Question :
11) Book & Bible Bookstore desires to buy a new : 1211982
11) Book & Bible Bookstore desires to buy a new coding machine to help control book inventories. The machine sells for $36,586 and requires working capital of $4,000. Its estimated useful life is five years and will have a salvage value of $4,000. Recovery of working capital will be $4,000 at the end of its useful life. Annual cash savings from the purchase of the machine will be $10,000.
Required:
a.Compute the net present value at a 14% required rate of return.
b.Compute the internal rate of return.
c.Determine the payback period of the investment.
12) Sam’s Structures desires to buy a new crane and accessories to help move and install modular buildings. The machine sells for $75,000 and requires working capital of $10,000. Its estimated useful life is six years and it will have a salvage value of $17,560. Recovery of working capital will be $10,000 at the end of its useful life. Annual cash savings from the purchase of the machine will be $20,000.
Required:
a.Compute the net present value at a 12% required rate of return.
b.Compute the internal rate of return.
c.Determine the payback period of the investment.
13) Griffith Vehicle has received three proposals for its new vehicle-painting machine. Information on each proposal is as follows:
Proposal X
Proposal Y
Proposal Z
Initial investment in equipment
$240,000
$150,000
$190,000
Working capital needed
0
0
10,000
Annual cash saved by operations:
Year 1
80,000
50,000
80,000
Year 2
80,000
42,000
80,000
Year 3
80,000
46,000
80,000
Year 4
80,000
24,000
80,000
Salvage value end of year:
Year 1
100,000
80,000
60,000
Year 2
80,000
60,000
50,000
Year 3
40,000
40,000
30,000
Year 4
10,000
20,000
15,000
Working capital returned
0
0
10,000
Required:
Determine each proposal’s payback.
14) Cedile Trailer Supply has received three proposals for its new trailer assembly line. Information on each proposal is as follows:
Proposal X
Proposal Y
Proposal Z
Initial investment in equipment
$180,000
$140,000
$145,000
Working capital needed
0
0
15,000
Annual cash saved by operations:
Year 1
60,000
60,000
60,000
Year 2
60,000
50,000
60,000
Year 3
60,000
35,000
60,000
Year 4
60,000
10,000
60,000
Salvage value end of year:
Year 1
30,000
25,000
45,000
Year 2
25,000
20,000
40,000
Year 3
20,000
15,000
35,000
Year 4
15,000
10,000
25,000
Working capital returned:
0
0
15,000
Required:
Determine each proposal’s payback.
