Question

Jupiter Inc. has decided to acquire a new weather satellite. After considering several options it has narrowed its search to two satellites.

Satellite XPTO: purchase cost of $348,217 and operating costs of $35,265 per year (paid at the end of each year).

Satellite XYZ: purchase cost of $105,205 and operating costs of $59,078 per year (paid at the end of each year).

Both satellites have a service life of 12 years. Based on the defender-challenger approach and given that the MARR is 3%, reinvestment rate is 11%, and minimum external rate of return is 11%, compute the incremental external rate of return of choosing the most expensive satellite. Note: round your answer to two decimal places, and do not include spaces, percentage signs, plus or minus signs, nor commas. If your answer is 15%, write 15, not 0.15.

Answer #1

Jupiter Inc. has decided to acquire a new weather satellite.
After considering several options it has narrowed its search to two
satellites.
Satellite XPTO: purchase cost of $336265 and operating costs of
$33495 per year (paid at the end of each year).
Satellite XYZ: purchase cost of $102246 and operating costs of
$62006 per year (paid at the end of each year).
Both satellites have a service life of 8 years. Based on the
defender-challenger approach and given that the...

Jupiter Inc. has decided to acquire a new weather satellite.
After considering several options it has narrowed its search to two
satellites.
Satellite XPTO: purchase cost of $331222 and operating costs of
$26454 per year (paid at the end of each year).
Satellite XYZ: purchase cost of $140617 and operating costs of
$64436 per year (paid at the end of each year).
Both satellites have a service life of 9 years. Based on the
defender-challenger approach and given that the...

Jupiter Inc. has decided to acquire a new weather satellite.
After considering several options it has narrowed its search to two
satellites.
Satellite XPTO: purchase cost of $306251 and operating costs of
$39998 per year (paid at the end of each year).
Satellite XYZ: purchase cost of $205569 and operating costs of
$55860 per year (paid at the end of each year).
Both satellites have a service life of 10 years. Based on the
defender-challenger approach and given that the...

Flounders Inc. has decided to acquire a new computer system.
After considering several options it has narrowed its search to two
systems. Apple System: purchase cost of $264,940 and operating
costs of $20,473 in year 1, $23,967 in year 2, and $24,939 in year
3 (paid at the end of each year). Dell System: purchase cost of
$236,416 and operating costs of $36,632 in year 1, $36,207 in year
2, and $37,719 in year 3 (paid at the end of...

A company is considering buying a new piece of machinery that
costs $20,000 and has a salvage value of $6,000 at the end of its
5-year useful life. The machinery nets $5,000 per year in annual
revenues. The internal rate of return (IRR) on this investment is
between__________.
A.
10%-11%
B.
12%-13%
C.
14%-15%
D.
13%-14%
E.
None of the above
Using the information in the previous Problem #6, if the company
considering purchasing the machine uses a MARR of...

Premier Steel, Inc. is considering the purchase of
a new machine for $100,000 that has a useful life of 3 years. The
firm’s cost of capital is 11% and the tax rate is 40%. This machine
will be sold for its salvage value of $20,000 at the end of
3-years. The machine will require an investment of $2,500 in spare
parts inventory upon installation. The machine will cost $8,000 to
ship and $4,000 to install and modify it. Sales are...

Mars Inc. is considering the purchase of a new machine that
costs $80,000. This machine will reduce manufacturing costs by
$20,000 annually. Mars will use the 3-year MACRS method (shown
below) to depreciate the machine, and it expects to sell the
machine at the end of its 5-year life for $10,000 salvage value.
The firm expects to be able to reduce net operating working capital
by $8,000 when the machine is installed, but the net working
capital will return to...

HEALTHY OPTIONS INC.
Healthy Options is a Pharmaceutical Company which is
considering investing in a new production line of portable
electrocardiogram (ECG) machines for its clients who suffer from
cardiovascular diseases. The company has to invest in equipment
which costs $2,500,000 and falls within a MARCS depreciation of 5
years, and is expected to have a scrap value of $200,000 at the end
of the project. Other than the equipment, the company needs to
increase its cash and cash equivalents...

Colina is considering opening a mezcal and tequila bar in
Laredo after the coronavirus pandemic subsides. She knows that
about $2.3 million is collected in mized beverage alcohol taxes per
year in Webb county (at a rate of 6.7% of the gross sale)and she
believes her bar could get about 1.4% of the liquor sales in the
county. Her variable costs likely to be 19% of her sales. She plans
to hire 2 full-time bartenders at $13/hour (assume 2000 working...

Please read the article and answear about
questions.
Determining the Value of the Business
After you have completed a thorough and exacting investigation,
you need to analyze all the infor- mation you have gathered. This
is the time to consult with your business, financial, and legal
advis- ers to arrive at an estimate of the value of the business.
Outside advisers are impartial and are more likely to see the bad
things about the business than are you. You should...

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