Morton and Moore LLC (M²) is trying to decide between two machines thatare necessary in its manufacturing facility. If M² has a MARR of 10%, whichof the following machines should be chosen?Hint: Minimize EUAC.Machine A Machine B6-28620First cost$45,000$24,000Annual operating costs31,00035,000Overhaul in Years 2 and 46,000Overhaul in Year 512,000Salvage value10,0008,000Useful life8 years6 years1NeAcCaCaEMYeCoPrRiViGeLitRaNeAnPrSaScBe

EUAC stands for Equivalent Uniform Annual Cost, and it is a financial metric used to compare…

Answered: Morton and Moore LLC (M²) is trying to…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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The Mowbot plant must replace an existing HVAC unit (doing nothing is not an option). You are evaluating two pieces of equipment. Each unit offers a saving in annual energy cost over the existing equipment. Alternative Unit A Unit B Unit C Up front cost $44,000 $65,000 $84,000 Operating cost/year $1.900 $1.400 $900 Energy savings / year $14,000 $16,500 $17,500 Salvage Value $2,000 $4,000 $5,000 Economic life, years 7. 7. Mowbot's MARR is 12%. Based on annual worth analysis (not incremental), which unit should you recommend? HTML Editora BI 工E三 E三xi x ミ = ECE 12pt Paragraph
Stockton Manufacturing Limited found out that after using only 2 years a machine for semi automation process, a more advanced model is now available in the market. This more advanced model will produce more output with greater efficiency as compare to existing machine. The cost of existing machine is $32,000 with life of 10 years, at the end of which it can be scrapped. The current market value of machine is $15,000 and there is a prospective buyer available to purchase it. The advanced model cost $123,500 with a useful life of 8 years and a scrap value of $20,500 at the end of life. The comparison of the two machines is as follows: EXISTING MACHINE ADVANCED MODEL CAPACITY PER ANNUM 200,000 UNITS 230,000 UNITS SALE PRICE PER UNIT ($) 0.95 0.95 LABOR COST PER UNIT ($) 0.12 0.08 MATERIAL COST PER UNIT ($) 0.48 0.46 FIXED OVERHEADS (ALLOCATION OF PORTION OF COMPANY’S FIXED OVERHEADS) ($) 0.24 0.16 The sales director is of the opinion…
Esquire comp need to acquire a molding machine to be used in its manufacturing process.2 types of machine would be appropriate. Machine A purchase for $48000. It will last 10 Yrs, require maintenance of $1000 per yr.after 10yrs the machine can be sold for $5000. Machine B purchase for $40000. It will last 10yrs and will require maintenance of $4000 in year 3, $5000 in yr 6, $6000 in yr 8. After 10 yrs the machine will have no salvage value. Assume interest rate at 8%,and maintenance cost are paid at the end of each year. Ignore income tax consideration. Use appropriate table factors. Calculate the present value of machine A and B.
A manufacturer of automated optical inspection devices is deciding on a project to increase the productivity of the manufacturing processes. The estimated costs for the two feasible alternatives being compared are shown below. Use the internal rate of return (IRR) method to determine which alternative should be selected if the analysis period is 8 years and the company's MARR is 4% per year. Alternative M N Initial costs $30,000 $45,000 Net annual cash flow $4,500 $7,000 Life in years 8 8 (a) IRR of base alternative = (b) IRR of incremental cash flow = (c) Choose Alternative
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Lacey Manufacturing is considering replacing one of its machines. You are provided with the following information: Old Machine: Original purchase price $100,000 Est. annual variable costs 225,000 Est. selling price 25,000 Est. remaining useful life 5 years New Machine: Purchase price $250,000 Est. annual variable costs 150,000 Est. residual value 0 Est. useful life 5 years Determine if the company should keep using the old machine or sell it and replace it with the new machine. Show your work to justify your answer
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