BAK Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company tobid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided below.Original costEstimated lifeSalvage valueEstimated annual cash inflowsEstimated annual cash outflowsNet present valueMachine A$78,2008 yearsProfitability index0$19,800$5,130Machine AMachine B$182,0008 yearsClick 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 andprofitability index to 2 decimal places, e.g. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)0$39,600$10,180Machine B

Net Present Value is the between the present value of net cash inflow and initial investment.…

BAK Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the com bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided below. Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Machine A $78,200 8 years 0 $19,800 $5,130 Machine A Machine B $182,000 8 years 0 $39,600 $10,180 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 ne 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. profitability index to 2 decimal places, e.g. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provide Machine B

BAK Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the com bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided below. Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Machine A $78,200 8 years 0 $19,800 $5,130 Machine A Machine B $182,000 8 years 0 $39,600 $10,180 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 ne 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. profitability index to 2 decimal places, e.g. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provide Machine B

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Sheridan 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 here. Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows. Machine A $78,200 8 years 0 $19,800 $5,130 Machine B $182,000 8 years 0 $39,600 $10,180
Wildhorse's Auto Care is considering the purchase of a new tow truck. The garage doesn't currently have a tow truck, and the $59,950 price tag for a new truck would represent a major expenditure. Wildhorse Austen, owner of the garage, has compiled the following estimates in trying to determine whether the tow truck should be purchased. Initial cost $59,950 Estimated useful life 8 years Net annual cash flows from towing $7,990 Overhaul costs (end of year 4) $5,970 Salvage value $12,000 Show Transcribed Text د Wildhorse's good friend, Rick Ryan, stopped by. He is trying to convince Wildhorse that the tow truck will have other benefits that Wildhorse hasn't even considered. First, he says, cars that need towing need to be fixed. Thus, when Wildhorse tows them to her facility, her repair revenues will increase. Second, he notes that the tow truck could have a plow mounted on it, thus saving Wildhorse the cost of plowing her parking lot. (Rick will give her a used plow blade for free if…
Freida Company is considering an asset replacement project of replacing a control device. This old control device has been fully depreciated but can be sold for $5,000. The new control device, which is more automated, will cost $42,000. The new device’s installation and shipping costs will total $16,000. The new device will be depreciated on a straight-line basis over its 2-year economic life to an estimated salvage value of $0. The actual salvage value of this device at the end of 2-year period (That is, the market value of the device at the end of 2-year period) is estimated to be $4,000. If the replacement project is accepted, Freida will require an initial working capital investment of $2,200 (that is, adding $2,200 initially to its net working capital). During the 1st year of operations, Freida expects its annual revenue to increase from $72,800 to $90,000. After the 1st year, revenues from the replacement are expected to increase at a rate of $2,800 a year for the remainder of…
Jarett Motors is trying to decide whether it should keep its existing car washing machine or purchase a new one that has technological advantages (which translate into cost savings) over the existing machine. Information on each machine follows: Old machine New machine Original cost $9,000 $20,000 Accumulated depreciation 5,000 0 Annual cash operating costs 9,000 4,000 Current salvage value of old machine 2,000 Salvage value in 10 years 500 1,000 Remaining life 10 yrs 10 yrs Refer to Jarett Motors. The incremental cost to purchase the new machine is Select one: a. $18,000 b. $11,000 c. $13,000 d. $20,000
Current Attempt in Progress 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. Original cost Estimated life i Salvage value Estimated annual cash inflows Estimated annual cash outflows Net present value Machine A Profitability index $78,300 Which machine should be purchased? 8 years $19,700 $5,040 Machine A 0 should be purchased Click here to view the factor table Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. Of 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 O decimal places, s 125 and profitability index to 2 decimal places, eg. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided) Machine B $185,000 8 years 0…
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 $74,000 $179,000 Estimated life 8 years 8 years Salvage value 0 0 Estimated annual cash inflows $19,500 $39,500 Estimated annual cash outflows $4,800 $9,800 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…
TLC 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 is not equipped to do. Estimates for each machine are as follows: Machine A Machine B Original cost $78,300 $190,100 Estimated life 8 years 8 Years Salvage value 0 0 Estimated annual cash inflows $24,700 $ 39,900 Estimated annual cash outflows $5,150 $9,000 1. Calculate the net present value and profitability index of each machine A & B. Assume a 10% discount rate.
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. Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Net present value. Machine A $76,600 Profitability index 8 years Which machine should be purchased? $19,900 $4,890 Machine A 0 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.) should be purchased. Machine B $179,000 8 years 0 $40,400 $9,940 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 $4,400 Maintenance per year $4,300 $1,000 Salvage value $1,600 $7,500 He is told to assume that: 1. The life of each machine is 3 years. 2. The company thinks it knows how to make 12% on investments no more risky than this one. 3. Labor and maintenance are paid at the end of the year. The NPV for Machine A=$nothing (round your response to the nearest whole number and include a minus sign if necessary). The NPV for Machine B=$00 (round your response to the nearest whole number and include a minus sign if necessary). Using the net present value as the basis of comparing the machines,…
Assume that United Technologies is evaluating a proposal to change the company's manual design system to a computer-aided design (CAD) system. The proposed system is expected to save 10,000 design hours per year; an operating cost savings of $50 per hour. The annual cash expenditures of operating the CAD system are estimated to be $250,000. The CAD system requires an initial investment of $500,000. The estimated life of this system is five years with no salvage value. The tax rate is 40 percent. United Technologies has a cost of capital of 20 percent.Assume that management intends to use double-declining balance depreciation with a switch to straight-line depreciation (applied to any undepreciated balance) starting in Year 4.Determine the project's net present value
Please view the following video before answering this question. Video Solution: 05.02-PR010 Click here to access the TVM Factor Table Calculator Bailey, Inc., is considering buying a new gang punch that would allow them to produce circuit boards more efficiently. The punch has a first cost of $70,000 and a useful life of 15 years. At the end of its useful life, the punch has no salvage value. Annual labor costs would increase $2,200 using the gang punch, but annual raw material costs would decrease $12,000. MARR is 5%/year. Part a What is the future worth of this investment? $ eTextbook and Media Round entry to nearest dollar. The tolerance is ±2.
Hillsong Inc. manufactures snowsuits. Hillsong is considering purchasing a new sewing machine at a cost of $2.45 million. Its existing machine was purchased five years ago at a price of $1.8 million; six months ago, Hillsong spent $55,000 to keep it operational. The existing sewing machine can be sold today for $245,090. The new sewing machine would require a one-time, $85,000 training cost. Operating costs would decrease by the following amounts for years 1 to 7: Year 1 $389,800 2 399,800 410,200 4 425,400 5 432,400 6 435,000 7 436,000 The new sewing machine would be depreciated according to the declining-balance method at a rate of 20%. The salvage value is expected to be $380,800. This new equipment would require maintenance costs of $99,000 at the end of the fifth year. The cost of capital is 9%. Click here to view the factor table. Use the net present value method to determine the following: (If net present value is negative then enter with negative sign preceding the number eg.…