Answered step by step
Verified Expert Solution
Question
1 Approved Answer
THE ANSWERS= a) $53,918 OR $53900 b) $53,900, n=7, G=$1,200 c) NPW=$312,745 OR $312,700 & EAUW = $45,921 OR $45,900 PLEASE SHOW WORK ON HOW
THE ANSWERS=
a) $53,918 OR $53900
b) $53,900, n=7, G=$1,200
c) NPW=$312,745 OR $312,700 & EAUW = $45,921 OR $45,900
PLEASE SHOW WORK ON HOW TO GET THE ANSWERS ABOVE.
The XYZ Corporation is planning to purchase an extruder. The purchase price of the extruder is $350,000. The company plans to make a down payment of 25% of the first cost of the extruder and to make annual payments on a 7- year, 10% loan for the remainder of the cost of the extruder. (a) What is XYZ's annual loan repayment? (b) XYZ believes that the extruder can be sold for $75,000 at the end of its 15- year service life. The new extruder will increase the company's annual income by $90,000. Maintenance and operating costs are expected to be $4,000 during the first year and to increase by $1,200 each year. Construct a cash flow diagram of the extruder for XYZ Corporation. (Note: XYZ's loan from bank will be used for extruder purchase. Both the financing of ($350,000 - down payment) and the investment of $350,000 for machine purchase occur at Time 0, which makes the net cash flow at Time O only a down payment. However, XYZ has to repay the loan within the next 7 years.) (c) Question (b) continued. XYZ uses a before-tax MARR of 12% for its preliminary economic studies. (MARR: minimum acceptable rate of return) [10 points] What is the net present worth (NPW) of this investment to XYZ? [10 points] What is the equivalent uniform annual worth (EUAW)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started