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11 book bible bookstore desires to buy a new coding machine to help control book inv 4301172

 

11) Book & Bible Bookstore desires to buy a new coding machine to help control book inventories. The machine sells for $36,586 and requires working capital of $4,000. Its estimated useful life is five years and will have a salvage value of $4,000. Recovery of working capital will be $4,000 at the end of its useful life. Annual cash savings from the purchase of the machine will be $10,000.

 

Required:

a.Compute the net present value at a 14% required rate of return.

b.Compute the internal rate of return.

c.Determine the payback period of the investment.

12) Sam's Structures desires to buy a new crane and accessories to help move and install modular buildings. The machine sells for $75,000 and requires working capital of $10,000. Its estimated useful life is six years and it will have a salvage value of $17,560. Recovery of working capital will be $10,000 at the end of its useful life. Annual cash savings from the purchase of the machine will be $20,000.

 

Required:

a.Compute the net present value at a 12% required rate of return.

b.Compute the internal rate of return.

c.Determine the payback period of the investment.

13) Griffith Vehicle has received three proposals for its new vehicle-painting machine. Information on each proposal is as follows:

 

 

Proposal X

Proposal Y

Proposal Z

Initial investment in equipment

$240,000

$150,000

$190,000

Working capital needed

0

0

10,000

Annual cash saved by operations:

 

 

 

   Year 1

80,000

50,000

80,000

   Year 2

80,000

42,000

           80,000

   Year 3

80,000

46,000

80,000

   Year 4

80,000

24,000

80,000

Salvage value end of year:

 

 

 

   Year 1

100,000

80,000

60,000

   Year 2

80,000

60,000

50,000

   Year 3

40,000

40,000

30,000

   Year 4

10,000

20,000

15,000

Working capital returned

0

0

10,000

 

Required:

Determine each proposal's payback.

14) Cedile Trailer Supply has received three proposals for its new trailer assembly line. Information on each proposal is as follows:

 

 

Proposal X

Proposal Y

Proposal Z

Initial investment in equipment

$180,000

$140,000

$145,000

Working capital needed

0

0

15,000

Annual cash saved by operations:

 

 

 

   Year 1

60,000

60,000

60,000

   Year 2

60,000

50,000

   60,000

   Year 3

60,000

35,000

60,000

   Year 4

60,000

10,000

60,000

Salvage value end of year:

 

 

 

   Year 1

30,000

25,000

45,000

   Year 2

25,000

20,000

40,000

   Year 3

20,000

15,000

35,000

   Year 4

15,000

10,000

25,000

Working capital returned:

0

0

15,000

 

Required:

Determine each proposal's payback.

 

 

 

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