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Question;121.(Ignore income taxes in this problem.) Dunay;Corporation is considering investing $810,000 in a project. The life of the;project would be 9 years. The project would require additional working capital;of $24,000, which would be released for use elsewhere at the end of the;project. The annual net cash inflows would be $162,000. The salvage value of;the assets used in the project would be $41,000. The company uses a discount;rate of 17%.;Required;Compute;the net present value of the project.;122.(Ignore income taxes in this;problem.) Whatley Inc. is considering investing in a project that would require;an initial investment of $460,000. The life of the project would be 5 years.;The annual net cash inflows from the project would be $138,000. The salvage;value of the assets at the end of the project would be $69,000. The company;uses a discount rate of 15%.;Required;Compute;the net present value of the project.;123.(Ignore;income taxes in this problem.) Bill Anders retires in 8 years. He has $650,000;to invest and is considering a franchise for a fast-food outlet. He would have;to purchase equipment costing $500,000 to equip the outlet and invest an;additional $150,000 for inventories and other working capital needs.;Other;outlets in the fast-food chain have an annual net cash inflow of about;$160,000. Mr. Anders would close the outlet in 8 years. He estimates that the;equipment could be sold at that time for about 10% of its original cost. Mr.;Anders' required rate of return is 16%.;Required;What;is the investment's net present value when the discount rate is 16 percent? Is;this an acceptable investment?;124.(Ignore income taxes in this problem.);Weilbacher Corporation is considering the purchase of a machine that would cost;$240,000 and would last for 8 years. At the end of 8 years, the machine would;have a salvage value of $50,000. The machine would reduce labor and other costs;by $62,000 per year. The company requires a minimum pretax return of 16% on all;investment projects.;Required;Determine;the net present value of the project. Show your work!;125.(Ignore;income taxes in this problem.) Jim Bingham is considering starting a small;catering business. He would need to purchase a delivery van and various;equipment costing $125,000 to equip the business and another $60,000 for;inventories and other working capital needs. Rent for the building used by the;business will be $35,000 per year. Jim's marketing studies indicate that the;annual cash inflow from the business will amount to $120,000. In addition to;the building rent, annual cash outflow for operating costs will amount to;$40,000. Jim wants to operate the catering business for only six years. He;estimates that the equipment could be sold at that time for 4% of its original;cost. Jim uses a 16% discount rate. Required;Would;you advise Jim to make this investment?;126.(Ignore income taxes in this problem.) Jane;Summers has just inherited $600,000 from her mother's estate. She is;considering investing part of these funds in a small catering business. She;would need to purchase a delivery van and various equipment costing $100,000 to;equip the business and another;$50,000;for inventories and other working capital needs. Rent on the building used by;the business will be $24,000 per year. Jane's marketing studies indicate that;the annual cash inflow from the business will amount to $90,000. In addition to;the building rent, other annual cash outflows for operating costs will amount;to $30,000. Jane wants to operate the catering business for only six years. She;estimates that the equipment could be sold at that time for about 10% of its;original cost. Jane's required rate of return is 16%.;Required;Compute;the net present value of this investment.;127.(Ignore income taxes in this problem.) The;management of Basler Corporation is considering the purchase of a machine that;would cost $440,000, would last for 7 years, and would have no salvage value.;The machine would reduce labor and other costs by $88,000 per year. The company;requires a minimum pretax return of 12% on all investment projects.;Required;Determine;the net present value of the project. Show your work!;128.(Ignore income taxes in this;problem.) A newly developed device is being considered by Fairway Foods for use;in processing and canning peaches. The device, which is available only on a;royalty basis, is reported to be a great labor saver. Fairway's production;manager has gathered the following;data;The;new device must be obtained through a licensing arrangement with the developer.;The license period lasts for only 8 years. Fairway Foods' required rate of;return is 10%.;Required;By;use of the incremental cost approach, compute the net present value of the;proposed licensing of the new device. Show all computations in good form.;Should the company enter into a licensing arrangement to use the new device?;129.(Ignore;income taxes in this problem.) Janes, Inc., is considering the purchase of a;machine that would cost $430,000 and would last for 6 years, at the end of;which, the machine would have a salvage value of $47,000. The machine would;reduce labor and other costs by $109,000 per year. Additional working capital;of $4,000 would be needed immediately, all of which would be recovered at the;end of 6 years. The company requires a minimum pretax return of 17% on all;investment projects.;Required;Determine;the net present value of the project. Show your work!;130.(Ignore;income taxes in this problem.) Juliar Inc. has provided the following data;concerning a proposed;investment;project: The company uses a discount rate of 12%.;Required;Compute;the net present value of the project.;131.(Ignore;income taxes in this problem.) The management of Peregoy Corporation is;considering the purchase of an automated molding machine that would cost;$255,552, would have a useful life of 5 years, and would have no salvage value.;The automated molding machine would result in cash savings of $64,000 per year;due to lower labor and other costs.;Required;Determine;the internal rate of return on the investment in the new automated molding;machine. Show your work!;132.(Ignore income taxes in this problem.) Hayner;Limos, Inc., is considering the purchase of a limousine that would cost;$149,868, would have a useful life of 9 years, and would have no salvage value.;The limousine would bring in cash inflows of $36,000 per year in excess of its;cash operating costs. Required;Determine;the internal rate of return on the investment in the new limousine. Show your;work!;133.(Ignore income taxes in this problem.) The;management of Eastridge Corporation is considering the purchase of a machine;that would cost $50,470 and would have a useful life of 7 years. The machine;would have no salvage value. The machine would reduce labor and other operating;costs by $14,000 per year.;Required;Determine;the internal rate of return on the investment in the new machine. Show your;work!;134.(Ignore income taxes in;this problem.) Rosenholm Corporation uses a discount rate of 18% in its capital;budgeting. Partial analysis of an investment in automated equipment with a;useful life of 5 years has thus far yielded a net present value of -$327,960.;This analysis did not include any estimates of the intangible benefits of;automating this process nor did it include any estimate of the salvage value of;the equipment. Required;a.;Ignoring any salvage value, how;large would the additional cash flow per year from the intangible benefits have;to be to make the investment in the automated equipment financially attractive?;b.;Ignoring any cash flows from;intangible benefits, how large would the salvage value of the automated;equipment have to be to make the investment in the automated equipment;financially attractive?;135.(Ignore;income taxes in this problem.) Verdin Corporation uses a discount rate of 16%;in its capital budgeting. Management is considering an investment in;telecommunications equipment with a useful life of 6 years. Excluding the;salvage value of the equipment, the net present value of the investment in the;equipment is -$166,194.;Required;How;large would the salvage value of the telecommunications equipment have to be to;make the investment in the telecommunications equipment financially attractive?;136.(Ignore income taxes in this problem.) The;management of an amusement park is considering purchasing a new ride for;$40,000 that would have a useful life of 10 years and a salvage value of;$4,000. The ride would require annual operating costs of $19,000 throughout its;useful life. The company's discount rate is 8%. Management is unsure about how much;additional ticket revenue the new ride would generate-particularly because;customers pay a flat fee when they enter the park that entitles them to;unlimited rides. Hopefully, the presence of the ride would attract new;customers.;Required;How;much additional revenue would the ride have to generate per year to make it an;attractive investment?;137.(Ignore;income taxes in this problem.) The management of Rosengarten Corporation is;investigating the purchase of a new satellite routing system with a useful life;of 7 years. The company uses a discount rate of 8% in its capital budgeting.;The net present value of the investment, excluding its intangible benefits, is;-$607,020.;Required;How;large would the additional cash flow per year from the intangible benefits have;to be to make the investment in the automated equipment financially attractive?;138.(Ignore;income taxes in this problem.) Ahlman Corporation is considering the following;three investment;projects;Required;Rank the;investment projects using the project profitability index. Show your work;139.(Ignore;income taxes in this problem.) The management of Suddreth Corporation is;considering the;following;three investment projects: The only cash outflows are the initial;investments in the projects.;Required;Rank the;investment projects using the project profitability index. Show your work;140.(Ignore income taxes in this problem.) Brewer;Company is considering purchasing a machine that would cost $537,600 and have a;useful life of 9 years. The machine would reduce cash operating costs by;$82,708 per year. The machine would have a salvage value of $107,520 at the end;of the project. Required;a.;Compute the payback period for the;machine.;b.;Compute the simple rate of return;for the machine.;141.(Ignore income taxes in this problem.) Gocke;Company is considering purchasing a machine that would cost $478,800 and have a;useful life of 5 years. The machine would reduce cash operating costs by;$114,000 per year. The machine would have no salvage value.;Required;a.;Compute the payback period for the;machine.;b.;Compute the simple rate of return;for the machine.;142.(Ignore income taxes in this;problem.) Limon Corporation is considering a project that would require an;initial investment of $204,000 and would last for 6 years. The incremental;annual revenues and expenses;for each of the 6 years would be;as follows: At the end of the project, the scrap value of;the project's assets would be $12,000. Required;Determine;the payback period of the project. Show your work!;143.(Ignore;income taxes in this problem.) The management of Fowkes Corporation is;considering a project that would require an initial investment of $331,000 and;would last for 8 years. The annual net operating income from the project would;be $54,000, including depreciation of $40,000. At the end of the project, the;scrap value of the project's assets would be $11,000.;Required;Determine;the payback period of the project. Show your work!;144.(Ignore income taxes in this problem.);Sheridon Corporation is investigating automating a process by purchasing a new;machine for $483,000 that would have a 7 year useful life and no salvage value.;By automating the process, the company would save $140,000 per year in cash;operating costs. The;company's current equipment would be sold for;scrap now, yielding $29,000. The annual depreciation on the new machine would;be $69,000.;Required;Determine;the simple rate of return on the investment to the nearest tenth of a percent.;Show your work!;145.(Ignore income taxes in this;problem.) The management of Orebaugh Corporation is investigating automating a;process by replacing old equipment by a new machine. The old equipment would be;sold for scrap now for $15,000. The new machine would cost $445,000, would have;a 5 year useful life, and would have no salvage value. By automating the process;the company would save $165,000 per year in cash operating costs.;Required;Determine;the simple rate of return on the investment to the nearest tenth of a percent.;Show your work!;146.(Ignore income taxes in;this problem.) Pal Corporation is contemplating purchasing equipment that would;increase sales revenues by $438,000 per year and cash operating expenses by;$258,000 per year. The equipment would cost $504,000 and have a 9 year life;with no salvage value. The annual depreciation would be $56,000.;Required;Determine;the simple rate of return on the investment to the nearest tenth of a percent.;Show your work!;147.(Ignore income taxes in this problem.) The;management of Ossenfort Corporation is investigating purchasing equipment that;would cost $440,000 and have a 8 year life with no salvage value. The equipment;would allow an expansion of capacity that would increase sales revenues by;$192,000 per year and cash operating expenses by $61,000 per year.;Required;Determine;the simple rate

Paper#42660 | Written in 18-Jul-2015

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