oncord Pix currently uses a six-year-old molding machine to manufacture silver picture frames. The company paid $95,000 for the achine, which was state of the art at the time of purchase. Although the machine will likely last another ten years, it will need a 12,000 overhaul in four years. More important, it does not provide enough capacity to meet customer demand. The company urrently produces and sells 9,000 frames per year, generating a total contribution margin of $92,500. Martson Molders currently sells a molding machine that will allow Concord Pix to increase production and sales to 12,000 frames per ear. The machine, which has a ten-year life, sells for $135,000 and would cost $10,000 per year to operate. Concord Pix's current machine costs only $8,000 per year to operate. If Concord Pix purchases the new machine, the old machine could be sold at its book alue of $5,000. The new machine is expected to have a salvage value of $19.900 at the end of its ten-year life. Concord Pix uses traight-line depreciation.
oncord Pix currently uses a six-year-old molding machine to manufacture silver picture frames. The company paid $95,000 for the achine, which was state of the art at the time of purchase. Although the machine will likely last another ten years, it will need a 12,000 overhaul in four years. More important, it does not provide enough capacity to meet customer demand. The company urrently produces and sells 9,000 frames per year, generating a total contribution margin of $92,500. Martson Molders currently sells a molding machine that will allow Concord Pix to increase production and sales to 12,000 frames per ear. The machine, which has a ten-year life, sells for $135,000 and would cost $10,000 per year to operate. Concord Pix's current machine costs only $8,000 per year to operate. If Concord Pix purchases the new machine, the old machine could be sold at its book alue of $5,000. The new machine is expected to have a salvage value of $19.900 at the end of its ten-year life. Concord Pix uses traight-line depreciation.
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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![Concord Pix currently uses a six-year-old molding machine to manufacture silver picture frames. The company paid $95,000 for the
machine, which was state of the art at the time of purchase. Although the machine will likely last another ten years, it will need a
$12,000 overhaul in four years. More important, it does not provide enough capacity to meet customer demand. The company
currently produces and sells 9,000 frames per year, generating a total contribution margin of $92,500.
Martson Molders currently sells a molding machine that will allow Concord Pix to increase production and sales to 12,000 frames per
year. The machine, which has a ten-year life, sells for $135,000 and would cost $10,000 per year to operate. Concord Pix's current
machine costs only $8,000 per year to operate. If Concord Pix purchases the new machine, the old machine could be sold at its book
value of $5,000. The new machine is expected to have a salvage value of $19,900 at the end of its ten-year life. Concord Pix uses
straight-line depreciation.
Click here to view the factor table.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb7d4978a-587f-4fb0-b662-b1647e006431%2Ff4743e8f-7721-49be-99fe-7d9ed9bfc00f%2Fm5n4zaf_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Concord Pix currently uses a six-year-old molding machine to manufacture silver picture frames. The company paid $95,000 for the
machine, which was state of the art at the time of purchase. Although the machine will likely last another ten years, it will need a
$12,000 overhaul in four years. More important, it does not provide enough capacity to meet customer demand. The company
currently produces and sells 9,000 frames per year, generating a total contribution margin of $92,500.
Martson Molders currently sells a molding machine that will allow Concord Pix to increase production and sales to 12,000 frames per
year. The machine, which has a ten-year life, sells for $135,000 and would cost $10,000 per year to operate. Concord Pix's current
machine costs only $8,000 per year to operate. If Concord Pix purchases the new machine, the old machine could be sold at its book
value of $5,000. The new machine is expected to have a salvage value of $19,900 at the end of its ten-year life. Concord Pix uses
straight-line depreciation.
Click here to view the factor table.
![(c).
Calculate the new machine's payback period. (Round answer to 2 decimal places, e.g. 1.25.)
Payback period
years](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb7d4978a-587f-4fb0-b662-b1647e006431%2Ff4743e8f-7721-49be-99fe-7d9ed9bfc00f%2Fvttoha.jpeg&w=3840&q=75)
Transcribed Image Text:(c).
Calculate the new machine's payback period. (Round answer to 2 decimal places, e.g. 1.25.)
Payback period
years
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