Replace Equipment A machine with a book value of $82,500 has an estimated five-year life. A proposal is offered to sell the old machine for $48,000 and replace it with a new machine at a cost of $72,000. The new machine has a five-year life with no residual value. The new machine would reduce annual direct labor costs from $10,300 to $8,300. This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. X Open spreadsheet a. Prepare a differential analysis dated June 2 on whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2). If an amount is zero, enter "0". Use a minus sign to indicate costs, losses, or negative differential effect on income. Revenues: Proceeds from sale of old machine. Costs: Purchase price Direct labor (5 years) Differential Analysis Continue (Alt. 1) or Replace (Alt. 2) Old Machine June 2 Continue with Old Profit (Loss) Machine (Alternative 1). Replace Old Machine (Alternative 2) Differential Effects (Alternative 2)

Replace Equipment A machine with a book value of $82,500 has an estimated five-year life. A proposal is offered to sell the old machine for $48,000 and replace it with a new machine at a cost of $72,000. The new machine has a five-year life with no residual value. The new machine would reduce annual direct labor costs from $10,300 to $8,300. This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. X Open spreadsheet a. Prepare a differential analysis dated June 2 on whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2). If an amount is zero, enter "0". Use a minus sign to indicate costs, losses, or negative differential effect on income. Revenues: Proceeds from sale of old machine. Costs: Purchase price Direct labor (5 years) Differential Analysis Continue (Alt. 1) or Replace (Alt. 2) Old Machine June 2 Continue with Old Profit (Loss) Machine (Alternative 1). Replace Old Machine (Alternative 2) Differential Effects (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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Replace equipment A machine with a book value of $86,000 has an estimated five-year life. A proposal is offered to sell the old machine for $40,500 and replace it with a new machine at a cost of $67,000. The new machine has a five-year life with no residual value. The new machine would reduce annual direct labor costs from $10,300 to $9,700. This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. 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". Use a minus sign to indicate costs, losses, or negative differential effect on income.
Xinhong Company is considering replacing one of its manufacturing machines. The machine has a book value of $41,000 and a remaining useful life of five years, at which time its salvage value will be zero. It has a current market value of $51,000. Variable manufacturing costs are $33,300 per year for this machine. Information on two alternative replacement machines follows. Alternative A Alternative B Cost $ 118,000 $ 118,000 Variable manufacturing costs per year 22,200 10,700 Calculate the total change in net income if Alternative A, B is adopted. Should Xinhong keep or replace its manufacturing machine? If the machine should be replaced, which alternative new machine should Xinhong purchase?
NEW PROJECT ANALYSIS You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price is $100,000, and it would cost another $15,000 to modify the equipment for special use by the firm. The equipment falls into the MACRS 3-year class and would be sold after 3 years for $45,000. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The equipment would require a $14,000 increase in net operating working capital (spare parts inventory). The project would have no effect on revenues, but it should save the firm $67,000 per year in before-tax labor costs. The firm's marginal federal-plus-state tax rate is 40%. a. What is the initial investment outlay for the spectrometer, that is, what is the Year 0 project cash flow? Round your answer to the nearest cent. Negative amount should be indicated by a minus sign. $ b. What are the project's annual cash flows in Years 1, 2, and 3? Round your answers to the nearest cent. In Year 1 $ In Year 2 $ In Year 3 $ c.…
! Required information Two options are available for setting up a wireless meter scanner and controller. A simple setup is good for 2 years and has an initial cost of $11,000, no salvage value, and an AOC of $27,000 per year. A more permanent system has a higher first cost of $73,000, but it has an estimated life of 6 years and a salvage value of $15,000. It costs only $17,000 per year to operate and maintain. NOTE: This is a multi-part question. Once an answer is submitted, you will be unable to return to this part. If the two options are compared using an incremental rate of return, what is the incremental cash flow in year 6? The incremental cash flow in year 6 is $
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A commercial oven with a book value of $87,000 has an estimated remaining 5-year life. A proposal is offered to sell the oven for $8,500 and replace it with a new oven costing $110,000. The new machine has a 5-year life with no residual value. The new machine would reduce annual maintenance costs by $23,000. Provide a differential analysis, in good form, on the proposal to replace the commercial oven.
The management of Ballard MicroBrew is considering the purchase of an automated bottling machinefor $120,000. The machine would replace an old piece of equipment that costs $30,000 per year to operate. The new machine would cost $12,000 per year to operate. The old machine currently in use couldbe sold now for a scrap value of $40,000. The new machine would have a useful life of 10 years with nosalvage value.Required:Compute the simple rate of return on the new automated bottling machine.
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