Butler Corporation is considering the purchase of new equipmentcosting $42,000. The projected annual after-tax net income from theequipment is $1,600, after deducting $14,000 for depreciation. Therevenue is to be received at the end of each year. The machine hasa useful life of 3 years and no salvage value. Butler requires a 8%return on its investments. The present value of an annuity of 1 fordifferent periods follows: Periods 8 Percent 1 0.9259 2 1.7833 32.5771 4 3.3121 What is the net present value of the machine?$4,800. $42,000. $36,079. $(1,797). $40,203.
Butler Corporation is considering the purchase of new equipmentcosting $42,000. The projected annual after-tax net income from theequipment is $1,600, after deducting $14,000 for depreciation. Therevenue is to be received at the end of each year. The machine hasa useful life of 3 years and no salvage value. Butler requires a 8%return on its investments. The present value of an annuity of 1 fordifferent periods follows: Periods 8 Percent 1 0.9259 2 1.7833 32.5771 4 3.3121 What is the net present value of the machine?$4,800. $42,000. $36,079. $(1,797). $40,203.
Related questions
1)
A company is considering the purchase of a new machine for$66,000. Management predicts that the machine can produce sales of$22,000 each year for the next 10 years. Expenses are expected toinclude direct materials, direct labor, and factory overheadtotaling $10,400 per year including depreciation of $5,800 peryear. The company's tax rate is 40%. What is the payback period forthe new machine? |
3.00 years.
6.73 years.
5.17 years.
11.38 years.
17.19 years.
2)
Butler Corporation is considering the purchase of new equipmentcosting $84,000. The projected annual after-tax net income from theequipment is $3,000, after deducting $28,000 for depreciation. Therevenue is to be received at the end of each year. The machine hasa useful life of 3 years and no salvage value. Butler requires a 9%return on its investments. The present value of an annuity of 1 fordifferent periods follows: |
| Periods | 9 Percent |
| 1 | 0.9174 |
| 2 | 1.7591 |
| 3 | 2.5313 |
| 4 | 3.2397 |
| What is the net present value ofthe machine? (closest to) |
$70,876.
$78,470.
$9,000.
$84,000.
$(5,530).
3)
A company is considering a new project that will cost $19,000.This project would result in additional annual revenues of $6,000for the next 5 years. The $19,000 cost is an example of a(n):
Sunk cost.
Fixed cost.
Incremental cost.
Uncontrollable cost.
Opportunity Cost
The following present value factors are provided for use in thisproblem.
| Periods | Present Value of $1 at 8% | Present Value of an Annuity of $1 at8% |
| 1 | 0.9259 | 0.9259 |
| 2 | 0.8573 | 1.7833 |
| 3 | 0.7938 | 2.5771 |
| 4 | 0.7350 | 3.3121 |
Xavier Co. wants to purchase a machine for $36,000 with a fouryear life and a $1,200 salvage value. Xavier requires an 8% returnon investment. The expected year-end net cash flows are $11,000 ineach of the four years. What is the machine's net present value(round to the nearest whole dollar)? |
$1,315.
$433.
$37,315.
$(1,315).
$(433
