Question
9. Oriole Co. purchased some equipment 3 years ago. The companys required rate of return is 12%, and the net present value of the project
9. Oriole Co. purchased some equipment 3 years ago. The companys required rate of return is 12%, and the net present value of the project was $(2100). Annual cost savings were: $19000 for year 1; $15000 for year 2; and $11000 for year 3. The amount of the initial investment was
Year | Present Value of 1 at 12% | PV of an Annuity of 1 at 12% |
1 | 0.893 | 0.893 |
2 | 0.797 | 1.690 |
3 | 0.712 | 2.402 |
$38854.
$34654.
$38130.
$33930.
10. Blue Spruce, Inc. is considering purchasing equipment costing $84000 with a 6-year useful life. The equipment will provide annual cost savings of $22600 and will be depreciated straight-line over its useful life with no salvage value. Blue Spruce requires a 10% rate of return.
Present Value of an Annuity of 1 | ||||||
Period | 8% | 9% | 10% | 11% | 12% | 15% |
6 | 4.623 | 4.486 | 4.355 | 4.231 | 4.111 | 3.784 |
What is the approximate net present value of this investment?
$17384
$14423
$51600
$11620
11. Bramble, Inc. is considering purchasing equipment costing $36000 with a 6-year useful life. The equipment will provide annual cost savings of $10600 and will be depreciated straight-line over its useful life with no salvage value. Bramble requires a 10% rate of return.
Present Value of an Annuity of 1 | ||||||
Period | 8% | 9% | 10% | 11% | 12% | 15% |
6 | 4.623 | 4.486 | 4.355 | 4.231 | 4.111 | 3.784 |
What is the approximate profitability index associated with this equipment?
1.38
1.28
0.73
1.25
Please answer all! Thank you !
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