The management of Ballard MicroBrew is considering the purchase of an automated bottling machine for $54,000. The machine would replace an old piece of equipment that costs $14.000 per year to operate. The new machine would cost $6,000 per year to operate. The old machine currently in use could be sold now for a salvage value of $20,000. The new machine would have a useful life of 10 years with no salvage value Required: 1. What is the annual depreciation expense associated with the new bottling machine? 2. What is the annual incremental net operating income provided by the new bottling machine? 3. What is the amount of the initial investment associated with this project that should be used for calculating the simple rate of return? 4. What is the simple rate of return on the new bottling machine? (Round your answer to 1 decimal place i.e. 0.123 should be considered as 12.3%) 1 2 3 Depreciation expense Incremental net operating income Initial Investment Simple rate of retum 4 Information on four investment proposals is given below: Investment required Present value of cash inflows Net present value Life of the project Investment Proposal D $(120,000) $(50,000) $(50,000) $(360,000) 169,200 67,300 79,000 476,000 $ 49,200 $ 17,300 $ 29,000 $ 116,000 5 years 7 years 6 years 6 years Required: 1. Compute the project profitability index for each investment proposal. (Round your answers to 2 decimal places.) 2. Rank the proposals in terms of preference Investment Proposal Project Profitability Index Rank Preference B D Windhoek Mines, Ltd, of Namibia, is contemplating the purchase of equipment to exploita mineral deposit on land to which the company has mineral rights. An engineering and cost analysis has been made, and it is expected that the following cash flows would be associated with opening and operating a mine in the area Cost of new equipment and timbers $410,000 Working capital required $ 135,000 Annual net cash receipts $ 150,000 Cost to construct new roads in year three $ 47,000 Salvage value of equipment in four years $72,000 "Receipts from sales of ore, less out of pocket costs for salaries, utilities, insurance, and so forth The mineral deposit would be exhausted after four years of mining. At that point, the working capital would be released for reinvestment elsewhere. The company's required rate of return is 18% Click here to view Exhibit 120.1 and Exhibit 120.2. to determine the appropriate discount factor(s) using tables, Required: a. What is the net present value of the proposed mining project? b. Should the project be accepted? Complete this question by entering your answers in the tabs below. Required a Required B What is the net present value of the proposed mining project? (Enter negative amount with a minus sign. Round your final answer to the nearest whole dotlar amount.) No punt value SR Required B >
