Galveston Excursons Corporation is considering the purchase of a new ocean-going vessel that could potentially reduce labor costs of its operation by a considerable margin. The new ship would cost $600,000 and would be fully depreciated by the straight-line method over 15 years. At the end of 15 years, the ship will have no value and will be scuttled. Galveston Excursons' cost of capital is 14
percent, and its marginal tax rate is 35 percent. Refer to Galveston Excursons Corporation. If the ship produces equal annual labor cost savings over its 10-year life, how much do the annual savings in labor costs need to be to generate a net present value of $0 on the project? (Round to the nearest dollar.) Present value tables or a financial calculator are required.
a. $ 83,685
b. $ 97,685
c. $146,906
d. $226,008
B
NPV of Labor Savings = $600,000
Use PV of Annuity Table 15 years, 14%; Constant = 6.1422
$600,000 / 6.1422 = $97,685
You might also like to view...
Marsden Company has three departments occupying the following amount of floor space: Department 115,000sq. ft.Department 210,000sq. ft.Department 325,000sq. ft.How much store rent should be allocated to Department 3 if total rent is equal to $200,000? (Do not round intermediate calculations.)
A. $66,667 B. $100,000 C. $50,000 D. None of the answers are correct.
The economic value of a tangible asset may decline below its book value but an impairment loss would not be recognized when the
a. undiscounted future cash flows exceed its book value. b. undiscounted future cash flows exceed its market value. c. discounted future cash flows exceed its book value. d. discounted future cash flows exceed its market value. e. discounted future cash flows exceed its liquidation value.
A company's organizational structure helps to determine where formal power and authority will be located within the organization.
Answer the following statement true (T) or false (F)
What is the appropriate term from systems theory for a set of interacting units that endures through time within an established boundary?
A. System D. Environment B. Morphogenesis E. Homeostasis C. Structure