Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A company wants to replace a machine with a better version. The replacement machine will require a net investment of $207,940 and is expected to

image text in transcribed
image text in transcribed
image text in transcribed
A company wants to replace a machine with a better version. The replacement machine will require a net investment of $207,940 and is expected to generate free cash flow of $93,534 per year for the next 5 years, The company requires 14% return on capital investments of this sort and desires a 24 -month pay back period. The existing, machine would continue to function for the next five years if it is not replaced, but gradually become less useful. Free cash flows for the existing machine are forecasted to be $80,857 in year 1, $62,068 in yeat 2,$41,817 in year 3,$20,059 in year 4 and $14,723 in year 5 . What is the incremental cash filow for year 3 ? Enter your answer as a monetary amount rounded to four decimal ploces, but without the currency symbol. For exomple, if your answer is $90.1234, enter 90.1234 , If you answer is less than zero, enter a negative value, IVke this: .90 .1234 Type your answer. 1 point A company wants to replace a machine with a better version. The replacement machine will require a net investment of $200,847 and is expected to generate free cash flow of $91,741 per year for the next 5 years. The compary requires 11% return on capital investments of this sort and desires a 24 -month pay back period, The existing machine would continue to function for the next five years if it is not replaced, but gradually become less useful. Free cash flows for the existing machine are forecasted to be $82,839 in year 1,$61,731 in year 2,$42,895 in year 3,$23,687 in year 4 and $58,882 in year 5 . What is the incremental cash flow for year 2 ? Enter your answer as a monetary amount rounded to four decimal ploces, but without the currency symbol. For example, if your answer is $90.1234, enter 90.1234 , If you answer is less than zero, enter a negative value, like this: 90,1234 A company wants to replace a machine with a better version. The replacement machine will require a net investment of $195,295 and is expected to generate free cash flow of $97,765 per year for the next 5 years. The company requires 11% return on capital imvestments of this sort and desires a 24 -month pay back period. The existing machine woufd continue to function for the next five years if it is not replaced, but gradually become less useful. Free cash flows for the existing machine are forecasted to be $81,059 in year 1,$63,250 in year 2,$40,296 in year 3,$24,414 in year 4 and $11,716 in year 5 . What is the incremental cash flow for year 4 ? Enter your answer as a monetory amount rounded to four decimal places, but without the currency symbol. For example, if your answer is $90.1234, enter 90.1234 . If you answer is less than zero, enter a negative vafue, the this:-90.1234 Type your answer. 1 point A company wants to replace a machine with a bettee version. The replacement machine will require a net investment of $197,580 and is expected to generate free cash flow of $100,691 per year for the next 5 years. The company requires 13% return on capital imvestments of this sort and desires a 24 -month pay back period. Th existing machine would continue to function for the next five years if it is not replaced, but gradually become less useful. Free cash flows for the existing machine are forecasted to be $80,441 in year 1,$61,660 in year 2,$40,777 in year 3,$24,927 in year 4 and $12,053 in year 5 . What is the incremental cash flow for year 5 ? Enter your answer as a monetary amount rounded to four decimal places, but without the currency symbol. For example, if your answer is $90,1234, enter 90.1234 . If you answer is less thon zero, enter o negative value, like this: -90.1234 A company wants to replace a machine with a better version. The replacement machine will require a net investment of $180,000 and is expected to generate free cash flow of $100,000 per vear for the next 5 years. The company requires 12% return on capital investments of this sort and desires a 24 -month pay back period. The existing machine would continue to function for the next, five years if it is not replaced, but gradually become less useful. Free cash flows for the existing machine are forecasted to be $80,000 in year 1,$60,000 in year 2,$40,000 in year 3,$20,000 in year 4 and $10,000 in year 5 . What is the internal rate of return for this proposal? Enter your onswer as a percentage with two decimal places, but without the percent symbol. For example, If your answer is 90,1234%, enter 90,12 Type your answer. 8 I point A company is considering opening a new store. The company's WACC (weighted average cost of capital) is 11%, so this will be the required rate of return for this expansion. They also would like a 25 -month payback periocko that capital will become available for other projects. They are subject to a 25% tax rate. Opening the store will require foxtures, etc, which will cost $1314403 before the store can begin operating. These will be depreciated straightline over 5 years assuming a 6% salvage value. The salvage amount will also be included as part of the terminal value, representing the amount recaptured at the end of year 5 , There will be no tax effect in the salvage value because the book value is expected to be 6% of the historical cost at the end of year 5 . There will be a need for $13407 for net working capital before the store opens, and net working capital will grow equally each year through year 4 . At the end of year 5 , the total net working capital will be $60000. This amount will be released in the final year as part of the terminal value. Sales for each year are forecasted to be: - Year 1:$413,375 - Year 2: $949,478 - Year 3:\$1,441,399 - Year 4:\$2,100,000 - Year 5:\$2,100,000 - Cash operating costs will be 64% of revenue for each year. What is the net present value of this proposal? Enter your onswer as a monetary amount rounded to four decimal places, but without the currency symbol. For example, if your answer is $90.1234, enter 90.1234 , If you answer is less than zero, enter a negative value, like this: 90.1234

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Legal Aspects Of Trade Finance

Authors: Charles Chatterjee

1st Edition

1857433890, 978-1857433890

More Books

Students also viewed these Finance questions

Question

Which form of proof do you find least persuasive? Why?

Answered: 1 week ago