Chp 10 Problem Solutions

# Chp 10 Problem Solutions - 0.09-100000 25000 25000 25000...

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Unformatted text preview: 0.09-100000 25000 25000 25000 25000 25000 (\$2,758.72) Step 1: Compute PV Step 2: Calculate Annuity Factor (Chp 6) of each Machine Step 3: Calculate EAC Machine 1: -117.36 * 1.7355 = -67.26 Machine 2: -159.89 * 2.4869 = -64.29 Conclusion Machine B is more effective Machine A costs \$100 to buy and \$10 per year to operate. It wears out and must be replaced every two Machine B costs \$140 to buy and \$8 per year to operate. It lasts for three years and must then be replac Ignoring taxes, which one should we choose if we use a 10 percent discount rate? Machine A: PV= -100 + (-10/1.1) + (-10/1.1 2 ) = -\$117.36 Machine B: PV= -140 + (-8/1.1) + (-8/1.1 2 ) + (-8/1.1 3 ) = -\$159.89 Machine 1: (1 – (1/1.1 2 )) / .1 = 1.7355 Machine 2: (1 – (1/1.1 3 ) / .1 = 2.4869 Your firm is contemplating the purchase of a new \$1,628,000 computer-based order entry system. The s will be depreciated straight-line to zero over its 5-year life. It will be worth \$158,400 at the end of that tim will save \$633,600 before taxes per year in order processing costs and you will be able to reduce workin by \$115,764 (this is a one-time reduction). The net working capital will return to its original level when th ends. The tax rate is 35 percent. What is the internal rate of return for this project? Northern Railway is considering a project which will produce annual sales of \$975,000 and increase cash expenses by \$859,000. If the project is implemented, taxes will increase from \$141,000 to \$154,000 and depreciation will increase from \$194,000 to \$272,000. The company is debt-free. What is the amount of the operating cash flow using the top-down approach? Top Down= 975000 – 859000 - (272000-194000) = 103000 years. ced. system e. You ing capital he project Q= (FC + D) / (P - v) Answer 23970 Base Best Worst (+/-) Sales Units 8000 8160 7840 0.02 Var Cost/Unit 11 10.45 11.55 0.05 Fixed Costs 287,000 272650 301350 0.05 Dep 68000 68000 68000 68000 Tax Rate 0.32 0.32 0.32 0.32 Sales Price 64 65.92 62.08 0.03 Sales Rev 486707.20 Var Costs 717.02 Fix Costs 301350 Dep 68000 Ebit 116640.18 Taxes 37324.86 N/I 79315.32 Sales Price 38 Q= (FC + OCF) / (P-v) Answer 2651 VC 18.5 FC 32000 OCF 19700 Init Investment 460000 Price 34 Var Cost 19 FC 188600 Units Sold 90528 A project has a unit price of \$5,000, a variable cost per unit of \$4,000, fixed costs of \$17,000,000, and depreciation expense of \$6,970,000. What is the accounting break-even quantity?...
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Chp 10 Problem Solutions - 0.09-100000 25000 25000 25000...

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