6Check my work mode: This shows what is correct or incorrect for the work you have completed so far. It does not indicate compleProblem 6-30 Mutually exclusive investments and project livesAs a result of improvements in product engineering. United Automation is able to sell one of its two milling machines. Both machinesperform the same function but differ in age. The newer machine could be sold today for $77.000. Its operating costs are $23,600 ayear, but at the end of five years, the machine will require a $18.200 overhaul (which is tax deductible) Thereafter operating costs willbe $31,800 until the machine is finally sold in year 10 for $7700The older machine could be sold today for $26,800 if it is kept, it will need an immediate $29,000 (tax-deductible) overhaulThereafter, operating costs will be $38,000 a year until the machine is finally sold in year 5 for $7700Both machines are fully depreciated for tax purposes. The company pays tax at 21% Cash flows have been forecasted in real termsThe real cost of capital is 10%. Calculate the equivalent annual costs for selling the new machine and for selling the old machineNote: Do not round intermediate calculations. Enter your answers as a positive value rounded to 2 decimal placesb. Which machine should United Automation sell?DAnswer is complete but not entirely correct,Equivalent AnnualCostR

We first need to determine the NPV of costs of each of the mill. EAC is the NPV of the project…

Answered: Calculate the equivalent annual costs…

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

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Applying Differential Analysis to Equipment Replacement Decision TaylorMade - Adidas Golf Company a subsidiary of Adidas, manufactures golf clubs using "adjustable weight technology" or AWT. Suppose a European machine company has proposed to sell TaylorMade a new highly automated machine that would reduce significantly the labor cost of producing its golf clubs. The cost of the machine is $ 7,800,000, and would have an expected life of six years, at the end of which it would have a residual value of 10% of its original cost. The machine has an estimated operating cost of $39,000 per month. The direct labor cost savings per club from using the machine is estimated to be $16 per club, per month. In addition, other fixed overhead costs of $20,800 per month would be eliminated if the new machine is purchased. Also, the new machine would free up about 13,000 square feet of space from the displaced workers. Assume TaylorMade's building is held under a 10-year lease that has eight years…
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Sampson Corporation is evaluating the introduction of a new product. The possible levels of unit sales and the probabilities of their occurrence are shown next: Possible Market Reaction Low response Moderate response High response Very high response Sales in Units 40 Probabilities 0.30 70 0.20 90 120 0.20 0.30 a. What is the expected value of unit sales for the new product? Note: Do not round Intermediate calculations and round your answer to the nearest whole unit.) Answer is complete but not entirely correct. Expected value 70 units b. What is the standard deviation of unit sales? Note: Do not round Intermediate calculations. Round your answer to 2 decimal places. Answer is complete but not entirely correct. Standard deviation 19.24 units
An operations manager is deciding on the level of automation for a new process. The fixed cost for automation includes the equipment purchase price, installation, and initial spare parts. The variable costs per unit for each level of automation are primarily labor related. Each unit can be sold for $81. As in many cases, you have the default alternative of doing nothing ($0 fixed cost, $0 variable costs). Hint: For these questions, also consider the “Do Nothing” option as a viable option when making your decision. Alternative Fixed Costs Variable Costs per Unit A $100,000 $54 B $272,000 $31 C $560,000 $20 Recommended: graph each alternative with units on the x-axis and $ on the y-axis. Also, include revenue on the chart. Identify the break-even points and points of indifference.
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The Borstal Company has to choose between two machines that do the same job but have different lives. The two machines have the following costs: Year Machine A 0 OLN3+ 1 2 4 $48,000 11,600 11,600 11,600 + replace Machine A Machine B These costs are expressed in real terms. a. Suppose you are Borstal's financial manager. If you had to buy one or the other machine and rent it to the production manager for that machine's economic life, what annual rental payment would you have to charge? Assume a 12% real discount rate and ignore taxes. (Do not round intermediate calculations. Enter your answers as a positive value rounded to 2 decimal places.) Machine B $58,000 11,200 11, 200 11,200 11,200 + replace Annual Rental Payment
Esquire Company needs to acquire a molding machine to be used in its manufacturing process. Two types of machines that would be appropriate are presently on the market. The company has determined the following: (FV of $1, PV of $1, FVA of S1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Machine À could be purchased for $27,000. It will last 10 years with annual maintenance costs of $900 per year. After 10 years the machine can be sold for $2,835. Machine 8 could be purchased for $22,500. It also will last 10 years and will require maintenance costs of $3,600 in year three, $4,500 in year six, and $5,400 in year eight. After 10 years, the machine will have no salvage value. Required: Assume an interest rate of 8% properly reflects the time value of money in this situation and that maintenance costs are paid at the end of each year. Ignore income tax considerations. Calculate the present value of Machine A & Machine B. Which machine Esquire…
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A manager must decide between two machines. The manager will take into account each machine's operating costs and initial costs, and its breakdown and repair times. Machine A has a projected average operating time of 131 hours and a projected average repair time of 4 hours. Projected times for machine B are an average operating time of 61 hours and a repair time of 5 hours. What are the projected availabilities of each machine? (Round your answers to 3 decimal places.) Answer is complete but not entirely correct. Availability 0.952 0.945 Machine A Machine B

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Calculate the equivalent annual costs for selling the new machine and for selling the old machine Note: Do not round intermediate calculations. Enter your answers as a positive value rounded to 2 decimal places b. Which machine should United Automation sell?