and productivity growth.

Explanation:

A country's long run growth rate is generally calculated by adding the increases in the market value of the goods and services produced within a country during a period of time. It is generally stated as a percentage growth of real GDP.

The real GDP's growth rate is determined by two factors: labor force growth and productivity growth. So it is determined by the growth in productivity, demographic growth and labor force participation.

7 0
3 years ago
When should you write a functional (skills) résumé? a. when you work history does not have obvious gaps. b. when you are making
Paul [167]

One should write a functional (skills) resume when you are making a career change.

<h3>What is a resume?</h3>

A resume is a document that outline information about a job applicant including his or professional experience.

The document also contains applicant work skills and background details.

Hence, one should write a functional (skills) resume when you are making a career change.

Learn more about resume here : brainly.com/question/14178136

#SPJ4

5 0
2 years ago
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