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Question 8. Humble Beginning Manufacturing Company purchased a specialized production machine a year ago for R180,000. During that time, the machine was estimated to have a useful life of 6 years with no scrap value. The annual cash operating cost was estimated at R300,000. A new modernized production machine has just come on the market that will do the same job but with an annual cash operating cost estimated at R255,000. The new machine costs R315,000 and has an estimated life of 5 years with zero scrap value. The old machine can be sold for R150,000 to a scrap dealer. The company uses a straight-line
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- Question 1 LTC Inc. is considering whether to sell an existing diecasting mould and then lease it back for 3 years. In this way, cash can be freed up to meet more intermediate needs. The mould brings in revenue of $20,000 yearly with variable cost staking 20% of revenue. The mould was bought 7 years ago for $500,000 with an estimated life of 10 years. It has been depreciated based on the straight-line method. The mould can be sold now for $100,000. Mitti Heavy Equipment Inc. has agreed to buy and then lease back the mould to LTC Inc. at $20,000 yearly for 3 years. The yearly lease payments are to be made in advance, that is, beginning of the lease period. LTC Inc. still enjoys tax holidays granted by the country's economic bureau. Its cost of funds is at 5% (a) Analyse if LTC Inc. should go ahead with the sale-and-lease back plan.(b) LTC Inc. now learns that it can junk the mould as scrap metal for $88,000 payable immediately. Hence, production shall stop as LTC Inc. will relocate to…CC1 company is considering an investment (at time = 0) in a machine that produces arrows. The cost of the machine is 42205 dollars with zero expected salvage value. Annual production in units during the 3-year life of the machine is expected to be (starting at time = 1) 4046 , 7950, and 10350. The arrows sale price per unit is 13 dollars in year one and it is expected to increase by 6% per year thereafter. Production costs per unit will be 5 dollars in year one, and then increase by 4% per year. Depreciation on the machine is fixed at 14204 dollars per year, and the overall tax rate is 40%. and the minimum acceptable rate of return is 10% percent. Calculate the net present value of this investment. Assume all flows are at the end of each year. round your answer to the nearest cent.3. A factory purchased a machine at price RM165,000. The machine has an expected life of 15 years. It will then have a scrap value of RM15,000. No use excel. Find the book value after 5 years using the straight-line method. (RM115000)
- 2. Brown Company bought a new machine 1 year ago for 12 million dollars. At that time the machine was estimated to have a life of 6 years and no salvage value. Annual operating costs are estimated at 20 million dollars. A new machine produced by another company does the same job but with an annual operating cost of only 17 million dollars. This new machine costs $21 million with a 5 year lifespan and no salvage value. The old machine can be sold for 10 million dollars. Straight-line depreciation is used and 40 percent corporate tax. If the cost of capital is 8 percent after taxes, calculate:a). Initial investment costsb). After-tax incremental cash flow.c). NPV of new investment.X Company is using a fully depreciated machine having a current market value of 20,000. The salvage value of the machine eight years from now would be zero. The company is considering replacing this machine by a new one costing 1,02, 500, and having an estimated salvage value of 12,500. With the use of the new machine, annual sales are expected to increase from 80,000 to 92, 500. Operating efficiencies with the new machine will save 12,500 per year as operating expenses. Depreciation will be charged on written - down basis at 25 per cent. The cost of capital is 11 per cent. The new machine has a 8-year life and the company's taxation rate is 35 per cent. Assume that book profit or loss from the sale of the asset is taxable at corporate tax rate. Should the company replace the old machine? Show calculations on incremental cash flow basis. How would your decision be affected if another new machine is available at a cost of 1,75,000 with a salvage value of 25,000. The machine is expected…4 It is possible to replace a used machine with book value of $380,000 and remaining useful life five years, after which its book value will be zero, although today may sold on the market for $250,000. The alternative machine costs $900,000, life five-year useful life and $150,000 salvage value at the end of that period. will produce savings $250,000 per year. Taxes are paid at 50%, the company's MARR is 11%, and the Equipment is depreciated on a straight line basis. Determine the economic desirability of the replacement. Reply Accept replacement; $102,753 incremental NPV
- A machine can be purchased at t=0 for $20,000. The estimated life is 15 years, with an estimated salvage value of zero at that time. The average annual operating and maintenance expenses are expected to be $5,500. If MARR =2.54%, what must the average annual revenues be in order to be indifferent between purchasing the machine and doing nothing? $7,120 $3,880 $6,969 @$7,213 $7,175A company plans to purchase a new machine due to the expected demand for anew product. The machine costs Ghc185,000 and it is expected that the machineshall be used for five (5) years with a scrap value of Ghc15,000. The companyexpects the demand for the product to be as follows: Year 1 2 3 4 5 Demand (Units) 25,000 30,000 35,000 40,000 20,000 Increase Selling Price 2% per year Variable Cost of production Fixed production expenses 3% per year5% per year The company’s cost of capital is 10% and pays corporate tax at a rate of 25% inthe related year. Calculate the Net Present Value (NPV) of purchasing the newmachine advice whether it makes economic sense to buy the new machine.PART 2 (RATE OF RETURN) ABC Company is trying to decide whether or not to automate their product packing process. The machine costs $200,000, has a useful life of 10 years and a salvage value $10,000. The machine costs $9000 per year to operate and maintain but will save the company $50,000 per year in labor costs. ABC Company has asked you to evaluate the economics of this purchase. (Assume their MARR is 14% per year).
