Internet Manufacturing is considering purchasing a new machine for $110,000. The machine would generate an annual cash flow of $28,500 for five years. At the end of six years, the machine would have no salvage value. What is the payback period in years for the machine?
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- Although the Chen Company’s milling machine is old, it is still in relatively good working order and would last for another 10 years. It is inefficient compared to modern standards, though, and so the company is considering replacing it. The new milling machine, at a cost of $110,000 delivered and installed, would also last for 10 years and would produce after-tax cash flows (labor savings and depreciation tax savings) of $19,000 per year. It would have zero salvage value at the end of its life. The project cost of capital is 10%, and its marginal tax rate is 25%. Should Chen buy the new machine?Schultz company is considering purchasing a machine that would cost $478,800 and have a useful life of 5 years. The machinery would reduce cash operating costs by $114,000 per year. The machine would have a salvage value of $6,200. Schultz Company prefers a payback period if 3.5 years or less. compute the payback period for the machine. what does this mean?Bark Company is considering buying a machine for $240,000 with an estimated life of ten years and no salvage value. The straight-line method of depreciation will be used. The machine is expected to generate net income of $6,297 each year. The cash payback period on this investment is? Round your answer to the nearest whole year.
- Ramson Corporation is considering purchasing a machine that would cost $609,580 and have a useful life of 9 years. The machine would reduce cash operating costs by $105,100 per year. The machine would have a salvage value of $107,340 at the end of the project. (Ignore income taxes.) Required: a. Compute the payback period for the machine. (Round your answer to 2 decimal places.) b. Compute the simple rate of return for the machine. (Round your intermediate calculations to nearest whole dollar and your final answer to 2 decimal places.) a. Payback period 5.80 years b. Simple rate of return 8.09 %Ramson Corporation is considering purchasing a machine that would cost $510,510 and have a useful life of 8 years. The machine would reduce cash operating costs by $100,100 per year. The machine would have a salvage value of $107,290 at the end of the project. (Ignore income taxes.) Required: a. Compute the payback period for the machine. (Round your answer to 2 decimal places.) b. Compute the simple rate of return for the machine. (Round your intermediate calculations to nearest whole dollar and your final answer to 2 decimal places.) a. Payback period b. Simple rate of return 3 years %Razorback Manufacturing is considering replacing a broken metal cutting machine. Several options have been proposed.Option 1: The broken machine can be sold today for $3,000.Option 2: It can be overhauled completely for $7,000, after which it willproduce $2,500 in annual cash flows over the next five years. The resalevalue of the asset at the end of five years is zero.Option 3: It can be replaced for $18,000. The life of the replacement machine is five years, and it has an estimated salvage value of $2,000 at the end of five years. The anticipated operating cash inflows for each year will be $5,000. If the firm's required rate of return of 12%, what should Razorback do?
- You are considering purchasing a new injection molding machine. This machine will have an estimated service life of 10 years with negligible after-tax salvage value. Its annual net after-tax operating cash flows are estimated to be $60,000. If you expect a 15% rate of return on investment, what would be the maximum amount that you should spend to purchase the injection molding machine?Maxwell Company has an opportunity to acquire a new machine to replace one of its present machines. The new machine would cost $90,000, have a 5-year life, and no estimated salvage value. Variable operating costs would be $100,000 per year. The present machine has a book value of $50,000 and a remaining life of 5 years. Its disposal value now is $5,000, but it would be zero after 5 years. Variable operating costs would be $125,000 per year. Ignore income taxes. Considering the 5 years in total, what would be the difference in profit before income taxes by acquiring the new machine as opposed to retaining the present one? * A. $10,000 decrease B. $15,000 decrease C. $35,000 increase D. $40,000 increaseJoanette, Inc., is considering the purchase of a machine that would cost $460,000 and would last for 6 years, at the end of which, the machine would have a salvage value of $56,000. The machine would reduce labor and other costs by $116,000 per year. Additional working capital of $2,000 would be needed immediately, all of which would be recovered at the end of 6 years. The company requires a minimum pretax return of 17% on all investment projects. (Ignore income taxes.) Click here to view Exhibit 12B-1 2 and Exhibit 12B-2 ¤ to determine the appropriate discount factor(s) using the tables provided. YOU MAY USE YOUR OWN PRESENT VALUE TABLES AS WELL. Required: Determine the net present value of the project. (Negative amount should be indicated by a minus sign. Round your intermediate calculations and final answer to the nearest whole dollar amount.)
- Joanette, Inc., is considering the purchase of a machine that would cost $420,000 and would last for 5 years, at the end of which, the machine would have a salvage value of $42,000. The machine would reduce labor and other costs by $102,000 per year. Additional working capital of $4,000 would be needed immediately, all of which would be recovered at the end of 5 years. The company requires a minimum pretax return of 17% on all investment projects. (ignore income taxes.) Click here to view Exhibit 128-1 and Exhibit 128-2 to determine the appropriate discount factor(s) using the tables provided. Required: Determine the net present value of the project. (Negative amount should be indicated by a minus sign. Round your intermediate calculations and final answer to the nearest whole dollar amount.) Net present valueBallard MicroBrew is considering the purchase of an automated bottling machine for $120,000. The machine would replace an old piece of equipment that costs $30,000 per year to operate. The new machine would cost $12,000 per year to operate. The old machine currently in use is fully depreciated and could be sold now for a salvage value of $40,000. The new machine would have a useful life of 10 years with no salvage value. Required: 1. What is the annual depreciation expense associated with the new bottling machine? 2. What is the annual incremental net operating income provided by the new bottling machine? 3. What is the initial investment used for calculating the machine's simple rate of return? 4. What is the simple rate of return on the new bottling machine? Note: Round your answer to 1 decimal place i.e. 0.123 should be considered as 12.3% 1. Depreciation expense 2. Incremental net operating income 3. Initial investment 4. Simple rate of return $ $ 12,000 80,000The Oviedo Company is considering the purchase of a new machine to replace an obsolete one. The machine being used for the operation has a book value and a market value of zero. However, the machine is in good working order and will last at least another 10 years. The proposed replacement machine will perform the operation so much more efficiently than Oviedo's engineers estimate that it will produce after-tax cash flows (labor savings) of $6,000 per year. The after-tax cost of the new machine is $50,000, and its economic life is estimated to be 10 years. It has zero salvage value. The firm's WACC is 10%, and its marginal tax rate is 25%. Should Oviedo buy the new machine?Oviedo purchase the new machine.
