Calculate the net present value of proposed new investment

Assignment Help Financial Management

Reference no: EM131529865

ZENG is considering investing in a high tech. Machine to replace its current less technologically advanced machine. The cost of the new machine is $20,000,000 and it is estimated that installation and personnel training costs of $5,000,000 would be incurred. This $5,000,000 will be incurred at the inception of the investment and will be capitalized and amortized over the useful life of the machine which is 5 years. The residual value of the machine is estimated to be $3,000,000 at the end of its useful life. If the new machine is purchased it will offer annual cost savings of $6,000,000 in labor cost, and maintenance of $4,000,000. Annual cost of maintaining and upgrading the new will be $2,000,000. ZENG uses a discount rate of 10%.

Calculate the payback period.

Calculate the net present value of the proposed new investment.

Calculate the profitability index.

Reference no: EM131529865

Questions Cloud

Use the cost based pricing method : Use the cost based pricing method to determine what price Bushwacker should charge for its product.

Determine the net income after taxes : This problem shows the importance of considering the importance of converting operating leases to capital leases for financial statement analysis.

Which of the following is an example of symbolic modeling : Which of the following is one of the underlying principles of cognitive psychology?Which of the following is an example of symbolic modeling?

Analyze what factors could have affected the results : Explain What do the results suggest? What factors could have affected the results? How can these results be used to make changes on campus?

Calculate the net present value of proposed new investment : ZENG is considering investing in a high tech. Calculate the net present value of the proposed new investment.

Volume of byproduct sales would fosbeck have break-even npv : At what volume of byproduct sales would Fosbeck have a break-even NPV=0?

Differenciate between purchase and pooling of interests : The logic of pooling rests heavily on the assumption that no substantive economic transaction occurs between the combiner and stockholders of the combine.

Proposal for a themed film festival : Create a 1,050- to 1,400-word proposal for a themed film festival. Identify and explain your theme. What is the justification for this focus

What meant by the term one-line consolidation : Compare proportionate consolidation with capitalizing of all leases extending beyond a year, another example of rigid uniformity.

User Account

All Pages