A Company is considering the purchase of a machine for ? 3,50,000. It feels quite confident that it can sell the goods produced by the machine so as to yield an annual cash surplus of 1,00,000. There is however an uncertainty as to the machine's working life. A recently published Trade Association Survey shows that members of the association have between them owned 250 of these machines and have found the lives of the machines vary as under: No. of year of machine life 3 4 5 6 7 Total 20 No. of machines having given life 50 100 70 10 250 Assuming discount rate of 10% the net present value for each different machine's life is as follows: Machine life 3 4 5 6 7 NPV () (1,01,000) (33,000) 29,000 86,000 1,37,000 You required to advice whether the company should purchase the machine or not.

A Company is considering the purchase of a machine for ? 3,50,000. It feels quite confident that it can sell the goods produced by the machine so as to yield an annual cash surplus of 1,00,000. There is however an uncertainty as to the machine's working life. A recently published Trade Association Survey shows that members of the association have between them owned 250 of these machines and have found the lives of the machines vary as under: No. of year of machine life 3 4 5 6 7 Total 20 No. of machines having given life 50 100 70 10 250 Assuming discount rate of 10% the net present value for each different machine's life is as follows: Machine life 3 4 5 6 7 NPV () (1,01,000) (33,000) 29,000 86,000 1,37,000 You required to advice whether the company should purchase the machine or not.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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The translation may be awkward. Please tell me the detailed explanation and answer.Please tell me how the answer process comes out. 1. Double-declining-balance methodOn January 1, 2018, Company A purchased one mechanical device. The acquisition cost of machinery is 800,000, and the content training is 8 years. The double-declining-balance method is applied separately when the residual value of the machine is 300,000 and 100,000, and the depreciation cost of the machine in 2020, 2021 and 2022 is calculated and depreciated. If there is a difference, please explain why. (Round to the nearest whole number when calculating depreciation.) 2, depreciation / sum-of-the-years'-digits methodOn October 1, Company A paid 1,600,000,000 cash and purchased the building. It is estimated that this building can be used for 5 years. The estimated residual value of the building is 100,000,000. If you use the sum-of-the-years'-digits method, calculate the depreciation of the building on your statement of…
Stella Company uses many kinds of machines in its operations. The following information relates to a machine that was acquired at the beginning of the current year: Cash paid for machine, including VAT of P96,000 Cost of transporting the machine Labor cost of installation by expert fitter 896,000 30,000 50,000 Labor cost of testing machine Cost of safety rails and platform surrounding machine Cost of water device to keep machine cool 40,000 60,000 80,000 Cost of adjustment to machine to make it operate more efficiently Estimated dismantling cost to be incurred as required by contract Insurance cost for the current year 75,000 65,000 15,000 Cost of training personnel who will use the machine 25,000 How much should be capitalized as cost of the machine?
Tim Smunt has been asked to evaluate two machines. After some investigation, he determines that they have the costs shown in the following table: Machine A Machine B Original Cost $15,000 $24,000 Labor per year $2,400 $4,000 Maintenance per year $4,300 $800 Salvage value $2,000 $7,500 He is told to assume that: 1. The life of each machine is 3 years. 2. The company thinks it knows how to make 14% on investments no more risky than this one. 3. Labor and maintenance are paid at the end of the year. The NPV for Machine B= $._____enter your response here
BolaBola uses different kinds of machines in its manufacturing process. The following information relates to the acquisition of machines that it has recorded in 2020.· Cash paid for equipment- P250,000· Cost of transporting machine - insurance and transport- P9,000· Labor cost of installation by expert fitter- P15,000· Labor cost of testing equipment- P12,000· Insurance cost for 2020- P4,500· Cost of training for personnel who will use the machine- P7,500· Cost of safety rails and platforms surrounding machine- P18,000· Cost of water devices to keep machine cool- P24,000· Cost of adjustments to machine during 2020 to make it operate more efficiently- P22,500 What is the cost of the machine?
Assume Plain Ice Cream Company, Incorporated, in Ithaca, NY, bought a new ice cream production kit (pasteurizer/homogenizer, cooler, aging vat, freezer, and filling machine) at the beginning of the year at a cost of $22,000. The estimated useful life was four years, and the residual value was $2,000. Assume that the estimated productive life of the machine was 10,000 hours. Actual annua usage was 4,000 hours in Year 1; 3,000 hours in Year 2; 2,000 hours in Year 3; and 1,000 hours in Year 4. Required: 1. Complete a separate depreciation schedule for each of the alternative methods. a. Straight-line. b. Units-of-production. c. Double-declining-balance. Complete this question by entering your answers in the tabs below. Req 1A Req 1B Year At acquisition 1 2 3 4 Req 1C Complete a depreciation schedule using the straight-line method. Depreciation Accumulated Expense Depreciation Net Book Value
Agranary purchases a conveyor used in the manufacture of grain for transporting, filling. or emptying. It is purchased and installed for $80,000 with a market value for salvage purposes that decreases at arate of 20% per year with a minimum of value $1.750, Operation and maintenance is expected to cost $15.000 in the first year, increasing $1.060 per year thereafter. The granary uses a MARR of 15%. What is the optimum replacement interval for the conveyor? years, Click here to access the TVM Factor Table Calculator For calculation purposes, use 5 decimal places as displayed in the factor table provided.
Which proposal should the company accept? Why?
A company owner has asked his accountant to research the photocopier equipment available from vendors, and to recommend the two best equipment alternatives. The company owner will decide on one piece of equipment to purchase. The fee charged for the accountant’s research was $500. The accountant’s report produced the following information: Photocopier (A) Photocopier (B) Initial cost, including installation $6,500 $ 6,000 Economic life 5 years 5 years Scrap value at end of economic life -0- -0- Initial training cost $ 500 $ 700 Annual maintenance $ 400 $ 300 Annual wage cost $12,500 $12,500 REQUIRED Which photocopier should the company owner choose? Why? The company owner requested your help in preparing the coming year company budget. Please, guide him to the best method and appropriate type from your perspective. Evaluation and Grading: Your answers would be evaluated and graded based on: Coverage…
New Style Corporation is a company that manufactures and sells chairs. On 1/1/20, the company purchases a piece of manufacturing equipment for $3,100,000 cash. The expected residual value is $200,000 and the useful life is 5 years. The company expects to produce 5,000,000 chairs with the equipment – 1,200,000 chairs in 2020; 1,400,000 chairs in 2021; 1,000,000 chairs in 2022; and 600,000 chairs 2023; and 800,000 chairs in 2024. Show your work. Round per unit to the nearest cent. Assume that New Style Corporation uses the Units-of-Activity method of depreciation.
BAK Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided below. Machine A Machine B Original cost $ 77,500 $ 186,000 Estimated life 8 years 8 years Salvage value $ 19,500 $ 39,600 Estimated annual cash inflows $ 5,040 $ 9,800 Estimated annual cash outflows Click here to view the factor table. Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round answer for present value to 0 decimal places, e.g. 125 and profitability index to 2 decimal places, e.g. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Machine A Machine B Net present value Profitability index Which machine should be purchased? should be…
The following data are accumulated by Geddes Company in evaluating the purchase of $120,000 of equipment, having a four-year useful life: Net Income Net Cash Flow Year 1 $49,500 $79,500 Year 2 29,000 59,000 Year 3 16,500 46,500 Year 4 6,500 36,500 This information has been collected in the Microsaft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. K) Open spreadsheet a. Assuming that the desired rate of return is 15%, determine the net present value for the proposal. If required, round to the nearest dollac. Net present value b. Would management be likely to look with favor on the propesal? the net present value indicates that the return on the proposal is than the minimum desired rate of retum of 15%
Assume Plain Ice Cream Company, Incorporated, in Ithaca, NY, bought a new ice cream production kit (pasteurizer/homogenizer, cooler, aging vat, freezer, and filling machine) at the beginning of the year at a cost of $24,000. The estimated useful life was four years, and the residual value was $2,580. Assume that the estimated productive life of the machine was 10,200 hours. Actual annual usage was 4,080 hours in Year 1; 3,060 hours in Year 2; 2,040 hours in Year 3; and 1,020 hours in Year 4. Required: 1. Complete a separate depreciation schedule for each of the alternative methods. a. Straight-line. b. Units-of-production. c. Double-declining-balance. Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 1C Complete a depreciation schedule using the units-of-production method. Note: Use two decimal places for the per unit output factor. Do not round intermediate calculations. Year Depreciation Expense At acquisition 1 2 3 4 Accumulated Depreciation Net…

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