ntrieterencesRequired informationAn electric switch manufacturing company is trying to decide between three different assembly methods. Method A hasan estimated first cost of $47,000, an annual operating cost (AOC) of $8,000, and a service life of 2 years. Method B willcost $88,000 to buy and will have an AOC of $7,500 over its 4-year service life. Method C costs $129,000 initially with anAOC of $4,000 over its 8-year life. Methods A and B will have no salvage value, but Method C will have equipment worth10% of its first cost.Perform a future worth analysis to select the method at /= 14% per year.The future worth of method A is $[The future worth of method B is $[The future worth of method C is $[Metho (Click to select) is selected.C

Method A First cost=47000 AOC=8000 Life=2years Discount rate=14% To calculate future worth first we…

Answered: Required information An electric switch…

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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Letang Industrial Systems Company (LSC) is trying to decide between two different conveyor belt systems. System A costs $325,000, has a four-year life, and requires $121,000 in pretax annual operating costs. System B costs $405,000, has a sle-year life. and requires $115,000 in pretax annual operating costs. Suppose the company always needs a conveyor belt system when one wears out, it must be replaced. Assume the tax rate is 22 percent and the discount rate is 11 percent Calculate the EAC for both conveyor belt systems. (A negative answer should be Indicated by a minus sign. Do not round Intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) System A System D 11:36 AM/
You are evaluating two different silicon wafer milling machines. The Techron I costs $252,000, has a three-year life, and has pretax operating costs of $67,000 per year. The Techron Il costs $440,000, has a five-year life, and has pretax operating costs of $40,000 per year. For both milling machines, use straight-line depreciation to zero over the project's life and assume a salvage value of $44,000. If your tax rate is 24 percent and your discount rate is 9 percent, compute the EAC for both machines. Note: Your answer should be a negative value and indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. Techron I Techron II $ -304,725.75 Which machine should you choose? O Techron I O Techron II
Dexcon Technologies, Inc., is evaluating two alternatives to produce its new plastic filament with tribological (i.e., low friction) properties for creating custom bearings for 3-D printers. The estimates associated with each alternative are shown below. Using a MARR of 15% year, which alternative has the lower present worth? per Method DDM LS First Cost $-200,000 $-40,000 $-500,000 M&O Cost, per Year $-40,000 Salvage Value Life $2,000 $21,000 2 years 4 years The present worth for the DDM method is $ The present worth for the LS method is $ The (Click to select) v method is selected.
Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $49,000 and a remaining useful life of five years. It can be sold now for $59,000. Variable manufacturing costs are $44,000 per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is five years. Machine A Machine B Purchase price $ 122,000 $ 136,000 Variable manufacturing costs per year 18,000 15,000 (a) Compute the income increase or decrease from replacing the old machine with Machine A. (b) Compute the income increase or decrease from replacing the old machine with Machine B. (c) Should Lopez keep or replace its old machine? (d) If the machine should be replaced, which new machine should Lopez purchase?
You are evaluating two different silicon wafer milling machines. The Techron I costs $216,000, has a three - year life, and has pretax operating costs of $55, 000 per year. The Techron II costs $380,000, has a five-year life, and has pretax operating costs of $28, 000 per year. For both milling machines, use straight - line depreciation to zero over the project's life and assume a salvage value of $32, 000. If your tax rate is 23 percent and your discount rate is 10 percent, compute the EAC for both machines. Note: Your answer should be a negative value and indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.
Factor Company is planning to add a new product to its line. To manufacture this product, the company needs to buy a new machine at a $491,000 cost with an expected four-year life and a $20,000 salvage value Additional annual information for this new product line follows PV of $. EX of St. PVA of Stand EVA of $ (Use appropriate factors) from the tables provided) Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation Machinery 1. Determine income and net cash flow for each year of this machine's life. 2. Compute this machine's payback period, assuming that cash flows occur evenly throughout each year 3. Compute net present value for this machine using a discount rate of 7% Complete this question by entering your answers in the tabs below. Required 1 Required 2 year 4 Required 3 Compute net present value for this machine using a discount rate of 7%. (Do not round intermediate calculations. Negative amounts should be entered with a minus sign.…
Smithson Mechanical Ltd. is considering replacing an existing hoist with a newer, more efficient piece of equipment. The existing hoist has a remaining useful life of 5 years. The new hoist costs CAD 46,000 to purchase and install and alsohas an estimated life of 5 years. It is a Class 5 asset with a CCA rate of 10.0% The company currently produces 8,500 units per year. The new hoist is expected to reduce variable costs by CAD 1.30 per unit and fixed costs by CAD 3,500 year. An increased investment in new working capital of CAD 4,500 will also be required to support the new machine. The existing hoist can currently be sold for CAD 15,000. At the end of 5 years, the existing hoist will have a salvage value of CAD 2,000. The new hoist can be sold for CAD 11,000 at the end of the 5-year period. The project’s RRR is 7.0% and its tax rate is 25.0%. The present value of the net initial cash flows of this project today is closest to: a) CAD -31,090. b) CAD -35,500. c) CAD -43,957. Net…
You are evaluating two different silicon wafer milling machines. The Techron I costs $303,000, has a 3-year life, and has pretax operating costs of $84,000 per year. The Techron Il costs $525,000, has a 5-year life, and has pretax operating costs of $57,000 per year. For both milling machines, use straight-line depreciation to zero over the project's life and assume a salvage value of $61,000. If your tax rate is 25 percent and your discount rate is 13 percent, compute the EAC for both machines. (A negative answer should be Indicated by a minus sign. Do not round Intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Techron I Techron II Which machine do you prefer? Techron I Techron II
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
Two techniques can be used to produce expansion anchors. Technique A costs $90,000 initially and will have a $12,000 salvage value after 3 years. The operating cost with this method will be $33,000 in year 1, increasing by $2600 each year. Technique B will have a first cost of $113,000, an operating cost of $7000 in year 1, increasing by $7000 each year,and a $43,000 salvage value after its 3-year life. At an interest rate of 13% per year, which technique should be used on the basis of a present worth analysis? Notice that there are no revenues. Please work out and do not use excel, however if you use excel please show how to input everything needed down to the formula, thank you!
A production plant manager has been presented with two proposals for automating an assembly process. Proposal A involve an initial cost of $15000 and an annual operating cost of $2000 per year for the next 4 years . Thereafter, the operating cost is expected to be $2700 per year. This equipment is expected to have a 20-year life with no salvage value. Proposal B requires an initial investment of $25000 and an annual operating cost of $1200 per year for the first 3 years. Thereafter, the operating cost is expected to increase by $120 per year. This equipment is expected to last 20 years and have a salvage value of $2000. If the company's MARR is 10%, which should be accepted using ROR analysis?
Mowbot's management is evaluating new proposals for production machines from three companies: Brawn Up front cost Annual cost saving Life (years) $ $ Apex (150,000) $ 63,000 $ 4 (200,000) $ 81,000 $ Cameo (250,000)102,000 4 4 Use incremental present worth analysis to decide which alternative should be recommended. MARR is 18%.

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