Hello solve and give true answer General Account - Ridley Company has a factorymachine with a book value of $95,200 and aremaining useful life of 5 years. A new machine isavailable at a cost of $195,600. This machine willhave a 5-year useful life with no salvage value. Thenew machine will lower annual variablemanufacturing costs from $569,700 to $382,200.Prepare an analysis showing whether the oldmachine should be retained or replaced.

To determine whether Ridley Company should retain or replace the old machine, we need to analyze the…

Answered: General Account - Ridley Company has a…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 17P

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Blossom Company has a factory machine with a book value of $85,000 and a remaining useful life of 5 years. It can be sold for $25,000. A new machine is available at a cost of $345,000. This machine will have a 5-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $550,000 to $450,000. Prepare an analysis showing whether the old machine should be retained or replaced. (In the first two columns, enter costs and expenses as positive amounts, and any amounts received as negative amounts. In the third column, enter net income increases as positive amounts and decreases as negative amounts. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Retain Equipment Variable manufacturing costs $ Replace Equipment $ Net Income Increase (Decrease) New machine cost Sell old machine Total $ The old factory machine should be tA $ $
Blossom Company has a factory machine with a book value of $85,000 and a remaining useful life of 5 years. It can be sold for $25,000. A new machine is available at a cost of $345,000. This machine will have a 5-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $550,000 to $450,000. Prepare an analysis showing whether the old machine should be retained or replaced. (In the first two columns, enter costs and expenses as positive amounts, and any amounts received as negative amounts. In the third column, enter net income increases as positive amounts and decreases as negative amounts. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Variable manufacturing costs New machine cost Sell old machine Total The old factory machine should be Retain Equipment replaced 500000 345000 25000 870000 $ $ Replace Equipment Net Income Increase (Decrease)
Bryant Company has a factory machine with a book value of $90,000 and a remaining useful life of 5 years. It can be sold for $30,000. A new machine is available at a cost of $400,000. This machine will have a 5-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $600,000 to $500,000. Prepare an analysis showing whether the old machine should be retained or replaced. (In the first two columns, enter costs and expenses as positive amounts, and any amounts received as negative amounts. In the third column, enter net income increases as positive amounts and decreases as negative amounts. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) RetainEquipment ReplaceEquipment Net IncomeIncrease (Decrease) Variable manufacturing costs $enter a dollar amount $enter a dollar amount $enter the difference between the two previous amounts in the row New…
Your company is considering the purchase of a new 623K Wheel Tractor-Scraper. Use the following information to calculate the hourly owning costs, hourly operating costs, and total owning and operating costs. - Delivered price (with tires): $420,000 - Cost of Tires: $30,000 and their life is determined by the average operation in zone B. - Salvage value is zero - the equipment is new and it is anticipated to be used for 5 years, until end of its service life. - Anticipated operating hours per year: 2,000 hrs/yr - Simple interest rate for purchase loan: 12% - Annual cost of Insurance: $5,500 (See optional method) - Property tax rate: 2% - Fuel use will be average value in medium range - Cost of fuel: $3.10 per gallon - Hourly Maintenance Cost: $5.00 per hour - Repair cost: $11.00 per hour - Operator cost (with fringes): $75 per hour - No undercarriage or special wear items costs…
Factor Company is planning to add a new product to its line. To manufacture this product, the company needs to buy a new machine at a $491,000 cost with an expected four-year life and a $20,000 salvage value Additional annual information for this new product line follows PV of $. EX of St. PVA of Stand EVA of $ (Use appropriate factors) from the tables provided) Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation Machinery 1. Determine income and net cash flow for each year of this machine's life. 2. Compute this machine's payback period, assuming that cash flows occur evenly throughout each year 3. Compute net present value for this machine using a discount rate of 7% Complete this question by entering your answers in the tabs below. Required 1 Required 2 year 4 Required 3 Compute net present value for this machine using a discount rate of 7%. (Do not round intermediate calculations. Negative amounts should be entered with a minus sign.…
You are considering two options for manufacturing a typical product: 1. You continuo to use an old machine now in use which was bought 8 years ago at $12,000. It has been fully depreciated but can be sold for $1,300. If kept, it could be used for 3 more years (romaining useful life), at the end of which time it would have no salvage valuo. The annual operating and maintenance costs amount to $10,000 for the old machine. 2. You purchase a brand new machino at an invoice price of $15,000 to replace the prosent equipment. Becauso of the nature of the product manufactured, it also has an expected economic life of 3 years, and will have a salvage value of $3,400 at the end of that time. With the new machine, the expected operating and maintenance costs amount to $3,000 for the first year and $4.000 in each of the next two years. What is the opportunity cost of not replacing the old machine now? O S700 $1,300 $2,000 O s10,000
Choose the correct answer for the following question: Your company is analyzing two machines to determine which one it should purchase. Whichever machine is purchased will be replaced at the end of its useful life. The company requires a 10 percent rate of return and uses straight-line depreciation to a zero book value over the life of the machine. Machine A has a cost of $300,000, annual operating costs of $42,000, and a 5-year life. Machine B costs $265,000, has annual operating costs of $50,000, and a 4-year life. The company currently pays no taxes. Which machine should be purchased and why? (Hint: consider the equivalent annual cost-EAC of the two machines) A. Machine A; because it will save the company about $8,783 a year B. Machine A; because it will save the company about $14,670 a year C. Machine B; because it will save the company about $11,482 a year D. Machine B; because it will save the company about $9,916 a year E. Machine A; because it will save the company about…
A CNC machine costs $220,000. A facility purchases one and plans to use it for 12 years, at which point it will have a salvage value of $34,000. What are the depreciation allowance and book value after 7 years of use using declining balance depreciation? Depreciation %24 allowance: %24 Book value: Carry all interim calculations to 5 decimal places and then round your final answers to a whole number. The tolerance is 170.
Sheridan Company has a factory machine with a book value of $150,000 and a remaining useful life of 4 years. A new machine is available at a cost of $245,000. This machine will have a 4-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $590,000 to $490,000. Prepare an analysis that shows whether Sheridan should retain or replace the old machine. (If an amount reduces the net income then enter with a negative sign preceding the number or parenthesis, e.g. -15,000, (15,000).) Variable costs New machine cost $ $ Keep Equipment $ $ Replace Equipment $ $ Net Income Increase (Decrease) Activate Windo Go to Settings to ac
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Provide answer in table format Xinhong Company is considering replacing one of its manufacturing machines. The machine has a book value of $43,000 and a remaining useful life of five years, at which time its salvage value will be zero. It has a current market value of $53,000. Variable manufacturing costs are $33,900 per year for this machine. Information on two alternative replacement machines follows. Alternative A Alternative B Cost $ 120,000 $ 119,000 Variable manufacturing costs per year 22,500 10,300 Calculate the total change in net income if Alternative A, B is adopted. Should Xinhong keep or replace its manufacturing machine? If the machine should be replaced, which alternative new machine should Xinhong purchase?
A company is planning to purchase a machine that will cost P240,000, have a six-year life, and be depreciated over a six-year period with no salvage value. The company expects to sell the machine's output of 30,000 units evenly throughout each year. A projected income statement for each year of the asset's life appears below. What is the accounting rate of return for this machine? Sales Costs: P 900,000 Manufacturing P 520,000 Depreciation on machine 40,000 Selling and administrative expenses 300,000 (860,000 ) Income before taxes P 40,000 Income tax (25%) (10,000 ) Net income…

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