Assume that a company is choosing between two alternatives-keep an existing machine or replace it with a new machine. The costs associated with thetwo alternatives are summarized as follows:Multiple ChoicePurchase cost (new)Remaining book valueOverhaul needed nowAnnual cash operating costsSalvage value (now)Salvage value (eight years from now)$ 6,000Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided.If the company overhauls its existing machine, it will be usable for eight more years. If it buys the new machine, it will be used for eight years. Assuming adiscount rate of 12%, what is the net present value of the cash flows associated with keeping the existing machine?$(50,760)$(56,760)ExistingMachine$ 15,000$ 6,000$ 5,000$ 10,500$ 2,000$ 1,000$(71,760)NewMachine$ 22,000$ 7,000 Remaining book valueOverhaul needed nowAnnual cash operating costsSalvage value (now)Salvage value (eight years from now)Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables proded.If the company overhauls its existing machine, it will be usable for eight more years. If it buys the new machine, it will be usediscount rate of 12%, what is the net present value of the cash flows associated with keeping the existing machine?Multiple Choice$(50,760)$(56,760)$(71,760)$ 6,000$ 5,000$ 10,500$ 2,000$ 1,000$(54,760)$ 7,000$ 6,000

It represents the amount of profitability in absolute dollar terms generated by the project after…

Answered: Assume that a company is choosing…

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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A cost analysis is to be made to determine what, if anything, should be done in a situation offering three "do-something" and one "do-nothing" alternatives. Estimates of the costs and benefits are as follows: End-of- Uniform Useful- Life Benefit Salvage (years) Value Useful First Alternatives Cost Annual Life -$500 $135 -600 100 250 5 -700 100 180 10 4 Use Present Worth Analysis with the Least Common Multiple Method to select the best alternative. Use MARR=6%. (Note: You MUST describe your answers with conversion factor notations and you DON'T NEED TO calculate the values of PW for supporting a decision. Simply describe your selection criterion with PW expressions.) 1.
Can someone please solve this question using hand calculations only? PLEASE AND THANK YOU!!!
An engineering analysis by net present worth (NPW) is to be made for the purchase of two devices, A and B. If an 8% interest rate is used, recommend the device to be purchased.
3. You are confronted with a decision whether to replace an old transit mixer or to purchase a new one of the same model and capacity. The following information is given, namely: Replacement (Brand New) 3,200,000 65,000 300,000 15 year Retention (Refurbished) Initial Cost, P 550,000 Operating Cost, P/year Salvage value Life, year 210,000 30,000 5 Assuming interest rate is 6% per year, would you recommend to retain (with refurbishment) or to totally replace the equipment now? What are the implications of your decision? Explain your answer.
Assume that a company is choosing between two alternatives-lease a piece of equipment for five years or buy a piece of equipment and sell it in five years. The costs associated with the two alternatives are summarized as follows: Lease Buy $ 60,000 $ 6,000 Purchase cost of equipment Annual operating costs Immediate deposit Annual lease payments Salvage value (5 years from now) $ 8,000 Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using the tables provided. If the company chooses the lease option, it will have to pay an immediate deposit of $25,000 to cover any future damages to the equipment. The deposit is refundable at the end of the lease term. The annual lease payments are made at the end of each year. Based on a net present value analysis with a discount rate of 12%, what is the financial advantage (disadvantage) of buying the equipment rather than leasing it? $ 25,000 $ 18,000
Cadet Inc. is considering the purchase of new equipment that will automate production and thus reduce labor costs. Cadet made the following estimates related to the new machinery: (Click the icon to view the information.) Present Value of $1 table Present Value of Annuity of $1 table Future Value of $1 table Future Value of Annuity of $1 table Read the requirements. C Requirement 1. Calculate (a) net present value, (b) payback period, (c) discounted payback period, and (d) internal rate of return. a. Net present value. (Round intermediary calculations to the nearest whole dollar. Use factors to three decimal places, X.XXX, and use a minus sign or parentheses for a negative net present value. Enter the net present value of the investment rounded to the nearest whole dollar.) The net present value is Requirements 1. Calculate (a) net present value, (b) payback period, (c) discounted payback period, and (d) internal rate of return. 2. Compare and contrast the capital budgeting methods in…
Provide step by step manual solution, given, and depreciation table for below mentioned problem. Make sure yet that your answer is the same as the given answer before sending your solution. An asset costing P50,000 has a life expectancy of 6 years and an estimated salvage value of P8,000. Calculate the depreciation charge at the end of the fourth period using fixed-percentage method. Answer. P5,263.87
The AW values for retaining a presently owned machine for additional years are shown in the table. Note that the values represent the AW amount for each of the n years that the asset is kept, i.e., if it is kept 5 more years, the annual worth is $−95,000 for each of the 5 years. Assume that future costs remain as estimated for the replacement study and that used machines like the one presently owned will always be available. (a) What is the ESL and associated AW of the defender at a MARR of 12% per year? (b) A challenger with an ESL of 7 years and an AWC = $-88,000 per year has been identified. Which AW will be less for the respective ESL periods? Retention Period, Years AW Value, $ per Year 1 -87,000 2 -93,000 3 -85,000 4 -83,000 5 -95,000 a) The ESL of the defender is_____ year(s) with the lowest AW of $_________ . b) The______________ has the lower AW at _________$ for n equal to ______ .
RR
Sun Coast Tours is considering purchasing a new boat for use in its tour business. Relevant information concerning the boat is as follows: (Ignore income taxes.) Purchase cost Annual net cash inflows that will be provided by the boat Life of the boat Required: 1-a. Compute the payback period for the boat. (Round your answer to 1 decimal place.) Payback period Yes O No 1-b. If the company rejects all proposals with a payback period of more than five years, will the boat be purchased? year(s) Simple rate of return $232,000 $ 55,000 2-a. Compute the simple rate of return on the boat. Use straight-line depreciation based on the boat's useful life, assuming $13,600 salvage value. (Round your answer to 1 decimal place.) Yes % 2-b. Will the boat be purchased if the company's required rate of return is 14%? 14 years
Reference: Case Study S Dunn Manufacturing is considering the following two alternatives. The cost information for the two proposals for replacing an equipment are provided are in table below. Initial cost Benefits/year Machine X $120,000 $20,000 for the first 10 years and $9,000 for the next 10 years Life Salvage value $40,000 MARR 5.2. The NPW of machine X is A) $35,158 B) $48,192 C) $50,752 Machine Y $96,000 $12,000 per year for 20 years. 20 years 8% $20,000
Subject: accounting

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