The above information and use cash flow approach

Assignment Help Financial Management

Reference no: EM132020370

A currently-owned shredder for use in a refuse-powered electrical generating plant has a present net realizable value of $200,000 and is expected to have a market value of $10,000 after 4 years. The shredder was purchased for $500,000 10 years ago. Operating and maintenance disbursements are $100,000 per year. An equivalent shredder can be leased for $200 per day plus $80 per hour of actual use as determined by an hour meter, with both components assumed to be paid at the end of the year. Actual use is expected to be 1,500 hours and 250 days per year. Using a 4 year planning horizon, a before tax analysis, and a MARR of 15%, determine the preferred alternative using the annual cost criterion:

Please show cash flow diagram and do not use excel functions.

a. Consider only the above information and use the cash flow approach (insider´s viewpoint approach).

b. Consider the additional information that the annual cost of operating without a shredder is $150,000 and use the cash flow approach (insider´s viewpoint approach). Hint: this is an extra challenger.

c. Consider only the original information and use the opportunity cost approach (outsider´s viewpoint approach).

d. Consider the additional information that the annual cost of operating without a shredder is $150,000 and use the opportunity cost approach (outsider´s viewpoint approach). Hint: this is an extra challenger.

Reference no: EM132020370

Questions Cloud

Identify each component of the wacc formula : You will need to identify each component of the WACC formula and calculate the overall WACC.

For technical analysis to generate excess returns : For technical analysis to generate excess returns, markets must be semi strong form efficient.

Calculate watervan economic value added : Calculate Watervan’s economic value added (EVA). What is the company’s return on capital?

The term net advantage to leasing is defined : The term "net advantage to leasing" is defined as. In most industries, planning beyond the period of one year is not very useful.

The above information and use cash flow approach : Consider only the above information and use the cash flow approach (insider´s viewpoint approach).

Correct regarding agency costs : Which of the following is correct regarding agency costs?

The balance be on the mortgage at halfway point : You anticipate either selling the building or refinancing it after 10 years. How much will the balance be on the mortgage at the halfway point?

Market value of firm equity is frequently called : The market value of a firm’s equity is frequently called:

What is the most you would pay for this expansion : What is the most you would pay for this expansion? Would you pay more, less, or the same if immediately share prices increase,

User Account

All Pages