Question 2ElectroMotion Corp is an electric vehicle manufacturer that produces fuel-cellpowered passenger cars and trucks. The company has developed a newproduction line machine that has considerably improved the efficiency of thefirm's existing manufacturing process. The cost of buying the new machine is£20,000 irrespective from when you buy it, and its economic useful life is 3years. The existing production line machine will last at most 2 more years.The annual operating costs of the two machines are given below.Old machineNew machineAnnual operating cost (£)Year 215,0006,000Year 110,0004,000The opportunity cost of capital is 10%.Year 3N/A8,000a) When should the company replace the existing machine with a new one?b) Interpret your result in question (a).

concept. Capital budgeting is used for making investment and replacement decisions. Cash flows…

Answered: Question 2 ElectroMotion Corp is an…

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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#3 Caspian Sea Drinks is considering the purchase of a new water filtration system produced by Rube Goldberg Machines. This new equipment, the RGM-7000, will allow Caspian Sea Drinks to expand production. It will cost $15.00 million fully installed and will be fully depreciated over a 20 year life, then removed for no cost. The RGM-7000 will result in additional revenues of $2.77 million per year and increased operating costs of $564,995.00 per year. Caspian Sea Drinks' marginal tax rate is 28.00%. If Caspian Sea Drinks uses a 12.00% discount rate, then the net present value of the RGM-7000 is _____. Answer format: Currency: Round to: 2 decimal places.
Question 13 Mack Company has a machine with a book value of $80,000 and a remaining four-year useful life. A new machine is available at a cost of $110,000, and Mack can also receive $50,000 for trading in its old machine. The new machine will reduce variable manufacturing costs by $15,000 per year over its four-year useful life. Show the computations as to whether the machine should be replaced or kept.
#34 Caspian Sea Drinks is considering the purchase of a new water filtration system produced by Rube Goldberg Machines. This new equipment, the RGM-7000, will allow Caspian Sea Drinks to expand production. It will cost $15.00 million fully installed and will be fully depreciated over a 15 year life, then removed for no cost. The RGM-7000 will result in additional revenues of $2.96 million per year and increased operating costs of $689,148.00 per year. Caspian Sea Drinks' marginal tax rate is 28.00%. The internal rate of return for the RGM- 7000 is Submit Answer format: Percentage Round to: 4 decimal places (Example: 9.2434%, % sign required. Will accept decimal format rounded to 6 decimal places (ex: 0.092434)) unanswered not_submitted Attempts Remaining: Infinity
Scenario 1: Four years ago, The Kresser Sdn. Bhd. purchased an Industrial Shredder Machine. Because of increasing maintenance costs for this equipment, a new piece of machine is being considered for the assembly line. The cost characteristics of the defender (present machine) and the challenger are shown in Table 1 below: Table 1 Defender Original cost = RM9,000 Maintenance = RM500 in year one (four years ago) increasing by a uniform gradient of RM100 per year thereafter Market Value (MV) at end of life = 0 Original estimated life = 9 years Challenger Purchased cost =RM11,000 Maintenance = RM150 per year 2 Market Value (MV) at end of life = RM3,000 Estimated life = 5 years Suppose a RM6,000 Market value is available now for the defender. Perform a before- tax analysis, using before-tax MARR of 15%, to determine which alternative to select. Be sure to state all important assumptions you make, and utilize a uniform gradient in your analysis of the defender.
Question 07: Virat Kohli Welders is planning to replace an old machine with a new one to improve efficiency in its production process. The machine will increase the efficiency as it is more modern and will result in an incremental savings of $80,000 per year. The old machine was bought 3 years ago at a cost of $270,000. The new machine will cost $420,000. Both machines have useful lives of 6 years. The machines are depreciated to zero for tax purpose over the six-year life using a straight-line depreciation method. The tax rate is 34% and the required rate of return is 11%. The old machine has no salvage value at the end of its life but can be sold now at a cost of $100,000. The new machine will have a salvage value of $80,000 at the end of its life. Should the new machine be purchased?
question 3
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