this is a 2 part questionExercise 23-10 (Algo) Keep or replace LO P5Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $49,000 and aremaining useful life of five years. It can be sold now for $59,000. Variable manufacturing costs are $49,000 per year for this oldmachine Information on two alternative replacement machines follows The expected useful life of each replacement machine is fiveyears.Purchase priceVariable manufacturing costs per year(a) Compute the income increase or decrease from replacing the old machine with Machine A(b) Compute the income increase or decrease from replacing the old machine with Machine B(c) Should Lopez keep or replace its old machine?(d) If the machine should be replaced, which new machine should Lopez purchase?Req AComplete this question by entering your answers in the tabs below.RevenuesMachine A: Keep or Replace AnalysisReq BCompute the income increase or decrease from replacing the old machine with Machine A. (Amounts to be deducted should beindicated with a minus sign.)CostsSale of existing machinePurchase of new machineVariable manufacturing costsIncome (loss)Req ACostsReq BReq C and DMachine B. Keep or Replace AnalysisRevenuesSale of existing machineReq C and DPurchase of new machineVariable manufacturing costsIncome (loss)Complete this question by entering your answers in the tabs below.Machine A$ 125,00020,000$$KeepKeepMachine B$ 137,00013,0000 $DCompute the income increase or decrease from replacing the old machine with Machine B. (Amounts to be deducted should beindicated with a minus sign.)0$Income Increase(Decrease) fromReplacing0Req C and D >

In order to make a keep or replacement decision, firstly we need to calculate the benefit of each…

Exercise 23-10 (Algo) Keep or replace LO P5 Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $49,000 and a remaining useful life of five years. It can be sold now for $59,000 Variable manufacturing costs are $49,000 per year for this old machine Information on two alternative replacement machines follows The expected useful life of each replacement machine is five years Purchase price Variable manufacturing costs per year Machine A $ 125,000 20,000 Machine B $ 137,000 13,000 (a) Compute the income increase or decrease from replacing the old machine with Machine A (b) Compute the income increase or decrease from replacing the old machine with Machine B (c) Should Lopez keep or replace its old machine? (d) if the machine should be replaced, which new machine should Lopez purchase?

Exercise 23-10 (Algo) Keep or replace LO P5 Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $49,000 and a remaining useful life of five years. It can be sold now for $59,000 Variable manufacturing costs are $49,000 per year for this old machine Information on two alternative replacement machines follows The expected useful life of each replacement machine is five years Purchase price Variable manufacturing costs per year Machine A $ 125,000 20,000 Machine B $ 137,000 13,000 (a) Compute the income increase or decrease from replacing the old machine with Machine A (b) Compute the income increase or decrease from replacing the old machine with Machine B (c) Should Lopez keep or replace its old machine? (d) if the machine should be replaced, which new machine should Lopez purchase?

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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New-Project Analysis The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $1,030,000, and it would cost another $18,500 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $537,000. The MACRS rates for the first three years are 0.3333, 0.4445, and 0.1481. The machine would require an increase in net working capital (inventory) of $20,000. The sprayer would not change revenues, but it is expected to save the firm $377,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 25%. (Ignore the half-year convention for the straight-line method.) Cash outflows, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest dollar. What is the Year-0 net cash flow? $ What are the net operating cash flows in Years 1, 2, and 3? Year 1: $ Year 2: $ Year 3: $ What is…
i 4 ances Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $47,000 and a remaining useful life of five years. It can be sold now for $57,000. Variable manufacturing costs are $50,000 per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is five years. Purchase price Variable manufacturing costs per year (a) Compute the income increase or decrease from replacing the old machine with Machine A (b) Compute the income increase or decrease from replacing the old machine with Machine B. (c) Should Lopez keep or replace its old machine? (d) if the machine should be replaced, which new machine should Lopez purchase? Req A Complete this question by entering your answers in the tabs below. Revenues Machine A: Keep or Replace Analysis Req B Compute the income increase or decrease from replacing the old machine with Machine A. (Amounts to be…
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