(Equivalent annual cost? calculation)??The Templeton Manufacturing and Distribution Company of? Tacoma, Washington, is contemplating the purchase of...

80.2K

Verified Solution

Question

Finance

(Equivalent annual cost? calculation)??The TempletonManufacturing and Distribution Company of? Tacoma, Washington, iscontemplating the purchase of a new conveyor belt system for one ofits regional distribution facilities. Both alternatives willaccomplish the same task but the Eclipse Model is substantiallymore expensive than the Sabre Model and will not have to bereplaced for 10? years, whereas the cheaper model will need to bereplaced in just 5 years. The costs of purchasing the two systemsand the costs of operating them annually over their expected livesare provided? below:??
.a.??Templeton typically evaluates investments in plantimprovements using a required rate of return of
11
percent.
What are the NPVs for the two? systems?
b.??Calculate the equivalent annual costs for the twosystems.
c.??Based on your analysis of the two systems using both theirNPV and? EAC, which system do you recommend the company? pick? ?Why?
a.
The NPV for Eclipse at a discount rate of
1111?%
is
?$nothing.
?(Round to the nearest? dollar.)
Enter your answer in the answer box and then click CheckAnswer.
4
parts remaining
Clear All
Check Answer
Data Table
Year
Eclipse
Sabre
0
?$(1 comma 500 comma 0001,500,000?)
?$(900 comma 000900,000?)
1
?(22 comma 00022,000?)
?(45 comma 00045,000?)
2
?(31 comma 00031,000?)
?(45 comma 00045,000?)
3
?(31 comma 00031,000?)
?(58 comma 00058,000?)
4
?(31 comma 00031,000?)
?(58 comma 00058,000?)
5
?(41 comma 00041,000?)
?(85 comma 00085,000?)
6
?(41 comma 00041,000?)
7
?(41 comma 00041,000?)
8
?(41 comma 00041,000?)
9
?(41 comma 00041,000?)
10
?(41 comma 00041,000?)

Answer & Explanation Solved by verified expert

4.0 Ratings (691 Votes)

aNet Present Value NPV of the two systems Net Present Value NPV Eclipse Period Annual Cash Flow Present Value factor at 11 Present Value of Cash Flow 1 22000 0900901 1981982 2 31000 0811622 2516030 3 31000 0731191 2266693 4 31000 0658731 2042066 5 41000 0593451 2433150 6 41000 0534641 2192027 7 41000 See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

(Equivalent annual cost? calculation)??The TempletonManufacturing and Distribution Company of? Tacoma, Washington, iscontemplating the purchase of a new conveyor belt system for one ofits regional distribution facilities. Both alternatives willaccomplish the same task but the Eclipse Model is substantiallymore expensive than the Sabre Model and will not have to bereplaced for 10? years, whereas the cheaper model will need to bereplaced in just 5 years. The costs of purchasing the two systemsand the costs of operating them annually over their expected livesare provided? below:??.a.??Templeton typically evaluates investments in plantimprovements using a required rate of return of11percent.What are the NPVs for the two? systems?b.??Calculate the equivalent annual costs for the twosystems.c.??Based on your analysis of the two systems using both theirNPV and? EAC, which system do you recommend the company? pick? ?Why?a.The NPV for Eclipse at a discount rate of1111?%is?$nothing.?(Round to the nearest? dollar.)Enter your answer in the answer box and then click CheckAnswer.4parts remainingClear AllCheck AnswerData TableYearEclipseSabre0?$(1 comma 500 comma 0001,500,000?)?$(900 comma 000900,000?)1?(22 comma 00022,000?)?(45 comma 00045,000?)2?(31 comma 00031,000?)?(45 comma 00045,000?)3?(31 comma 00031,000?)?(58 comma 00058,000?)4?(31 comma 00031,000?)?(58 comma 00058,000?)5?(41 comma 00041,000?)?(85 comma 00085,000?)6?(41 comma 00041,000?)7?(41 comma 00041,000?)8?(41 comma 00041,000?)9?(41 comma 00041,000?)10?(41 comma 00041,000?)

Year	Eclipse	Sabre
0	?$(1 comma 500 comma 0001,500,000?)	?$(900 comma 000900,000?)
1	?(22 comma 00022,000?)	?(45 comma 00045,000?)
2	?(31 comma 00031,000?)	?(45 comma 00045,000?)
3	?(31 comma 00031,000?)	?(58 comma 00058,000?)
4	?(31 comma 00031,000?)	?(58 comma 00058,000?)
5	?(41 comma 00041,000?)	?(85 comma 00085,000?)
6	?(41 comma 00041,000?)
7	?(41 comma 00041,000?)
8	?(41 comma 00041,000?)
9	?(41 comma 00041,000?)
10	?(41 comma 00041,000?)