Problem 1
Equipment is purchased at a cost of $80000. As a result annual cash revenues are expected to increase by $45000; annual cash expenses are expected to increase by $12000; straight-line depreciation is used; the asset has a seven-year life; the salvage value is $10000. Assume the company is in a 34% tax bracket.
Problem 2 (Ignore taxes for this problem)
Terra Networks is planning to buy injection molding machinery costing $180000. This machinerys expected useful life is 5 years. They require a minimum rate of return of 8% and have calculated the following data pertaining to the purchase and operation of this machinery:
1. Determine Terra’s payback period accounting rate of return and NPV for this investment?
Problem 3
Company X is planning on purchasing a 3-D printer. The expected cost of this printer is $75000 and it is expected to have a useful life of 6 years and an estimated salvage value of $3000. The printer is expected to produce cash savings of $23000 per year in reduced labor costs and the cash operating costs to run this printer are estimated to be $5000 per year. Assuming Company X is in the 34% tax bracket and has a minimum desired rate of return of 12% on this investment.
Determine the: