Replace Equipment A machine with a book value of $248,900 has an estimated six-year life. A proposal is offered to sell the old machine for $214,500 and replace it with a new machine at a cost of $280,700. The new machine has a six-year life with no residual value. The new machine would reduce annual direct labor costs from $50,800 to $40,600. a. Prepare a differential analysis dated April 11 on whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential Analysis Continue Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) April 11 Continue Replace Differential with Old Old Effects Machine Machine (Alternative 2) (Alternative 1) (Alternative 2) Revenues: Proceeds from sale of old machine Costs: Purchase price Direct labor (6 years) Profit (Loss) b. Should the company continue with the old machine (Alternative 1) or replace the old machine (Alternative 2)?

Replace Equipment A machine with a book value of $248,900 has an estimated six-year life. A proposal is offered to sell the old machine for $214,500 and replace it with a new machine at a cost of $280,700. The new machine has a six-year life with no residual value. The new machine would reduce annual direct labor costs from $50,800 to $40,600. a. Prepare a differential analysis dated April 11 on whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential Analysis Continue Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) April 11 Continue Replace Differential with Old Old Effects Machine Machine (Alternative 2) (Alternative 1) (Alternative 2) Revenues: Proceeds from sale of old machine Costs: Purchase price Direct labor (6 years) Profit (Loss) b. Should the company continue with the old machine (Alternative 1) or replace the old machine (Alternative 2)?

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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Check in Sleep Self- Assessment Give Feedback Holmes Manufacturing is considering a new machine that costs $290,000 and would scor reduce pretax manufacturing costs by $90,000 a annually. The new machine will be fully depreciated at the time of purchase Management thinks the machine would hava a value of $25,000 at the end of its 5-year operating life. Net operating working capital would increase by $28,000 initially, but it would be recovered at the end of the 40's 5-year life. Holmes's marginal tax is 25%, and a 12%. WACC is appropriate Ybm X 213500 for the project. ulan alloups gro a) Calculate them Prycct's NPV Negative value, if any, should be indicated by allmious sign. Do not Yound intermediate calculations. Rand your answer to the nearest cent. wwzno www Liavos 20orhol wolo $ Project rate is 8 = AA Calculate the project's IRR. % Calculate the project's MIRR % Calculate the project's pay back years b. Assume management is unsure about the $90,000 cost savings - this figure could…
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Lacey Manufacturing is considering replacing one of its machines. You are provided with the following information: Old Machine: Original purchase price $100,000 Est. annual variable costs 225,000 Est. selling price 25,000 Est. remaining useful life 5 years New Machine: Purchase price $250,000 Est. annual variable costs 150,000 Est. residual value 0 Est. useful life 5 years Determine if the company should keep using the old machine or sell it and replace it with the new machine. Show your work to justify your answer
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Previous attempt to ask only received partial correct answers: New-Project Analysis The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $1,030,000, and it would cost another $18,500 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $537,000. The MACRS rates for the first three years are 0.3333, 0.4445, and 0.1481. The machine would require an increase in net working capital (inventory) of $20,000. The sprayer would not change revenues, but it is expected to save the firm $377,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 25%. (Ignore the half-year convention for the straight-line method.) Cash outflows, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest dollar. What is the Year-0 net cash flow? (1068500 is not a correct answer) $ What are the net…
Reference: Case Study S Dunn Manufacturing is considering the following two alternatives. The cost information for the two proposals for replacing an equipment are provided are in table below. Initial cost Benefits/year Machine X $120,000 $20,000 for the first 10 years and $9,000 for the next 10 years Life Salvage value $40,000 MARR 5.2. The NPW of machine X is A) $35,158 B) $48,192 C) $50,752 Machine Y $96,000 $12,000 per year for 20 years. 20 years 8% $20,000