(Ignore income taxes in this problem.) Sibble Corporation is considering the pur
ID: 2376123 • Letter: #
Question
(Ignore income taxes in this problem.) Sibble Corporation is considering the purchase of a machine that would cost $380,000 and would last for 6 years. At the end of 6 years, the machine would have a salvage value of $52,000. By reducing labor and other operating costs, the machine would provide annual cost savings of $80,000. The company requires a minimum pretax return of 11% on all investment projects. The net present value of the proposed project is closest to: (Round your 'PV factors' to three decimal places.) (Use Exhibit11B-1 and Exhibit11B-2)
a. -13,700
b.-42,800
c.-10,480
d.-41,520
(Ignore income taxes in this problem.) The management of Dewitz Corporation is considering a project that would require an initial investment of $73,000. No other cash outflows would be required. The present value of the cash inflows would be $87,600. The profitability index of the project is closest to:
a.1.20
b.0.20
c.0.83
d.0.17
(Ignore income taxes in this problem.) Brewer Company is considering purchasing a machine that would cost $575,400 and have a useful life of 9 years. The machine would reduce cash operating costs by $91,708 per year. The machine would have a salvage value of $115,420 at the end of the project.
a.Compute the payback period for the machine. (Round your answer to 2 decimal places.)
Compute the simple rate of return for the machine. (Round your intermediate calculations to nearest dollar amount and final answer to 2 decimal places.)
(Ignore income taxes in this problem.) Brewer Company is considering purchasing a machine that would cost $575,400 and have a useful life of 9 years. The machine would reduce cash operating costs by $91,708 per year. The machine would have a salvage value of $115,420 at the end of the project.
a.Compute the payback period for the machine. (Round your answer to 2 decimal places.)
b.
Compute the simple rate of return for the machine. (Round your intermediate calculations to nearest dollar amount and final answer to 2 decimal places.)
Explanation / Answer
Q1)
NPV= 80000PVIFA(11%,6) + 52000PVIF(11%,6) - 380000
NPV= 80000*4.231 + 52000*.535 - 380000
NPV = -13700
a. -13,700
Q2) 87600/73000 = 1.20
a.1.20
Q3)
a.Compute the payback period for the machine. (Round your answer to 2 decimal places.)
Payback Period = 575400/91708 =6.27 year
b.
Compute the simple rate of return for the machine.
Simple rate of return = 91708/575400 *100 =15.94%
b.
Compute the simple rate of return for the machine.
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