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Chesapeake Bay Crabcake Factory is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual
Chesapeake Bay Crabcake Factory is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in net income after tax of $230,000. The equipment will have an initial cost of $1,000,000 and have an 8 year life. If there is no salvage value of the equipment, what is the simple rate of return? Multiple Choice 0 15.5% 0 23% 0 46% 0 18% Peter Pan Costume Shop provides theatrical and holiday costumes for the community. The shop is considering the purchase of a new piece of equipment, which would have an initial cost of $536,000, a 7-year life, and $150,000 salvage value. The increase in cash flow each year of the equipment's life would be as follows: Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 $111,000 $103,000 $101,000 $ 90,000 $ 87,000 $ 82,000 $ 76,000 What is the payback period? Multiple Choice 5.08 years 5.08 years 5.54 years oooo 5.57 years 5.75 years Daniel's Theme Park is a family favorite destination. To keep up with other theme parks, Daniel is thinking of investing in a new piece of equipment. The cost savings from the equipment would result in an annual increase in cash flow of $115,000. The equipment will have an initial cost of $550,000 and have a 5-year life. The salvage value of the equipment is estimated to be $78,000. If the hurdle rate is 7%, what is the approximate net present value? Ignore income taxes. ( Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor from the PV tables. Round your final answer to the nearest dollar amount.) Multiple Choice O o zero Zero O Negative $22,863 O Positive $78,000 O Positive $550,000
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