Use irr method to determine robot is justifiable investment

Assignment Help Financial Management
Reference no: EM131925209

An assembly operation at a software company currently requires $104,000 per year in labor costs. A robot can be purchased and installed to automate this operation, and the robot will cost $200,000 with no MV at the end of its 10-year life. The robot, if acquired, will be depreciated using SL depreciation to a terminal BV of zero after 10 years. Maintenance and operation expenses of the robot are estimated to be $71,000 per year. The company has an effective income tax rate of 35%. Invested capital must earn at least 9% after income taxes are taken into account.

a. Use the IRR method to determine if the robot is a justifiable investment.

b. If MACRS (seven-year recovery period) had been used in Part (a), would the after-tax IRR be lower or higher than your answer to Part (a)?

Reference no: EM131925209

Questions Cloud

What is most the firm can pay for the project : What is the most the firm can pay for the project and still earn its required return? Maximum the firm can pay?
Calculate the nal for lessee and npv for the lessor : If the lease payment is $180,500 calculate the NAL for the lessee and NPV for the lessor?
What is market value : What is the market value?
How much did thomas pay for the bond : Calculate the purchase price of the bond. How much did Thomas pay for the bond? What was the premium or discount on the bond?
Use irr method to determine robot is justifiable investment : Use the IRR method to determine if the robot is a justifiable investment.
Calculate the size of the periodic sinking fund deposit : Calculate the size of the periodic sinking fund deposit. Calculate the interest earned in payment period 11.
What is the expected return of portfolio : What is the expected return of a portfolio that has invested $8300 in Stock A, $7800 in Stock B and $14400 in Stock C?
Expected return on equally weighted portfolio : What is the expected return on an equally weighted portfolio of these three stocks?
Operating profit margin : Rogue's OPERATING PROFIT MARGIN is equal to.

Reviews

Write a Review

Financial Management Questions & Answers

  Foreign company acquisition

Acquisition by a foreign company and the effects of that decision and the results of foreign exchange in Euro and the exchange rate differences.

  Financial management for profit and non profit organizations

In this essay, we are going to discuss the issues of financial management in a non-profit organisation.

  Method for estimating a venture''s value

Evaluate venture's present value, cash and surplus cash and basic venture capital.

  Replacement analysis

This document show the Replacement Analysis of modling machine. Is replacement give profit to company or not?

  Business finance task - capital budgeting

Your company is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique.

  Analysis of the investment

In this project, you will focus on one of these: the additional cost resulting from the purchase of an apple press (a piece of equipment required to manufacture apple juice).

  Conduct a what-if analysis

Review the readings and media for this unit, including the Anthony's Orchard case study media. Familiarise yourself with the Anthony's Orchard company and its current situation.

  Determine operational expenditures

Organisations' behaviour is guided by financial data. In the short term, such data will help determine operational expenditures; in the long term, historical data may help generate forecasts aimed at determining strategic plans. In both instances.

  Personal financial management

How much will you have left over each half year if you adopt the latter course of action?

  Sources of finance for expansion into new foreign markets

A quoted company is considering several long-term sources of finance for expansion into new foreign markets.

  Long term financial planning

This assignment is designed for analyze Long term financial planning begins with the sales forecast and the key input in the long term fincial planning.

  Explain the role of fincial manager

This assignment explain the role of fincial manager, function of manger. And what are the motives of financial manager.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd