Hughes Manufacturing, Inc. has a manufacturing machine that needs attention. The company is considering two options. Option 1 is to refurbish the current machine at a cost of $2,600,000. If refurbished, Hughes expects the machine to last another eight years and then have no residual value. Option 2 is to replace the machine at a cost of $3,800,000. A new machine would last 10 years and have no residual value. Hughes expects the following net cash inflows from the two options: Year Refurbish Current Purchase New Machine Machine $ 1,760,000 $ 2,970,000 2 440,000 490,000 360,000 410,000 4 280,000 330,000 200,000 250,000 6 200,000 250,000 7 200,000 250,000 200,000 250,000

Hughes Manufacturing, Inc. has a manufacturing machine that needs attention. The company is considering two options. Option 1 is to refurbish the current machine at a cost of $2,600,000. If refurbished, Hughes expects the machine to last another eight years and then have no residual value. Option 2 is to replace the machine at a cost of $3,800,000. A new machine would last 10 years and have no residual value. Hughes expects the following net cash inflows from the two options: Year Refurbish Current Purchase New Machine Machine $ 1,760,000 $ 2,970,000 2 440,000 490,000 360,000 410,000 4 280,000 330,000 200,000 250,000 6 200,000 250,000 7 200,000 250,000 200,000 250,000

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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