What savings in year three is needed to make alt

Assignment Help Financial Management

Reference no: EM13951471

Your company evaluates proposals using a 2.5-year payback period. You have two alternatives for a new boring machine. Alt. A costs $10,000 and will last for six years. Alt.A will save $5,000 in year one and $2,000 in year two. Alt. B will cost $15,000 and will last for six years. Alt.B will save $7,000 in year one and $1,000 in year two. Assume a MARR of 12%. (a) What savings in year 3 is needed to make Alt. A an acceptable project? (b) What savings in year 3 is needed to make B an acceptable project? (c) If you believe that the year 3 savings will be $7,000 for A and $9,000 for B, which will you buy?

Reference no: EM13951471

Questions Cloud

Portfolio weight of stock-expected return of portfolio : Stock J has a beta of 1.38 and an expected return of 14.06 percent, while Stock K has a beta of 0.93 and an expected return of 11 percent. You want a portfolio with the same risk as the market. What is the portfolio weight of each stock? What is the ..

The dividends paid to the stocks in the underlying index : Since their introduction, stock index futures contracts have become very popular and are now widely traded by finance professionals. Many factors, including (1) the current price of the underlying stock index, (2) the time to contract maturity, and (..

Annual return consistently-future value : You elect to make an $80 contribution to your 401k from each bi-weekly paycheck. Your 401k has been producing an 8% annual return consistently. If you are retiring in 32 years, how much will you have accumulated in your 401k for your retirement?

Contrast the gain and loss potential for investors : Compare and contrast the gain and loss potential for investors holding the following positions: long forward, short forward, long call, short call, long put, and short put. Indicate what the terms symmetric and asymmetric mean in this context.

What savings in year three is needed to make alt : Your company evaluates proposals using a 2.5-year payback period. You have two alternatives for a new boring machine. Alt. A costs $10,000 and will last for six years. Alt.A will save $5,000 in year one and $2,000 in year two. What savings in year 3 ..

Capital structure-what is current market value of firms debt : In order to accurately assess the capital structure of a firm, it is necessary to convert its balance sheet figures to a market value basis. KJM Corporation's balance sheet as of today is as follows: Long-term debt (bonds, at par) $23,500,000 Preferr..

Calculate the standard deviation : The Knight and Day Café is contemplating making a $125,000 investment that has a 45% chance of producing a 8% return, a 25% chance of producing an 11% return, a 15% chance of producing a 15% return, a 10% chance of producing a 5% return, and a 5 % ch..

Sales-operating costs-assets-total invested capital : Quigley Inc. is considering two financial plans for the coming year. Management expects sales to be $300,000, operating costs to be $265,000, assets (which is equal to its total invested capital) to be $200,000, and its tax rate to be 35%. Assuming t..

What is the company pre-tax cost of debt : The Bet-r-Bilt Company has a 5-year bond outstanding with a 3.80 percent coupon. Interest payments are paid semi-annually. The face amount of the bond is $1,000. This bond is currently selling for 92 percent of its face value. What is the company's p..

User Account

All Pages