Reference no: EM132594486
Instructions
Your probationary period at the Cosmo K Manufacturing Group continues. Your supervisor, Gerry, assigns you a project each week to test your competence in finance.
The company is considering the addition of a new office machine that will perform many of the tasks now performed manually. For this week's task, Gerry has given you the responsibility of evaluating the cash flows associated with the new machine. He has requested the report to be delivered within the week.
Evaluation of a New Office Machine
The Cosmo K Manufacturing Group currently has sales of $1,400,000 per year. It is considering the addition of a new office machine, which will not result in any new sales but will save the company $105,500 before taxes per year over its 5-year useful life. The machine will cost $300,000 plus another $12,000 for installation. The new asset will be depreciated using a modified accelerated cost recovery system (MACRS) 5-year class life. It will be sold for $25,000 at the end of 5 years. Additional inventory of $11,000 will be required for parts and maintenance of the new machine. The company evaluates all projects at this risk level using an 11.99% required rate of return. The tax rate is expected to be 35% for the next decade.
Tasks:
What is the total investment in the new machine at time = 0 (T = 0)?
What are the net cash flows in each of the 5 years of operation?
What are the terminal cash flows from the sale of the asset at the end of 5 years?
What is the NPV of the investment?
What is the IRR of the investment?
What is the payback period for the investment?
What is the profitability index for the investment?
According to the decision rules for the NPV and those for the IRR, is the project acceptable?
Is there a conflict between the two decision methods? If so, what would you use to make a recommendation?
What are the pros and cons of the NPV and the IRR? Explain your answers.
|
Describe where is potential for growth for the client
: Explain where there is potential for growth for you, the social worker, as a result of listening to the client's stories and bearing witness to their trauma.
|
|
Forecasting and financing projects
: It can be difficult to accurately forecast a project's cash flows because many risk factors may be present.
|
|
PROJ6002 Project Planning and Budgeting Assignment
: PROJ6002 Project Planning and Budgeting Assignment Help and Solution, Laureate International Universities - Assessment Writing Service
|
|
What is its net operating profit after taxes
: A company has the following income statement - Interest expense 50 and Depreciation 100. What is its net operating profit after taxes (NOPAT)
|
|
Evaluation of new office machine
: The company is considering the addition of a new office machine that will perform many of the tasks now performed manually.
|
|
What are the major social forces at work
: Consider the major social forces in the workplace, such as poverty, race, ethnicity, gender, sexual orientation, and social status, and reflect on the readings
|
|
What amount is capitalizable borrowing cost
: Katrina Company obtained a loan of P4,000,000 at an interest rate of 10%, What amount is capitalizable borrowing cost
|
|
Explain graphic display of sociological theories
: Create a Venn Diagram or other graphical representation to illustrate the relationship between the foundational sociological theories of work
|
|
How do current political parties in the us stand on issue
: How can social science research be used to better inform politicians and voters about the issue, i.e. where can someone go to get reliable information
|