11-a2. a manager of the engineering

11-A2.

A manager of the engineering department of Manchester University is contemplating acquiring 120 computers. The computers will cost $240,000 cash, have zero terminal salvage value, and a useful life of 3 years. Annual cash savings from operations will be $110,000. The required rate of return is 14%. There are no taxes.

1.       Compute the NPV.

2.       Should the engineering department acquire the computers? Explain

 

11-37

City View Restaurant is about to open at a new location. Operating plans indicate the following expected cash flows:

                                                                                                Outflows                                             Inflows

Initial investment now                                                $235,000                                         $ ——

End of year: 1                                                                $150,000                                        $200,000

                      2                                                                $200,000                                        $250,000

                      3                                                                $250,000                                        $300,000

                      4                                                               $300,000                                         $450,000

                      5                                                               $350,000                                         $500,000

1.       Compute the NPV for all these cash flows. This should be a single amount. Use a discount rate of 14%.

2.       Suppose the minimum desired rate was 12%. Without further calculations, determine whether the NPV is positive or negative Explain.

 

11-47

De Luca Company is considering two possible investments, each of which requires an initial investment of $12,000. Investment A will provide a cash flow of $3,000 at the end of each year for 4 years. Investment B will provide a cash flow of $2,000 at the end of each year for 10 years.

1.       Determine the payback period for each investment. Which investment is most desirable using the payback method?

2.       Compute the NPV of each investment using a desired rate of return 5%. Which investment is most desirable using the NPV method?

3.       Explain why the payback method does not lead to an optimal decision for the De Luca Company.

 

11-48

The Jackson City Park department is considering the purchase of a new, more efficient pool heater for its Moorcroft Swimming Pool at a cost of $15,000. It should save $3,000 in cash operating costs per year. Its estimated useful life is 8 years, and it will have zero disposal value. Ignore taxes.

1.       What is the payback time?

2.       Compute the NPV if the minimum rate of return desired is 18%. Should the department buy the heater? Why?

3.       Using the ARR model, compute the rate of return on the initial investment.

Place your order
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more