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- 3. Analysis of a replacement project At times firms will need to decide if they want to continue to use their current equipment or replace the equipment with newer equipment. The company will need to do replacement analysis to determine which option is the best financial decision for the company. Price Co. is considering replacing an existing piece of equipment. The project involves the following: • The new equipment will have a cost of $1,800,000, and it will be depreciated on a straight-line basis over a period of six years (years 1–6). • The old machine is also being depreciated on a straight-line basis. It has a book value of $200,000 (at year 0) and four more years of depreciation left ($50,000 per year). • The new equipment will have a salvage value of $0 at the end of the project's life (year 6). The old machine has a current salvage value (at year 0) of $300,000. • Replacing the old machine will require an investment in net working capital (NOWC) of $50,000…3. Analysis of a replacement project At times firms will need to decide if they want to continue to use their current equipment or replace the equipment with newer equipment. The company will need to do replacement analysis to determine which option is the best financial decision for the company. Price Co. is considering replacing an existing piece of equipment. The project involves the following: • The new equipment will have a cost of $9,000,000, and it will be depreciated on a straight-line basis over a period of six years (years 1–6). • The old machine is also being depreciated on a straight-line basis. It has a book value of $200,000 (at year 0) and four more years of depreciation left ($50,000 per year). • The new equipment will have a salvage value of $0 at the end of the project's life (year 6). The old machine has a current salvage value (at year 0) of $300,000. • Replacing the old machine will require an investment in net working capital (NOWC) of $50,000 that…Q3. XYZ Company, a manufacturing firm in Saudi Arabia, wants to evaluate its fixed asset management using the straight-line depreciation method. Here are the relevant details in Saudi Riyals (SAR): Total Fixed Assets: SAR 1,500,000 Depreciation: SAR 500,000 Useful Life: 10 years SAR 100,000 Accumulated Salvage Value: Question: Calculate the book value and the annual depreciation expense of the fixed assets, analyze the impact of fixed assets on financial statements, and provide recommendations to optimize fixed asset management.
- 2) AMT, Inc., is considering the purchase of a digital camera for maintenance of design specifications by feeding digital pictures directly into an engineering workstation where computer-aided design files can be superimposed over the digital pictures. Differences between the two images can be noted, and corrections, as appropriate, can then be made by design engineers. a) You have been asked by management to determine the PW of the EVA of this equipment, assuming the following estimates: capital investment = $345,000; market value at end of year six = $120,000; annual revenues = $120,000; annual expenses $8,000; equipment life 6 years; effective income tax rate 50%; and after-tax MARR = 10% per year. MACRS depreciation will be used with a five-year recovery period. b) Compute the PW of the equipment's ATCFS. Is your answer in Part (a) the same as your answer in Part (b)? 1Required information [The following information applies to the questions displayed below.) Falcon Crest Aces (FCA), Incorporated, is considering the purchase of a small plane to use in its wing-walking demonstrations and aerial tour business. Various information about the proposed investment follows: Initial investment Useful life Salvage value Annual net income generated PCA's cost of capital. Assume straight line depreciation method is used. Help FCA evaluate this project by calculating each of the following: Required: 2. Payback period. Note: Round your answer to 2 decimal places. Payback Period years $ 180,000 10 years $20,000 $ 4,200 68AMT, Inc., is considering the purchase of a digital camera for maintenance of design specifications by feeding digital pictures directly into an engineering workstation where computer-aided design files can be superimposed over the digital pictures. Differences between the two images can be noted, and corrections, as appropriate, can then be made by design engineers. Solve, a. You have been asked by management to determine the PW of the EVA of this equipment, assuming the following estimates: capital investment = $345,000; market value at end of year six = $120,000; annual revenues = $120,000; annual expenses = $8,000; equipment life = 6 years; effective income tax rate = 50%; and after-tax MARR = 10% per year. MACRS depreciation will be used with a five-year recovery period. b. Compute the PW of the equipment’s ATCFs. Is youranswer in Part (a) the same as your answer in Part (b)?
- 8. Analysis of a replacement project At times firms will need to decide if they want to continue to use their current equipment or replace the equipment with newer equipment. The company will need to do replacement analysis to determine which option is the best financial decision for the company. Price Co. is considering replacing an existing piece of equipment. The project involves the following: • The new equipment will have a cost of $600,000, and it will be depreciated on a straight-line basis over a period of six years (years 1-6). • The old machine is also being depreciated on a straight-line basis. It has a book value of $200,000 (at year 0) and four more years of depreciation left ($50,000 per year). • The new equipment will have a salvage value of $0 at the end of the project's life (year 6). The old machine has a current salvage value (at year 0) of $300,000. • Replacing the old machine will require an investment in net working capital (NWC) of $45,000 that will be recovered…All parts are under one question and therefore can be answered in full per your policy. 4. Analysis of a replacement project At times firms will need to decide if they want to continue to use their current equipment or replace the equipment with newer equipment. The company will need to do replacement analysis to determine which option is the best financial decision for the company. Price Co. is considering replacing an existing piece of equipment. The project involves the following: • The new equipment will have a cost of $600,000, and it is eligible for 100% bonus depreciation so it will be fully depreciated at t = 0. • The old machine was purchased before the new tax law, so it is being depreciated on a straight-line basis. It has a book value of $200,000 (at year 0) and four more years of depreciation left ($50,000 per year). • The new equipment will have a salvage value of $0 at the end of the project's life (year 6). The old machine has a current salvage value (at…1. Should SS upgrade its production line or replace it? Show your calculations 2. Suppose the one-time equipment cost to replace the production equipment is negotiable.All other data are as given previously. What is the maximum one-time equipment cost that SSwould be willing to pay to replace the old equipment rather than upgrade it?
- Your company could use either straight line depreciation or the 3-year MACRS accelerated depreciation method. Discuss why a firm might prefer the 3-year MACRS accelerated depreciation method over the straight line depreciation method.Q3: ABC steel plant industry plans to manufacture a product. The product needs a special component. The industry has reviewed that the special component can be produced in the plant or bought in. An investment is required to start the production of the component for which two mutually exclusive projects A and B representing different production processes are available. The alternative option is to buy in from another company representing project C. The details of projects A and B are given in Table 3: (i) Using the information from table 3 and Discount Cash Flow criteria, calculate Pay Back Period (PBP), Account Rate of Return (ARR), Net Present Value (NPV) and Internal Rate Return (IRR) for project A & Project B if the industry plans to sale the unit cost of RO 350. (ii) Using the annual cost data from table 3, determine which project incurs less cost if the industry considers producing 7,500 units per year. (iii) Using the table 3, determine the Break-Even quantity and margin of…What would the capital investment amount for pump SP240 have to be such that the firm would be indifferent as to which pump model isselected? You are a member of an engineering project team that is designing a new processing facility. Your present design task involves the portion of the catalytic system that requires pumping a hydrocarbon slurry that is corrosive and contains abrasive particles. For final analysis and comparison, you have selected two fully lined slurry pump units, of equal output capacity, from different manufacturers. Each unit has a large diameter impeller required and an integrated electric motor with solid-state controls. Both units will provide the same level of service (support) to the catalytic system but have different useful lives and costs. The new processing facility is needed by your firm at least as far into the future as the strategic plan forecasts operating requirements. The MARR is 20% per year. Based on this information, which slurry pump should you…