Colors and More is considering replacing the equipment it uses to produce crayons. The equipment would cost $1.37 million

A project will produce an operating cash flow of $14,600 a year for 7 years. The initial fixed asset investment in the project will be $48,900. The net aftertax salvage value is estimated at $12,000 and will be received during the last year of the project's life. What is the net present value of the project if the required rate of return is 12 percent?    A.  $22,627.54 B.  $23,159.04 C.  $34,627.54 D.  $39,070.26 E.  $41,040.83

72.

Kwik ‘n Hot Dogs is considering the installation of a new computerized pressure cooker that will cut annual operating costs by $23,000. The system will cost $39,900 to purchase and install. This system is expected to have a 4-year life and will be depreciated to zero using straight-line depreciation. What is the amount of the earnings before interest and taxes for this project?    A.  $10,525 B.  $13,025 C.  $15,525 D.  $16,900 E.  $19,400 Earnings before interest and taxes = $23,000 - ($39,900/4) = $13,025

73.

Colors and More is considering replacing the equipment it uses to produce crayons. The equipment would cost $1.37 million, have a 12-year life, and lower manufacturing costs by an estimated $310,000 a year. The equipment will be depreciated using straight-line depreciation to a book value of zero. The required rate of return is 15 percent and the tax rate is 35 percent. What is the net income from this proposed project?    A.  $18,508.75 B.  $40,211.24 C.  $66,441.67 D.  $127,291.67 E.  $136,709.48 Net income = [$310,000 - ($1,370,000/12)] × [1 - 0.35] = $127,291.67