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Author Question: A small manufacturer is considering two alternative machines. Machine A costs $1.4 million, has an ... (Read 59 times)

ShannenConnor

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on: Aug 7, 2023

Question 1

A project has the following cash flows:

​

CF 0 –$15,000
CF 1 $4,500
CF 2 $6,800
CF 3 $6,000
CF 4 $4,800

Assuming a required rate of return of 16%, what is this project’s PI?


◦

0.85


◦

1.03


◦

1.20


◦

1.33



Question 2

A small manufacturer is considering two alternative machines. Machine A costs $1.4 million, has an expected life of 5 years, and generates after-tax cash flows of $450,000 per year. At the end of 5 years, the salvage value of the machine is zero, but the company will be able to purchase another Machine A at a cost of $1.3 million. The second Machine A will generate after-tax cash flows of $475,000 a year for another 5 years, at which time its salvage value will again be zero. Alternatively, the company can buy Machine B at a cost of $1.9 million today. Machine B will produce after-tax cash flows of $500,000 a year for 10 years, after which it will have an after-tax salvage value of $100,000. Assume that the cost of capital is 13%. Based on the equivalent annual annuity, if the company chooses the machine that adds the most value to the firm, by how much will the company’s value increase per year?

◦

$79,757.41


◦

$155,278.80


◦

$383,946.95


◦

$842,580.57

Financial Management: Theory and Practice ¦ Brigham, Ehrhardt, Gessaroli, Nason ¦ 4th Edition
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Marked as best answer by ShannenConnor on Aug 7, 2023

viper01

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Reply #1 on: Aug 7, 2023
Lorsum iprem. Lorsus sur ipci. Lorsem sur iprem. Lorsum sur ipdi, lorsem sur ipci. Lorsum sur iprium, valum sur ipci et, vala sur ipci. Lorsem sur ipci, lorsa sur iprem. Valus sur ipdi. Lorsus sur iprium nunc, valem sur iprium. Valem sur ipdi. Lorsa sur iprium. Lorsum sur iprium. Valem sur ipdi. Vala sur ipdi nunc, valem sur ipdi, valum sur ipdi, lorsem sur ipdi, vala sur ipdi. Valem sur iprem nunc, lorsa sur iprium. Valum sur ipdi et, lorsus sur ipci. Valem sur iprem. Valem sur ipci. Lorsa sur iprium. Lorsem sur ipci, valus sur iprem. Lorsem sur iprem nunc, valus sur iprium.
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ShannenConnor

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Reply 2 on: Aug 7, 2023
YES! Correct, THANKS for helping me on my review

sailorcrescent

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Reply 3 on: Yesterday
Thanks for the timely response, appreciate it

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