1.
2.
3.
Concord Inc. wants to purchase a new machine for $39,840, excluding $1,400 of installation costs. The old machine was bought five years ago and had an expected economic life of 10 years without salvage value. This old machine now has a book value of $2,000, and Concord Inc. expects to sell it for that amount. The new machine would decrease operating costs by $9,000 each year of its economic life. The straight-line depreciation method would be used for the new machine, for a six-year period with no salvage value. Click here to view PV table. (a) Determine the cash payback period. (Round cash payback period to 2 decimal places, e.g. 10.53.) Cash payback period years (b) Determine the approximate internal rate of return. (Round answer to 0 decimal places, e.g. 13%. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Internal rate of return % Crane Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $519,000, has an expected useful life of 12 years, a salvage value of zero, and is expected to increase net annual cash flows by $71,600. Project B will cost $367,000, has an expected useful life of 12 years, a salvage value of zero, and is expected to increase net annual cash flows by $51,800. A discount rate of 7% is appropriate for both projects. Click here to view PV table. Compute the net present value and profitability index of each project. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round present value answers to 0 decimal places, e.g. 125 and profitability index answers to 2 decimal places, e.g. 15.25. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present value - Project A $ Profitability index - Project A 1.10 Net present value - Project B $ Profitability index - Project B 1.12 Bramble Corporation is reviewing an investment proposal. The initial cost is $104,700. Estimates of the book value of the investment at the end of each year, the net cash flows for each year, and the net income for each year are presented in the schedule below. All cash flows are assumed to take place at the end of the year. The salvage value of the investment at the end of each year is assumed to equal its book value. There would be no salvage value at the end of the investment's life. Investment Proposal Book Value Annual Cash Flows Annual Net Income Year 1 $69,200 $44,600 $9,100 2 43,000 39,700 13,500 3 21,800 34,000 12,800 4 6,400 30,200 14,800 5 0 24,255 17,855 Bramble Corporation uses an 11% target rate of return for new investment proposals. (a) What is the cash payback period for this proposal? (Round answer to 2 decimal places, e.g. 10.50.) Cash payback period years (b) What is the annual rate of return for the investment? (Round answer to 2 decimal places, e.g. 10.50%.) Annual rate of return for the investment % (c) What is the net present value of the investment? (If the net present value is negative, use either a negative sign preceding the number e.g.-45 or parentheses eg (45). Round answer to O decimal places, e.g. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present value $
