What is the equivalent annual annuity for each machine?

Assignment Help Finance Basics
Reference no: EM13295509

The Perez Company has the opportunity to invest one of two mutually exclusive machines that will produce a product it will need for the forseeable future. Machine A costs $11 million but realizes after-tax inflows of $5 million per year for 4 years. After 4 years the machine must be replaced. Machine B costs $13 million and realizes after-tax inflowa of 3.5 million per year for 8 years after which it must be replaces. Assume that machine prices are not expected to rise because inflation will be offset by cheaper components used in machines. The cost of capital is 14%.

 

a.) By how much would the value of the company increase if it accepted the better machine? Enter your answer in millions. For example, an answer of 1.2 million should be entered as 1.2 million not 1,200,000. Round your answer to two decimal places.

 

What is the Equivalent annual annuity for each machine? Round your answer to two decimal places

 

 

Reference no: EM13295509

Questions Cloud

What amount must you deposit each year : If the account pays 4.75 percent interest, what amount must you deposit each year?
Calculate the velocity a spherical rain drop : Calculate the velocity a spherical rain drop would achieve falling from 5.00 km, in the absence of air drag
What is the npv at a discount rate of 10 percent : What is the NPV at a discount rate of 10 percent? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
What is the crossover rate for these two projects : What is the NPV of Projects X and Y at discount rates of 0%, 15%, and 25%? (Negative amount should be indicated by a minus sign. Round your answers to 2 decimal places. (e.g., 32.16))
What is the equivalent annual annuity for each machine? : What is the Equivalent annual annuity for each machine? Round your answer to two decimal place
What is the npv for the project : The company is somewhat unsure about the assumption of a 3 percent growth rate in its cash flows. At what constant growth rate would the company just break even if it still required a return of 12 percent on investment?
Explain methyl bromide and hydrogen bromide : Using bond enthalpies, estimate the heat of the gas phase reaction of methane with bromine to form methyl bromide and hydrogen bromide.
Two mutually exclusive plans for extracting oil on property : The Ewert Exploration Company is considering two mutually exclusive plans for extracting oil on property for which it has mineral rights. Both plans call for the expenditure of $10.5 millionto drill development wells. Under Plan A, all the oil will b..
What is the density of the beer : The gauge pressure at the bottom of a pint of beer, at a depth of 14.6 cm, is 1450 Pa. What is the density of the beer

Reviews

Write a Review

Finance Basics Questions & Answers

  Determine at least one primary and one secondary method

There are a number if large projects to evaluate. What criteria are you most likely to use to evaluate these projects and why? What would each criterion tell you? Determine at least one primary and one secondary method.

  What is the intrinsic value of deployment specialists stock

Deployment Specialists pays a current (annual) dividend of $1 and is expected to grow at 20% for two years and then at 3% thereafter. If the required return for Deployment Specialists is 9.0%, what is the intrinsic value of Deployment Specialists ..

  Determining the state lottery

Assume that you just won the state lottery. Your prize can be taken either in form of $40,000 at the end of each of the next 25 years (i.e., $1 million over 25 years) or as a lump sum of $500,000 paid immediately.

  What is the weighted average flotation cost

What is the weighted average flotation cost if the company finances new assets using new debt, new shares of preferred stock, and Retained Earnings? Assume the company maintains the current capital structure.

  What is the wacc of startlight

What is the WACC of Startlight if it would like to finance a new investment project?

  Evaluate job offers-synergy through mergers and acquisitions

You've two job offers, one from a dominant-business firm and one from an unrelated diversified firm (suppose the beginning salaries are virtually identical). Which offer would they accept and why?

  What is your estimate of the stock current price

The company's stock has a beta of 1.2, the risk-free rate is 7.5%, and the market risk premium is 4%. What is your estimate of the stock's current price?

  Importance of operational risk

Explain briefly why operational risk is important. Though the cost of implementing a new operational risk management system is expensive, determine why it could also improve the efficiency.

  Perform calculations

For those Assignments in this course that require you to perform calculations you must: Create an Excel spreadsheet containing the information provided.  Template in Word is provided. Show all your work.

  What is the future value of the same annuity due

If the future value of an ordinary, 8 year annuity is $5,800 and interest rates are 8.0 percent, what is the future value of the same annuity due?

  What is the required return

Lane, Inc., has an issue of preferred stock outstanding that pays a dividend of $4.75 dividend every year in perpetuity. If the issue currently sells for $93, what is the required return?

  Discuss on to issue of new debt and break even analysis

Discuss on to issue of new debt and break even analysis and what does it imply regarding whether or not the firm should go ahead with the new debt issue

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