What is the payback period

Assignment Help Financial Management
Reference no: EM131442533

GoodEats, a chain of diner restaurants, is considering the purchase of new Garland brand energy efficient refrigerators for all of its 60 restaurants. These new refrigerators will cost $15,000 each and will have useful lives of five years before they will need to be replaced. Installation of the total set of 60 refrigerators will cost $100,000. The net cost saving is expected to peak in the first year at $200,000 and subsequently decline at a rate of 12% each year. At the end of their usage lifecycle, the salvage value of these refrigerators is likely to be 5% of their total purchase price.

What is the payback period?

In addition, to the option of purchasing the Garland brand energy efficient refrigerators; the company is also considering some less expensive models from Bolger Appliances. The Bolger units will cost only $6000 each and it will cost the same ($100,000) to install all 60 refrigerators. The refrigerators will have a useful life of only four years and will produce net cost savings of $120,000 per year because they are not as energy efficient. There is no salvage value associated with these refrigerators. Based on a careful analysis, the company sets a discount rate at 10%. Calculate the NPV for both projects? What model of refrigerators should the company purchase?

Reference no: EM131442533

Questions Cloud

What may be lost as a result of this requirement : This week we will discuss one of the requirements of the course Integrative Project Literature Review, that only evidence-based articles that report on experiments conducted by the article authors be used. This is a requirement of many an MA in P..
Present your philosophy of teaching statement : Present your philosophy of teaching statement using a powerpoint presentation. Presentation Length: 12-15 slides, with a separate reference slide. Notes Length: 100-150 words for each slide (notes may be audio if desired).
Consider a pair of random variables : Consider a pair of random variables X and Y which have joint probability density fx,y(X,Y) which is a constant over the region 0 =0.3].
What is the probability the load weighs : (a) What is the probability the load weighs more than 1231 tons? (b) What is the 90th percentile of load weights?
What is the payback period : GoodEats, a chain of diner restaurants, is considering the purchase of new Garland brand energy efficient refrigerators for all of its 60 restaurants. These new refrigerators will cost $15,000 each and will have useful lives of five years before they..
Explain the statement : New technologies do not lead to economies in the use of Raw materials
How your own teachers differentiated instruction : ECE 430- What do you remember about how your own teachers differentiated instruction in order to meet the needs of all the children in your childhood classroom(s)?
Save in present value terms vs waiting to buy a car : You own a 10-year-old car and are considering whether to buy a new car now. Your car will last three more years whereupon you will buy a new car. The new car cost $23,000 today and prices on new cars are rising 3% per year on average. Maintenance cos..
Discuss about the physical development : Writing an Exploring development and i want you to focus on a general topic of development (physical development ).

Reviews

Write a Review

Financial Management Questions & Answers

  What was the market price of one detachable warrant

The Bonds Payable (8.5%) are dated January 1, 2008 and were sold at 97.5 (plus the market value of the detachable warrants) on the same day. On January 1, 2008, what was the market price of one detachable warrant (on the 8.5% bonds)

  The member banks and the reserve banks

Does the current relationship between the member banks and the Reserve Banks indicate that Congress achieved its goal?

  The first deposit will occur one year from today

Assume that you deposit $ 1, 651 each year for the next 15 years into an account that pays 17 percent per annum. The first deposit will occur one year from today (that is, at t = 1) and the last deposit will occur 15 years from today (that is, at t =..

  Determine the amount of additional financing

In the Industrial Supply Company example (Table 4.4) it was assumed that the company’s fixed assets were being used at nearly full capacity and that net fixed assets would have to increase proportionately as sales increased.

  What is the cash collected in july

Consider a company that has sales in May, June, and July of $10.3 million, $12.3 million, and $9.3 million, respectively. The firm is paid by 35 percent of its customers in the month of the sale, 40 percent in the following month, and 22 percent in t..

  How do you set the minimum required return for a project

How do you set the minimum required return for a project? How do you compute project revenue when there is erosion? How do you compute the value of a previously acquired asset used in a new project? How do you evaluate projects from two separate divi..

  What is the external financing needed

The most recent financial statements for Reply, Inc., are shown here:  - - What is the external financing needed?

  The expected market rate of return is stable

Security ABC has a beta of 1.1. The expected market rate of return is stable at 8% and the risk-free rate is 4%. If the realized rate of return is 12%, the alpha of the stock is __________

  What is target fixed assets and sales ratio

Walter Industries has $4 billion in sales and $1.7 billion in fixed assets. Currently, the company's fixed assets are operating at 95% of capacity. What is Walter's target fixed assets/Sales ratio? What level of sales could Walter Industries have obt..

  What is the expected rate of return on the market

You own a stock that has an expected return of 13.6% and a beta of 1.3. The U.S. Treasury bill is yielding 4.2% and the inflation rate is 3.8%. What is the expected rate of return on the market?

  Intended learning outcomes 1 evaluate the performance of a

intended learning outcomes 1. evaluate the performance of a company using various financial analytical tools.2.

  Find the cash value of insurance

Mark has a $10,000 cash-value policy purchased 15 years ago when he was 25 years old. The policy will be paid at age 65. Find the cash value of insurance. Explain the other two options available to Mark.

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