ОGranfield Company has a piece of manufacturing equipment with a book value of $47,000 and a remaining useful life of four years. At the end of the four years theequipment will have a zero-salvage value. Granfield can purchase new equipment for $162,000 and receive $27,600 in return for trading in its current equipment. Thecurrent equipment has variable manufacturing costs of $53,000 per year. The new equipment will reduce variable manufacturing costs by $26,000 per year over its four-year life. The total increase or decrease in income by replacing the current equipment with the new equipment is:Multiple Choice$30,400 decreaseО$104,000 increase$16,600 decrease$70,900 increase$30,400 increase

Cost of new equipment162,000(-) trading in cost of current equipment27,600Net cost of new…

Answered: О Granfield Company has a piece of…

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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A company sells Gizmos to consumers at a price of $117 per unit. The cost to produce Gizmos is $27 per unit. The company will sell 15,000 Gizmos to consumers each year. The fixed costs incurred each year will be $190,000. There is an initial investment to produce the goods $3,400,000 which will be depreciated straight line over the 10-year life of the investment to a salvage value of $0. The opportunity cost of capital is 6% and the tax rate is 34%. What is the operating cash flow each year?
Dragoo Building Inc. has a crane with a book value of $240,000 and a four-year remaining life. A new crane is available at a cost of $615,000. Dragoo can also receive $48,000 for trading in the old crane. The new crane will reduce variable costs by $145,000 per year over its four-year life. The total impact to Dragoo over the crane’s four-year life is:
A company has decided to replace its inspection machine with an advanced one. The advanced machine costs $15,000 and will have operating costs of $3,600 in the first year, increasing by $2,000 per year thereafter. The expected salvage value of the new machine is $6,000 at the end of the first year and will decline by 10% of the preceding S.V. each year. Find the missing values in the following table and determine the economic life of the new machine. Total Cost (8%) CR (8%) OC (8%) 3,600 1 10,200 13,800 2 ? ? ... .... .. 3 4332.36 5,495.82 ? 4 ? 6,406.46 ? .......... . 3086.31 7,293.42 10,379.73 OPTIMAL n = A+ta ch Cilo
B2B Co. is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment is expected to cost $382,400 with a 8-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 152,960 units of the equipment's product each year. The expected annual income related to this equipment follows. Sales 239,000 Costs Materials, labor, and overhead (except depreciation on new equipment) Depreciation on new equipment Selling and administrative expenses Total costs and expenses 84,000 47,800 23,900 155,700 Pretax income 83,300 24,990 Income taxes (30%) Net income 58,310 If at least an 8% return on this investment must be earned, compute the net present value of this investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Chart Values are Based on: n = PV Factor Select Chart Amount Present Value X 106,110 Present Value of an Annuity of 1 0 Present…
The management of Kanban Company is considering the purchase of a $27,000 machine that would reduce operating costs by $6,000 per year. At the end of the machine's six-year useful life, it will have zero salvage value. The company's required rate of return is 10%. ---------------------------------------- What is the total 'undiscounted' cash savings that this machine will provide over its useful life?
Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $46,000 and a remaining useful life of five years. It can be sold now for $56,000. Variable manufacturing costs are $43,000 per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is five years. Purchase price Variable manufacturing costs per year Machine A $ 123,000 19,000 Machine B $136,000 15,000 (a) Compute the income increase or decrease from replacing the old machine with Machine A. (b) Compute the income increase or decrease from replacing the old machine with Machine B. (c) Should Lopez keep or replace its old machine? (d) If the machine should be replaced, which new machine should Lopez purchase? Complete this question by entering your answers in the tabs below. Req A Req B Req C and D Compute the income increase or decrease from replacing the old machine with Machine B. Note:…
Granfield Company has a piece of manufacturing equipment with a book value of $48,500 and a remaining useful life of four years. At the end of the four years the equipment will have a zero-salvage value. Granfield can purchase new equipment for $171,000 and receive $28,800 in return for trading in its current equipment. The current equipment has variable manufacturing costs of $56,000 per year. The new equipment will reduce variable manufacturing costs by $27,500 per year over its four-year life. The total increase or decrease in income by replacing the current equipment with the new equipment is: Multiple Choice $32,200 increase $110,000 increase $16,300 decrease $74,950 increase $32,200 decrease
Maxwell Manufacturing is contemplating the purchase of a new machine to replace a machine that has been in use for seven years. The old machine has a net book value (NBV) of $51,000 and still has five years of useful life remaining. The old machine has a current market value of $5,100, but is expected to have no market value after five years. The variable operating costs and depreciation expenses (straight-line basis) are $120,000 per year. The new machine will cost $86,000, has an estimated useful life of five years with zero disposal value after five years, and an annual operating expense of $101,000 (including straight-line depreciation). Considering the five years in total and ignoring the time value of money and income taxes, what is the difference in total relevant costs for the two decision alternatives (keep vs. replace)?
K Company has purchased a new machine costing $27,000 and the machine is expected to reduce the operating expenses by $7,000 every year. The useful life of machine is 5 years and the machine is expected to have a zero-scrap! value at the end of its useful life. The company's required rate of return is 12%. Calculate the Net Present Value (NPV) of the machine. (Round intermediate calculations to 3 decimal places and final answer to the nearest dollar.)
Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $48,000 and a remaining useful life of four years. It can be sold now for $58,000. Variable manufacturing costs are $48,000 per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is four years. Purchase price Variable manufacturing costs per year (a) Compute the income increase or decrease from replacing the old machine with Machine A. (b) Compute the income increase or decrease from replacing the old machine with Machine B. (c) Should Lopez keep or replace its old machine? (d) If the machine should be replaced, which new machine should Lopez purchase? Req A Complete this question by entering your answers in the tabs below. Req B Req C and D Compute the income increase or decrease from replacing the old machine with Machine B. (Amounts to be deducted should be indicated with a minus…
Inc. uses fine-tuned equipment to produce electronic products. Each one of its machines costs $10,000,000 to purchase plus an additional $900,000 a year to operate. The machines have a 6-year (6) life after which they are worthless. What is the equivalent annual cost of one these machines if the required return is 11.4 percent?
Your company is considering the purchase of a new 623K Wheel Tractor-Scraper. Use the following information to calculate the hourly owning costs, hourly operating costs, and total owning and operating costs. - Delivered price (with tires): $420,000 - Cost of Tires: $30,000 and their life is determined by the average operation in zone B. - Salvage value is zero - the equipment is new and it is anticipated to be used for 5 years, until end of its service life. - Anticipated operating hours per year: 2,000 hrs/yr - Simple interest rate for purchase loan: 12% - Annual cost of Insurance: $5,500 (See optional method) - Property tax rate: 2% - Fuel use will be average value in medium range - Cost of fuel: $3.10 per gallon - Hourly Maintenance Cost: $5.00 per hour - Repair cost: $11.00 per hour - Operator cost (with fringes): $75 per hour - No undercarriage or special wear items costs…

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