QS 25-15 (Algo) Keep or replace LO P5Rory Company has an old machine with a book value of $83,000 and a remaining five-year useful life. Rory is considering purchasing anew machine at a price of $112,000. Rory can sell its old machine now for $89,000. The old machine has variable manufacturing costsof $39,000 per year. The new machine will reduce variable manufacturing costs by $15,600 per year over its five-year useful life.(a) Prepare a keep or replace analysis of income effects for the machines.(b) Should the old machine be replaced?Complete this question by entering your answers in the tabs below.Required A Required BPrepare a keep or replace analysis of income effects for the machines.Keep or Replace AnalysisRevenuesSale of existing machineCostsPurchase of new machineVariable manufacturing costsIncome (loss)KeepReplaceIncome Increase(Decrease) if replaced

Required AKeep or Replace AnalysisKeepReplaceIncome Increase(Decrease) If replacedRevenues Sale of…

Answered: QS 25-15 (Algo) Keep or replace LO P5…

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter10: Project Cash Flows And Risk

Section: Chapter Questions

Problem 13PROB

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Brief Exercise 20-7 Your answer is partially correct. Try again. Bryant Company has a factory machine with a book value of $93,500 and a remaining useful life of 6 years. It can be sold for $30,600. A new machine is available at a cost of $534,000. This machine will have a 6-year useful life with no salvage value. The new machine brings annual variable manufacturing costs from $556,800 to $480,200. Prepare an analysis showing whether the old machine should be retained or replaced. (In the first two columns, enter costs and expenses as positive amounts, and any amounts received as negative amounts. In the third column, enter net income increases as positive amounts and decreases as negative amounts. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Variable manufacturing costs New machine cost Sell old machine Total Retain Equipment The old factory machine should be 556800 556800 retained + Replace Equipment 480200 534000 -30600…
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QUESTION ONE Epica PLC is considering marketing a new product with a four-year life. Epica will need to install new equipment to manufacture the product. Epica has to choose between two machines both of which would be suitable. Machine 1 costs K460,000 to purchase and install, and will have a residual value of K20,000 at the end of four years. Machine 2 costs K630,000 to purchase and install, and has a residual value of K30,000 at the end of four years. Machine 2 takes slightly longer to install and commission, but once in operation it has slightly lower operating costs per unit, and will eventually produce more output. The following projections have been prepared of the cash flows from product sales and operating costs for the two machines: Year 1 Year 2 Year 3 Year 4 Machine 1 Sales K'000 1,340 1,460 1,300 820 Costs K'000 1,160 1,260 1,140 760 Machine 2 Sales K'000 700 1,400 1,600 900 Costs K'000 610 1,100 1,240 750 The company's cost of capital is 12% p.a. All capital investments…
13 Spartan Scooters is contemplating rolling out a new model of motor scooter, which will sell for $2000 each It has estimated that its Fixed Costs will be S1000.000 annual Depreciation will be $200,000, annual Operating Cash Flow will be $440.000, and the varlable cost per scooter will be $1200. What is the financial break even quantity? Mupie Choice 1500 1940 201
Which option should xinhong choose
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Current Attempt in Progress It costs Oriole Company $28 of variable costs and $14 of allocated fixed costs to produce an industrial trash can that sells for $88. A buyer in Mexico offers to purchase 3500 units at $34 each. Oriole Company has excess capacity and can handle the additional production. What effect will acceptance of the offer have on net income? O Decrease $28000 O Increase $21000 O Increase $119000 O Increase $28000 Save for Later Attempts: 0 of 1 used Submit Answer
4 Hang Coffee uses high-end coffee roasting machines that cost $30,000 to purchase plus $5,000 per year to operate. The machines have a four-year life, after which they are worthless. What is the equivalent annual cost of one these machines if the required return is 18 percent? $16,550 O $10,863 O $11,152 O $16,152 O $12,500
4

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