131. (Ignore income taxes in this problem.) The management of Peregoy Corporation is
considering the purchase of a automated molding machine that would cost $255,552, would have
a useful life of 5 years, and would have no salvage value. The automated molding machine would
result in cash savings of $64,000 per year due to lower labor and other costs.
Required:
Determine the internal rate of return on the investment in the new automated molding machine.
Show your work!
132. (Ignore income taxes in this problem.) Hayner Limos, Inc., is considering the purchase of
a limousine that would cost $149,868, would have a useful life of 9 years, and would have no
salvage value. The limousine would bring in cash inflows of $36,000 per year in excess of its cash
operating costs.
Required:
Determine the internal rate of return on the investment in the new limousine. Show your work!
133. (Ignore income taxes in this problem.) The management of Eastridge Corporation is
considering the purchase of a machine that would cost $50,470 and would have a useful life of 7
years. The machine would have no salvage value. The machine would reduce labor and other
operating costs by $14,000 per year.
Required:
Determine the internal rate of return on the investment in the new machine. Show your work!
134. (Ignore income taxes in this problem.) Rosenholm Corporation uses a discount rate of
18% in its capital budgeting. Partial analysis of an investment in automated equipment with a
useful life of 5 years has thus far yielded a net present value of -$327,960. This analysis did not
include any estimates of the intangible benefits of automating this process nor did it include any
estimate of the salvage value of the equipment.
Required:
a. Ignoring any salvage value, how large would the additional cash flow per year from the
intangible benefits have to be to make the investment in the automated equipment financially
attractive?
b. Ignoring any cash flows from intangible benefits, how large would the salvage value of the
automated equipment have to be to make the investment in the automated equipment financially
attractive?
135. (Ignore income taxes in this problem.) Verdin Corporation uses a discount rate of 16% in
its capital budgeting. Management is considering an investment in telecommunications
equipment with a useful life of 6 years. Excluding the salvage value of the equipment, the net
present value of the investment in the equipment is -$166,194.
Required:
How large would the salvage value of the telecommunications equipment have to be to make the
investment in the telecommunications equipment financially attractive?
136. (Ignore income taxes in this problem.) The management of an amusement park is
considering purchasing a new ride for $40,000 that would have a useful life of 10 years and a
salvage value of $4,000. The ride would require annual operating costs of $19,000 throughout its
useful life. The company’s discount rate is 8%. Management is unsure about how much additional
ticket revenue the new ride would generate-particularly because customers pay a flat fee when
they enter the park that entitles them to unlimited rides. Hopefully, the presence of the ride
would attract new customers.
Required:
How much additional revenue would the ride have to generate per year to make it an attractive
investment?
137. (Ignore income taxes in this problem.) The management of Rosengarten Corporation is
investigating the purchase of a new satellite routing system with a useful life of 7 years. The
company uses a discount rate of 8% in its capital budgeting. The net present value of the
investment, excluding its intangible benefits, is -$607,020.
Required:
How large would the additional cash flow per year from the intangible benefits have to be to
make the investment in the automated equipment financially attractive?
138. (Ignore income taxes in this problem.) Ahlman Corporation is considering the following
three investment projects:
Required:
Rank the investment projects using the project profitability index. Show your work
139. (Ignore income taxes in this problem.) The management of Suddreth Corporation is
considering the following three investment projects:
The only cash outflows are the initial investments in the projects.
Required:
Rank the investment projects using the project profitability index. Show your work
140. (Ignore income taxes in this problem.) Brewer Company is considering purchasing a
machine that would cost $537,600 and have a useful life of 9 years. The machine would reduce
cash operating costs by $82,708 per year. The machine would have a salvage value of $107,520
at the end of the project.
Required:
a. Compute the payback period for the machine.
b. Compute the simple rate of return for the machine.
141. (Ignore income taxes in this problem.) Gocke Company is considering purchasing a
machine that would cost $478,800 and have a useful life of 5 years. The machine would reduce
cash operating costs by $114,000 per year. The machine would have no salvage value.
Required:
a. Compute the payback period for the machine.
b. Compute the simple rate of return for the machine.
142. (Ignore income taxes in this problem.) Limon Corporation is considering a project that
would require an initial investment of $204,000 and would last for 6 years. The incremental
annual revenues and expenses for each of the 6 years would be as follows:
At the end of the project, the scrap value of the project’s assets would be $12,000.
Required:
Determine the payback period of the project. Show your work!
143. (Ignore income taxes in this problem.) The management of Fowkes Corporation is
considering a project that would require an initial investment of $331,000 and would last for 8
years. The annual net operating income from the project would be $54,000, including
depreciation of $40,000. At the end of the project, the scrap value of the project’s assets would
be $11,000.
Required:
Determine the payback period of the project. Show your work!
144. (Ignore income taxes in this problem.) Sheridon Corporation is investigating automating a
process by purchasing a new machine for $483,000 that would have a 7 year useful life and no
salvage value. By automating the process, the company would save $140,000 per year in cash
operating costs. The company’s current equipment would be sold for scrap now, yielding $29,000.
The annual depreciation on the new machine would be $69,000.
Required:
Determine the simple rate of return on the investment to the nearest tenth of a percent. Show
your work!
145. (Ignore income taxes in this problem.) The management of Orebaugh Corporation is
investigating automating a process by replacing old equipment by a new machine. The old
equipment would be sold for scrap now for $15,000. The new machine would cost $445,000,
would have a 5 year useful life, and would have no salvage value. By automating the process, the
company would save $165,000 per year in cash operating costs.
Required:
Determine the simple rate of return on the investment to the nearest tenth of a percent. Show
your work!
146. (Ignore income taxes in this problem.) Pal Corporation is contemplating purchasing
equipment that would increase sales revenues by $438,000 per year and cash operating
expenses by $258,000 per year. The equipment would cost $504,000 and have a 9 year life with
no salvage value. The annual depreciation would be $56,000.
Required:
Determine the simple rate of return on the investment to the nearest tenth of a percent. Show
your work!
147. (Ignore income taxes in this problem.) The management of Ossenfort Corporation is
investigating purchasing equipment that would cost $440,000 and have a 8 year life with no
salvage value. The equipment would allow an expansion of capacity that would increase sales
revenues by $192,000 per year and cash operating expenses by $61,000 per year.
Required:
Determine the simple rate of return on the investment to the nearest tenth of a percent. Show
your work!