A piece of new equipment has been proposed by engineers to increase theproductivity of a certain manual welding operation. The investment cost is$25,000, and the equipment will have a market value of $5,000 at the end ofa study period of five years. Increased productivity attributable to theequipment will amount to $8,000 per year after extra operating costs havebeen subtracted from the revenue generated by the additional production.The firm's MARR is 20% per year.Find the present worth equivalent of allcash flows.[Select]Find the future worth equivalent of allcash flows.[ Select]Find the annual worth equivalent of allcash flows.(Select ]

The present value of the cash flows means the discounted values of cash flows as if they happen to…

Answered: A piece of new equipment has been…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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A company is planning to install a new automated plastic-molding press. Four different presses are available. The initial capital investments and annual expenses for these four mutually exclusive alternatives are as shown: Assume that each press has the same output capacity (120,000 units per year) and has no market value at the end of its useful life; the selected analysis period is five years; and any additional capital invested is expected to earn at least 10% per year. Which press should be chosen if 120,000 nondefective units per year are produced by each press and all units can be sold? The selling price is $0.375 per unit. Solve by hand and by spreadsheet.
Jones Excavation Company is planning an investment of $233,500 for a bulldozer. The bulldozer is expected to operate for 2,000 hours per year for eight years. Customers will be charged $120 per hour for bulldozer work. The bulldozer operator costs $37 per hour in wages and benefits. The bulldozer is expected to require annual maintenance costing $20,000. The bulldozer uses fuel that is expected to cost $48 per hour of bulldozer operation. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192
Heyden Motion Solutions ordered $7 million worth of seamless tubes for manufacturing their high performance and precision linear motion products. If their annual operating costs are $860,000 per year, how much annual revenue is required over a 3-year planning period to recover the initial investment and operating costs at the company’s MARR of 15% per year?
Natural Foods Inc. is planning to invest in new manufacturing equipment to make a new garden tool. The new garden tool is expected to generate additional annual sales of 7,600 units at $38 each. The new manufacturing equipment will cost $123,500 and is expected to have a 10-year life and a $9,500 residual value. Selling expenses related to the new product are expected to be 5% of sales revenue. The cost to manufacture the product includes the following on a per-unit basis: Direct labor $6.50 Direct materials 21.00 Fixed factory overhead-depreciation 1.50 Variable factory overhead 3.30 Total $32.30 Determine the net cash flows for the first year of the project, Years 2–9, and for the last year of the project. Use the minus sign to indicate cash outflows. Do not round your intermediate calculations but, if required, round your final answers to the nearest dollar. Natural Foods Inc.Net Cash Flows Year 1 Years 2-9 Last Year Initial investment $fill in the blank 1…
The engineering team at Manuel’s Manufacturing, Inc., is planning to purchase an enterprise resource planning (ERP) system. The software and installation from Vendor A costs $380,000 initially and is expected to increase revenue $125,000 per year every year. The software and installation from Vendor B costs $280,000 and is expected to increase revenue $95,000 per year. Manuel’s uses a 4-year planning horizon and a 10%/year MARR. Solve, a. What is the annual worth of each investment?b. What is the decision rule for determining the preferred investment basedon annual worth ranking? c. Which (if either) ERP system should Manuel purchase?
Camellia Engineering Ltd is a manufacturer of high pressure steam valves andsteam traps. Its initial investment on equipment was $50,000 and its annualoperating costs were $20,000. The revenues generated from these products were$45,000 per year. The used equipment was salvaged for $ 4,000 at the end of 5years. The minimum attractive rate of return of the company is 15% per year. a.Calculate the internal rate of return (IRR) that the company earned on theproducts. Justify your answer.b. Compute the discounted payback period for the above investment at MARRof 15% per year.
The engineering team at Manuel’s Manufacturing, Inc., is planning to purchase an enterprise resource planning (ERP) system. The software and installation from Vendor A costs $380,000 initially and is expected to increase revenue $125,000 per year every year. The software and installation from Vendor B costs $280,000 and is expected to increase revenue $95,000 per year. Manuel’s uses a 4-year planning horizon and a 10% per year MARR. Solve, a. What is the discounted payback period of each investment? b. Which ERP system should Manuel purchase if his decision rule is to select the system with the shortest DPBP?
A retrofitted space-heating system is being considered for a small office building. The system can be purchased and installed for $142,000, and it will save an estimated 240,000 kilowatt-hours (kWh) of electric power each year over a six-year period. A kilowatt-hour of electricity costs $0.14, and the company uses a MARR of 12% per year in its economic evaluations of refurbished systems. The market value of the system will be $28,400 at the end of six years, and additional operating and maintenance expenses are $15,600 per year. Use the benefit-cost method to make a recommendation. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 12% per year. The conventional B-C ratio of the system is 1.41. (Round to two decimal places.) This B-C ratio indicates that the project is not acceptable .
Costs associated with the manufacture of miniature high-sensitivity piezoresistive pressure transducers is $85,000 per year. A clever industrial engineer found that by spending $19,000 now to reconfigure the production line and reprogram two of the robotic arms, the cost will go down to $52,000 next year and $58,000 in years 2 through 5. Using an interest rate of 15% per year, determine the present worth of the savings due to the reconfiguration. The present worth of the savings is determined to be $
Pittsburgh Custom Products (PCP) purchased a new machine for ram cambering large I beams. PCP expects to bend 80 beams at $2000 per beam in each of the first 3 years, after which it expects to bend 100 beams per year at $2500 per beam through year 8. If the company’s minimum attractive rate of return is 18% per year, what is the present worth of the expected revenue?
Winthrop Company has an opportunity to manufacture and sell a new product for a five-year period. To pursue this opportunity, the company would need to purchase a plece of equipment for $130,000. The equipment would have a useful life of five years and a $10,000 salvage value. The CCA rate for the equipment is 30%. After careful study. Winthrop estimated the following annual costs and revenues for the new product: Sales revenues: Variable expenses Fixed expenses $250,000 $130,000 $ 70,000 The company's tax rate is 30% and its after-tax cost of capital is 10%. Required: 1. Compute the net present value of the project. (Hint Use Microsoft Excel to calculate the discount factor(s).) (Do not round intermediate calculations and PV factor. Round the final answers to the nearest whole dollar. Negative value should be indicated with minus sign.) 2. Would you recommend that the project be undertaken? 1. Net present value 2 Would you recommend that the project be undertaken?
A new manufacturing plant costs $5 million to build. Operating and maintenance costs are estimated to be $45,000 per year and a salvage value of 25% of the initial cost is expected. The units the plant produces are sold for $35 each. Sales and production are designed to run 365 days per year. The planning horizon is 10 years. Find the break-even value for the number of units sold per day for the following value of MARR 5%.

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