Machine Replacement DecisionA company is considering replacing an old piece of machinery, which cost $598,000 and has $351,800 of accumulated depreciation to date, with a new machine that has a purchaseprice of $486,800. The old machine could be sold for $64,000. The annual variable production costs associated with the old machine are estimated to be $158,600 per year for eightyears. The annual variable production costs for the new machine are estimated to be $98,700 per year for eight years.a. Prepare a differential analysis dated April 29 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. If an amount is zero, enter "0". Forthose boxes in which you must enter subtracted or negative numbers use a minus sign.Differential AnalysisContinue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2)April 29Continuewith OldMachineReplaceOldMachineDifferentialEffecton Income(Alternative 1) (Alternative 2) (Alternative 2)Revenues:QQProceeds from sale of old machineCosts:Purchase priceVariable productions costs (8 years)Income (Loss) b. What is the sunk cost in this situation?The sunk cost is $

Required (a)Differential AnalysisContinue with Old Machine (Alt. 1) or Replace Old Machine (Alt.…

Answered: Machine Replacement Decision A company…

FINANCIAL ACCOUNTING

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ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Machine Replacement Decision A company is considering replacing an old piece of machinery, which cost $602,800 and has $351,400 of accumulated depreciation to date, with a new machine that has a purchase price of $487,000. The old machine could be sold for $61,400. The annual variable production costs associated with the old machine are estimated to be $156,400 per year for 8 years. The annual variable production costs for the new machine are estimated to be $98,900 per year for 8 years. Question Content Area a.1 Prepare a differential analysis dated December 10 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. If an amount is zero, enter "0". If required, use
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Replacement Analysis 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 $100,000 delivered and installed, would also last for 10 years and would produce after-tax cash flows (labor savings and depreciation tax savings) of $18,200 per year. It would have zero salvage value at the end of its life. The project cost of capital is 9%, and its marginal tax rate is 25%. Should Chen buy the new machine? Do not round intermediate calculations. Round your answer to the nearest cent. Negative value, if any, should be indicated by a minus sign. NPV: $ Chen -Select- purchase the new machine.
unc.4
Differential Analysis for Machine Replacement Proposal Flint Tooling Company is considering replacing a machine that has been used in its factory for four years. Relevant data associated with the operations of the old machine and the new machine, neither of which has any estimated residual value, are as follows: Old Machine Cost of machine, 10-year life $107,000 Annual depreciation (straight-line) 10,700 Annual manufacturing costs, excluding depreciation 39,400 Annual nonmanufacturing operating expenses 12,300 Annual revenue 95,200 Current estimated selling price of the machine 36,700 New Machine Cost of machine, six-year life $138,000 Annual depreciation (straight-line) 23,000 Estimated annual manufacturing costs, exclusive of depreciation 18,800 Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine. Required: 1. Prepare a differential analysis as of November 8 comparing operations…
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A machine with a book value of $246,000 has an estimated six-year life. A proposal is offered to sell the old machine for $217,100 and replace it with a new machine at a cost of $280,000. The new machine has a six-year life with no residual value. The new machine would reduce annual direct labor costs from $49,800 to $39,800. Prepare a differential analysis dated October 3 on whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2). If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) October 3 Continue withOld Machine(Alternative 1) Replace OldMachine(Alternative 2) Differential Effecton Income(Alternative 2) Revenues: Proceeds from sale of old machine $fill in the blank 8104d10e9fd9003_1 $fill in the blank 8104d10e9fd9003_2 $fill in the blank…
Machine Replacement Decision A company is considering replacing an old piece of machinery, which cost $600,000 and has $347,700 of accumulated depreciation to date, with a new machine that has a purchase price of $483,000. The old machine could be sold for $62,300. The annual variable production costs associated with the old machine are estimated to be $157,200 per year for eight years. The annual variable production costs for the new machine are estimated to be $99,200 per year for eight years. a.1 Prepare a differential analysis dated May 29 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential Analysis Continue with Old Machine (Alt. 1) or Replace Old Revenues: Proceeds from sale of old machine. Costs: Machine (Alt. 2) May 29 Purchase price Variable productions costs (8 years) Profit (Loss) Continue with Old Replace Old Differential Machine…
Payback periodLaredo Laminates is considering the purchase of new production technology equipment requiring an initial $1,200,000 investment and having an expected ten year life. At the end of its life, the equipment would have no salvage value. By installing the new equipment, the firm’s annual labor and quality costs would decline by $600,000a. Compute the payback period for this equipment. b. Assume instead that the annual cost savings would vary according to the following schedule: Years Annual Cost Savings 1–5 $350,000 6–10 500,000 Note: Round answer to two decimal places. Compute the payback period under the revised circumstances.
b. What is the sunk cost in this situation? The sunk cost is $
New-Project Analysis Madison Manufacturing is considering a new machine that costs $350,000 and would reduce pre-tax manufacturing costs by $110,000 annually. Madison would use the 3-year MACRS method to depreciate the machine, and management thinks the machine would have a value of $33,000 at the end of its 5-year operating life. The applicable depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%. Working capital would increase by $35,000 initially, but it would be recovered at the end of the project's 5-year life. Madison's marginal tax rate is 40%, and a 10% cost of capital is appropriate for the project. 1. Assume management is unsure about the $110,000 cost savings - this figure could deviate by as much as plus or minus 20%. Calculate the NPV if cost savings value deviate by plus 20%. Round your answer to the nearest dollar.$ Calculate the NPV if cost savings value deviate by minus 20%. Round your answer to the nearest dollar.$ 2. Suppose the CFO wants you to do a…

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