What is the npv of buying the new system

Assignment Help Finance Basics
Reference no: EM133058421

You were hired as a consultant for GB Corp.. GB Corp. is considering replacing a labour intensive process with an automated system that requires 74.0% less labour than the current system. It would cost $902,000 to acquire the new automated system. The cost will be depreciated at a 35% CCA rate. The new machinery has an expected life of 7 years. The system is estimated to have a salvage value of $150,300 at the end of the 7 years. The automated system would save $271,000 per year pre-tax in labour costs. The tax rate is 44% and the required rate of return on projects of this risk is 18%. What is the NPV of buying the new system? This question should take you no more than 20 minutes to answer.

Reference no: EM133058421

Questions Cloud

Arbitrage pricing theory : The Capital Asset Pricing Model (CAPM) is often described as an "off-the-shelf suit" whereas the Arbitrage Pricing Theory (APT) is colloquially called a "bespok
Calculating flotation costs : The Sullivan Co. needs to raise $78 million to finance its expansion into new markets. The company will sell new shares of equity via a general cash offering to
How much is the initial cost of the equipment : Sebastian Co. estimated that the decommissioning activities would cost P200000. How much is the initial cost of the equipment
Describe recent phenomena in the bond markets : Describe any recent phenomena in the bond markets, for example why are some bonds trading with negative yields and why is the yield curve being closely watched?
What is the npv of buying the new system : What is the NPV of buying the new system? This question should take you no more than 20 minutes to answer.
Estimate the required annual rate of return : Estimate the required annual rate of return on Baker Hughes's new bond that the company plans to issue to fund the new project.
How much revenue will be recognized on the contract : Commonlo Corp. commits to selling 100 of its merchandise to MCH Co, for P30,000 (P300 per product), How much revenue will be recognized on the contract
What is tds : Q1. Jerry has calculated that the GDS of his client is at 33%. Given this scenario which one of the following statements is most correct?
What will the first order be : Assume that the firm wants a safety stock of 3,000 nails. What will the first order be and what will each subsequent order be

Reviews

Write a Review

Finance Basics Questions & Answers

  How much should meowth inc pay at the end

How much should Meowth Inc. pay at the end of the 4-month period?

  Fuel shortage slows india economic growth

India has struggled to provide enough electricity to power its industry. New power stations have been built but the country cannot get enough fuel

  Determine which has a higher roi

Using net present value calculations, determine which has a higher ROI. Buying a Chevrolet Impala today for $30,000, putting $15,000 down and taking a six-year loan for the rest at 5%.

  What forces exist that encourage unethical accounting

what forces exist that encourage unethical accounting practices? what justification do you think accountants use for

  Determine the debt-to capital ratio-sandik inc

Sandik Inc. has a market/book ratio equal to 2.5 Its stock price is $30 per share and it has 4.5 million shares outstanding.

  What is the effective annual interest rate

If the quoted rate (APR) is 5.55 percent, and the compounding is daily, what is the effective annual interest rate (EAR)?

  What is the density of the soft tissue

The wave velocity of ultrasound in soft tissues is 1540m/s and the impedance offered by it is 1.63 X 106 kg/m2s. What is the density of the soft tissue?

  Question regarding the classified balance sheets

The following (given in scrambled order) are accounts and balances from the accounting records of Alleg, Inc., as of December 31, 2012, after the books were closed for the year.

  List and describe each of the three methods used to

list and describe each of the three methods used to calculate the cost of common

  Explain the difference in the cost of financing

Explain the difference in the cost of financing with foreign currencies during a strong-dollar period versus a weak-dollar period for a U.S. firm.

  Industry and competitor standard ratios

Compare and contrast your company's ratios to industry and competitor standard ratios obtained from Yahoo Finance, Morningstar, MotleyFool, Macroaxis or other Internet sources, and provide a detailed answer and analysis as to why your company's ra..

  Foreign and local investors to the market

The Nigerian Stock Exchange (NSE) with its regulatory bodies has embarked on publicity and awareness of their duties and functions

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd