Solved

Table 11.5 Nuff Folding Box Company, Inc. Is Considering Purchasing a New

question 3

Multiple Choice

Table 11.5
Nuff Folding Box Company, Inc. is considering purchasing a new gluing machine. The gluing machine costs $50,000 and requires installation costs of $2,500. This outlay would be partially offset by the sale of an existing gluer. The existing gluer originally cost $10,000 and is four years old. It is being depreciated under MACRS using a five-year recovery schedule and can currently be sold for $15,000. The existing gluer has a remaining useful life of five years. If held until year 5, the existing machine's market value would be zero. Over its five-year life, the new machine should reduce operating costs (excluding depreciation) by $17,000 per year. Training costs of employees who will operate the new machine will be a one-time cost of $5,000 which should be included in the initial outlay. The new machine will be depreciated under MACRS using a five-year recovery period. The firm has a 12 percent cost of capital and a 40 percent tax on ordinary income and capital gains.
-The present value of the project's annual cash flows is ________. (See Table 11.5)

Definitions:

Double Exponential Smoothing

A forecasting technique that applies two levels of exponential smoothing to capture both the level and trend of a time series data.

Trend Significance

The measure of how meaningful or impactful a trend is within a dataset, often determined through statistical analysis.

Exponential Smoothing Model

A time series forecasting method for univariate data that smoothes past observations using an exponential window function.

Double Exponential Smoothing

A forecasting technique that applies two levels of smoothing to capture trends in time series data more accurately than single exponential smoothing.