### Problem 1MaBak Inc. is considering buying a robotic assembly machine that will bring in an extra $28,000 per year in profit (after deducting costs for electricity, maintenance, etc.). The machine will last for 8 years; however, it will not have any resale value. MaBak Inc. has not priced robotic machines. Calculate the maximum price MaBak Inc. should pay if they want to earn a 10% return on any money invested in the company.**Questions and Relevant Data:**1. **Which table will you use for the above calculation?** - 2. **Number of periods?** - 3. **Interest Rate?** - 4. **Factor?** - 5. **What is the maximum price?** - **Explanation:**To solve this problem, you'll need to use the Present Value of Annuity table to calculate the present value of future cash flows generated by the machine. Here's a step-by-step approach:1. **Table Selection:** The present value of an annuity table is used because the machine generates equal annual profits over its lifespan. 2. **Number of Periods:** - The machine will generate profits for 8 years. Thus, the number of periods is 8.3. **Interest Rate:** - The desired return on investment is 10%. Therefore, the interest rate used for the calculation is 10%.4. **Factor:** - Using the present value of an annuity table, find the factor for 8 periods at an interest rate of 10%. (Refer to a standard financial table or financial calculator for the precise factor.)5. **Maximum Price Calculation:** - Multiply the annual profit ($28,000) by the factor obtained from the present value of an annuity table.By performing these steps, you will find the maximum price that MaBak Inc. should be willing to pay for the robotic assembly machine to achieve their desired return on investment.

To solve this question, we will use the concept of time value of money.As per the concept of time…

MaBak Inc. is considering buying a robotic assembly machine that will bring in an extra $28,000 per year in profit (after deducting costs for electricity, maintenance, etc.). The machine will last for 8 years; however, it will not have any resale value. MaBak Inc. has not priced robotic machines. Calculate the maximum price MaBak Inc. should pay if they want to earn an 10% return on any money invested in the company. Which table will you use for the above calculation? Number of periods? Interest Rate? Factor? What is the maximum price?

MaBak Inc. is considering buying a robotic assembly machine that will bring in an extra $28,000 per year in profit (after deducting costs for electricity, maintenance, etc.). The machine will last for 8 years; however, it will not have any resale value. MaBak Inc. has not priced robotic machines. Calculate the maximum price MaBak Inc. should pay if they want to earn an 10% return on any money invested in the company. Which table will you use for the above calculation? Number of periods? Interest Rate? Factor? What is the maximum price?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 15E: Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided...

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