Question
22. NetPresentValueAnalysis. ArchitectServices,Inc.,wouldliketopurchaseablueprintmachinefor$50,000.Themachineisexpectedtohavealifeof4years,andasalvagevalueof$10,000.Annualmaintenancecostswilltotal$14,000.Annualsavingsarepredictedtobe$30,000.Thecompany'srequiredrateofreturnis11percent. Required: Ignoringthetimevalueofmoney,calculatethenetcashinfloworoutflowresultingfromthisinvestmentopportunity. FindthenetpresentvalueofthisinvestmentusingtheformatpresentedinFigure5.2NPVCalculationforCopyMachineInvestmentbyJackson'sQualityCopies. Shouldthecompanypurchasetheblueprintmachine?Explain. 23.InternalRateofReturnAnalysis. ArchitectServices,Inc.,wouldliketopurchaseablueprintmachinefor$50,000.Themachineisexpectedtohavealifeof4years,andasalvagevalueof$10,000.Annualmaintenancecostswilltotal$14,000.Annualsavingsarepredictedtobe$30,000.Thecompany'srequiredrateofreturnis11percent(thisisthesamedataasthepreviousexercise). Required: Usetrialanderrortoapproximatetheinternalrateofreturnforthisinvestmentproposal.Roundtothenearestdollar. Shouldthecompanypurchasetheblueprintmachine?Explain.
22. NetPresentValueAnalysis.ArchitectServices,Inc.,wouldliketopurchaseablueprintmachinefor$50,000.Themachineisexpectedtohavealifeof4years,andasalvagevalueof$10,000.Annualmaintenancecostswilltotal$14,000.Annualsavingsarepredictedtobe$30,000.Thecompany'srequiredrateofreturnis11percent.
Required:
- Ignoringthetimevalueofmoney,calculatethenetcashinfloworoutflowresultingfromthisinvestmentopportunity.
- FindthenetpresentvalueofthisinvestmentusingtheformatpresentedinFigure5.2"NPVCalculationforCopyMachineInvestmentbyJackson'sQualityCopies". Shouldthecompanypurchasetheblueprintmachine?Explain.
23.InternalRateofReturnAnalysis.ArchitectServices,Inc.,wouldliketopurchaseablueprintmachinefor$50,000.Themachineisexpectedtohavealifeof4years,andasalvagevalueof$10,000.Annualmaintenancecostswilltotal$14,000.Annualsavingsarepredictedtobe$30,000.Thecompany'srequiredrateofreturnis11percent(thisisthesamedataasthepreviousexercise).
Required:
- Usetrialanderrortoapproximatetheinternalrateofreturnforthisinvestmentproposal.Roundtothenearestdollar.
- Shouldthecompanypurchasetheblueprintmachine?Explain.
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