Reference no: EM133106786
Question - Lindsey Tomas, owner of LT Company was approached by a local dealer in air conditioning units. The dealer proposed replacing LT's old cooling system, with a modern, and more efficient system. The cost of the new system was quoted at P96,660, but it would save P20,000 per year in energy costs. The estimated life of the new system ten years, with no salvage value expected. Excited over saving P20,000 per year and having a more reliable unit, Lindsey requested an analysis of the project's economic viability. All capital projects are required to earn at least the firm's cost of capital, which is 10 percent. There are no income taxes.
Required -
1. Calculate the project's internal rate of return. Should the company acquire the new cooling system?
2. Suppose that energy savings are less than claimed. Calculate the minimum annual cash savings that must be realized for the project to earn a rate equal to the firm's cost of capital.
3. Supposed that the life of the new system is overestimated by two years. Repeat Requirements 1 and 2 under this assumption.
4. Explain the implications of the answers from requirement 1, 2, 3.
|
How much must lisa include in her current-year gross income
: Free travel on planes, when not displacing paying customers 4,000. How much must Lisa include in her current-year gross income
|
|
Describe the deal between AT-T and Michael Cohen
: Describe the "deal" between AT&T and Michael Cohen. What are the 3 core pillars of Enron's Management Control System
|
|
Effectiveness of mandated treatment
: What evidence exists regarding the effectiveness of treatment with and without coercion for this type of situation - What would be the challenges in evaluating
|
|
Calculate the output level that will maximize RII-X profit
: Prices for its RII-X control switches are stable at $50 each. Calculate the output level (Q) that will maximize RII-X profit
|
|
Calculate the minimum annual cash savings
: Calculate the minimum annual cash savings that must be realized for the project to earn a rate equal to the firm's cost of capital
|
|
What is the maximum you can consume in each period
: Assume you have income of £1,000 in each of two periods and can lend at 5% but pay 15% on borrowing. What is the maximum you can consume in each period
|
|
Calculate the balance payment offered
: If the two payments are financially equivalent and the interest rate is 3.96% compounded quarterly, calculate the balance payment offered in Option(B)
|
|
What is the total interest income
: The bonds have a par of $10,000, pay interest at a 7% annual rate and have 10 years until maturity. What is the total Interest Income
|
|
What is the accounts receivable turnover ratio
: The accounts receivable balance on February 1, 2020 was 50,000 and the balance was 45,000 on January 31, 2021. What is the accounts receivable turnover ratio
|