Reference no: EM133056712
1. Econo-Cool Air Conditioners cost $450 to purchase and results in an electricity bill of $140 per year. The Econo-Cool Air Conditioners lasts for 5 years. The discount rate is 17%. What is the equivalent annual cost?
2. Consider the following two machines a company can purchase. The following table provides the costs of the machines and the annual cash flows obtained from the machines over their lifetimes.
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Initial Cost
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Cash Inflows per year
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Years of Service
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Machine A
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$19,000
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$5,000
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7
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Machine B
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$7,000
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$11,000
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4
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The discount rate is 10%.
What is the net present value for each machine?
Machine A =
Machine B =
3. A project has an investment cost of $250,000 and a profitability index of 0.2. What is the net present value of the project?
NPV=
4. A project requires an increase in net working capital of $325,000 at time 0 that will be recovered at the end of its 16 year life. If opportunity cost of capital is 3%, what is the effect on the NPV of the project? Enter your answer rounded to two decimal places.
Effect on NPV=
5. Daily Enterprises is purchasing a $5,000,000 machine. The machine will be depreciated using straight-line depreciation over its 9 year life and will have no salvage value. The machine will generate revenues of $7,000,000 per year along with costs of $4,000,000 per year.
If Daily's marginal tax rate is 30%, what will be the cash flow in each of years 1 to 9 (the cash flow will be the same each year)?
Enter your answer rounded to the nearest whole number.
6. A project has revenues of $99,000, expenses of $45,000, and depreciation of $10,000. The corporate tax rate is 34%. What is the operating cash flow?
Enter your response below.
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