Granfield Company has a piece of manufacturing equipment with a book value of $45,500 and a remaining useful life of four years. At the end of the fouryears the equipment will have a zero-salvage value, Granfield can purchase new equipment for $153,000 and receive $26.400 in return for trading in itscurrent equipment. The current equipment has variable manufacturing costs of $50,000 per year. The new equipment will reduce variable manufacturingcosts by $24,500 per year over its four-year life. The total increase or decrease in income by replacing the current equipment with the new equipment is: Markson Company had the following results of operations for the past year:Contribution margin income statementPer Unit$ 20.00Sales (11,000 units)Variable costsDirect materialsDirect laborOverheadContribution marginFixed costsFixed overheadIncome4.256.002.007.754.25$ 3.50Annual Total$ 220,00046,75066,00022,00085,25046,750$ 38,500A foreign company offers to buy 3,500 units at $14 per unit. In addition to variable manufacturing and administrative costs, selling these units wouldincrease fixed overhead by $2,800 for the purchase of special tools. Markson's annual productive capacity is 16,500 units. If Markson accepts thisadditional business, its profits will

Hi studentSince there are multiple questions, we will answer only first question.Incremental costs…

Granfield Company has a piece of manufacturing equipment with a book value of $45,500 and a remaining useful life of four years. At the end of the four years the equipment will have a zero-salvage value, Granfield can purchase new equipment for $153,000 and receive $26,400 in return for trading in its current equipment. The current equipment has variable manufacturing costs of $50,000 per year. The new equipment will reduce variable manufacturing costs by $24,500 per year over its four-year life. The total increase or decrease in income by replacing the current equipment with the new equipment is:

Granfield Company has a piece of manufacturing equipment with a book value of $45,500 and a remaining useful life of four years. At the end of the four years the equipment will have a zero-salvage value, Granfield can purchase new equipment for $153,000 and receive $26,400 in return for trading in its current equipment. The current equipment has variable manufacturing costs of $50,000 per year. The new equipment will reduce variable manufacturing costs by $24,500 per year over its four-year life. The total increase or decrease in income by replacing the current equipment with the new equipment is:

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

B2B Co. is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment is expected to cost $382,400 with a 8-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 152,960 units of the equipment's product each year. The expected annual income related to this equipment follows. Sales 239,000 Costs Materials, labor, and overhead (except depreciation on new equipment) Depreciation on new equipment Selling and administrative expenses Total costs and expenses 84,000 47,800 23,900 155,700 Pretax income 83,300 24,990 Income taxes (30%) Net income 58,310 If at least an 8% return on this investment must be earned, compute the net present value of this investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Chart Values are Based on: n = PV Factor Select Chart Amount Present Value X 106,110 Present Value of an Annuity of 1 0 Present…
Granfield Company has a piece of manufacturing equipment with a book value of $48,500 and a remaining useful life of four years. At the end of the four years the equipment will have a zero-salvage value. Granfield can purchase new equipment for $171,000 and receive $28,800 in return for trading in its current equipment. The current equipment has variable manufacturing costs of $56,000 per year. The new equipment will reduce variable manufacturing costs by $27,500 per year over its four-year life. The total increase or decrease in income by replacing the current equipment with the new equipment is: Multiple Choice $32,200 increase $110,000 increase $16,300 decrease $74,950 increase $32,200 decrease
K Company has purchased a new machine costing $27,000 and the machine is expected to reduce the operating expenses by $7,000 every year. The useful life of machine is 5 years and the machine is expected to have a zero-scrap! value at the end of its useful life. The company's required rate of return is 12%. Calculate the Net Present Value (NPV) of the machine. (Round intermediate calculations to 3 decimal places and final answer to the nearest dollar.)
Natural Foods Inc. is planning to invest in new manufacturing equipment to make a new garden tool. The new garden tool is expected to generate additional annual sales of 7,600 units at $38 each. The new manufacturing equipment will cost $123,500 and is expected to have a 10-year life and a $9,500 residual value. Selling expenses related to the new product are expected to be 5% of sales revenue. The cost to manufacture the product includes the following on a per-unit basis: Direct labor $6.50 Direct materials 21.00 Fixed factory overhead-depreciation 1.50 Variable factory overhead 3.30 Total $32.30 Determine the net cash flows for the first year of the project, Years 2–9, and for the last year of the project. Use the minus sign to indicate cash outflows. Do not round your intermediate calculations but, if required, round your final answers to the nearest dollar. Natural Foods Inc.Net Cash Flows Year 1 Years 2-9 Last Year Initial investment $fill in the blank 1…
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…
K Company has purchased a new machine costing $27,000 and the machine is expected to reduce the operating expenses by $7,000 every year. The useful life of machine is 5 years and the machine is expected to have a zero-scrap value at the end of its useful life. The company's required rate of return is 12%. Calculate the Net Present Value (NPV) of the machine. (Round intermediate calculations to 3 decimal places and final answer to the nearest dollar.) -$1,765 $1765 -$464 $25,235
Bing Enterprises, Inc., has been considering the purchase of a new manufacturing facility for $279,000. The facility is to be fully depreciated on a straight-line basis over seven years. It is expected to have no resale value after the seven years. Operating revenues from the facility are expected to be $114,000, in nominal terms, at the end of the first year. The revenues are expected to increase at the inflation rate of 4 percent. Production costs at the end of the first year will be $39,000, in nominal terms, and they are expected to increase at 5 percent per year. The real discount rate is 7 percent. The corporate tax rate is 24 percent.
1. The following is a data transaction from PT Colorpop's records as the basis for making a Statement of Comprehensive Income for the period ended 31 December 2020: Rent Revenue $ 44,000 Interest Expense $ 20,000 Unrealized gain on non-trading equity securities, net of tax $ 35,000 Selling expenses $ 140,000 Income tax $ 30,600 Administrative expenses $ 185,000 Cost of goods sold $ 500,000 Net sales $ 954,000 Loss on sale of plant assets $ 10,000 Loss from Fixed Assets Revaluation, net of tax $2,000 Instructions: Create a Statement of Comprehensive Income using a two-statement approach! Calculate the value of Ending Per Share for 2020 if the number of shares outstanding is 100,000 shares.
If Lew's Steel Forms purchases $632,000 of new equipment, they can lower annual operating costs by $300,000. The equipment will be depreciated straight-line to a zero book value over its 3-year life. Ignore bonus depreciation. At the end of the three years, the equipment will be sold for an estimated $25,000. The equipment will require the company to hold an extra $65,000 of inventory over the 3-year period. What is the NPV if the discount rate is 13 percent and the tax rate is 21 percent? NPV = 36491.30 X Attempt # 1: 0/1 (Score: 0/1) Allowed attempts: 3 X Incorrect Check Answer
Covidam Company clinches a contract to supply cleaning services to a nursing home for the next 5 years. Under the contract, the Company will be paid $1 million a year. To take up this contract, it would have to invest in new cleaning equipment costing $600,000 which will be depreciated straight line to zero over 5 years. There is no salvage value at the end of 5 years. Labour cost will be $300,000 per year and overheads $250,000per year. The Company will need to invest in net working capital of $350,000. It plans to issue $1 million worth of bonds for 5 years at a coupon rate of 6% and will price the bonds at par. The Company has an existing bank loan of $9 million. The cost of debt from the bank loan is the same as the bonds. The common stock of the Company is selling for $10 per share and it has 2 million shares outstanding. Expected dividend next year is $1 per share and dividends are expected to grow at 2% per annum into the foreseeable future. The tax rate is 20%.(a) Determine the…
Winthrop Company has an opportunity to manufacture and sell a new product for a five-year period. To pursue this opportunity, the company would need to purchase a plece of equipment for $130,000. The equipment would have a useful life of five years and a $10,000 salvage value. The CCA rate for the equipment is 30%. After careful study. Winthrop estimated the following annual costs and revenues for the new product: Sales revenues: Variable expenses Fixed expenses $250,000 $130,000 $ 70,000 The company's tax rate is 30% and its after-tax cost of capital is 10%. Required: 1. Compute the net present value of the project. (Hint Use Microsoft Excel to calculate the discount factor(s).) (Do not round intermediate calculations and PV factor. Round the final answers to the nearest whole dollar. Negative value should be indicated with minus sign.) 2. Would you recommend that the project be undertaken? 1. Net present value 2 Would you recommend that the project be undertaken?
Pique Corporation plans to purchase a new machine for $300,000. Management estimates that with the machine cash flows from sales will increase by $160,000 each year for the next 5 years. Expenses to generate the additional sales include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $70,000 per year. The firm uses straight-line depreciation with no terminal disposal value for all depreciable assets. The new machine has an expected salvage value of zero at the end of the project. Pique's combined income tax rate is 20%. Management requires a minimum after-tax rate of return of 8% on all investments.a. Calculate the Net Present Value (NPV) for this project.