Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

URGENT PLEASE!!! A new furnace for your small factory will cost $33,000 and a year to install, will require ongoing maintenance expenditures of $1,000 a

image text in transcribedURGENT PLEASE!!!

A new furnace for your small factory will cost $33,000 and a year to install, will require ongoing maintenance expenditures of $1,000 a year. But it is far more fuel-efficient than your old furnace and will reduce your consumption of heating oil by 3,000 gallons per year. Heating oil this year will cost $2 a gallon, the price per gallon is expected to increase by $0.50 a year for the next 3 years and then to stabilize for the foreseeable future. The furnace will last for 20 years, at which point it will need to be replaced and will have no salvage value. The discount rate is 10%. a. What is the net present value of the investment in the furnace? (Do not round intermediate calculations. Round your answer to the nearest whole dollar.) b. What is the IRR? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) c. What is the payback period? (Do not round intermediate calculations. Round your answer to 2 decimal places.) d. What is the equivalent annual cost of the furnace? (Do not round intermediate calculations. Round your answer to 2 decimal places.) e. What is the equivalent annual savings derived from the furnace? (Do not round intermediate calculations. Round your answer to 2 decimal places.) f. Compare the PV of the difference between the equivalent annual cost and savings to your answer to part (a). Are the two measures the same or is one larger? b. NPV IRR Cumulative cash flows are positive in: Equivalent annual cost Equivalent annual savings Are the two measures the same or is one larger? d

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

Step: 3

blur-text-image

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

Accounting Comes Alive The Color Accounting Parable

Authors: Mark Robilliard ,Peter Frampton, Chang Chang, Mark Morrow, John Gorman

1st Edition

1450769608, 978-1450769600

More Books

Students also viewed these Finance questions

Question

Who is known as the father of the indian constitution?

Answered: 1 week ago

Question

1.explain evaporation ?

Answered: 1 week ago

Question

Who was the first woman prime minister of india?

Answered: 1 week ago

Question

Explain the concept of going concern value in detail.

Answered: 1 week ago

Question

Does the page or screen design support the intended message?

Answered: 1 week ago

Question

What is necessary to implement the IMC plan?

Answered: 1 week ago