Required information Lego Group in Bellund, Denmark, manufactures Lego toy construction blocks. The company is considering two methods for producing special-purpose Lego parts. Method 1 will have an initial cost of $480,000, an annual operating cost of $110,000, and a life of 3 years. Method 2 will have an initial cost of $580,000, an operating cost of $110,000 per year, and a 6-year life. Assume 9% salvage values for both methods. Lego uses an MARR of 11% per year. Which method should it select on the basis of a present worth analysis? The present worth of method 1 is $ Method 2 is selected. and that of method 2 is $

Required information Lego Group in Bellund, Denmark, manufactures Lego toy construction blocks. The company is considering two methods for producing special-purpose Lego parts. Method 1 will have an initial cost of $480,000, an annual operating cost of $110,000, and a life of 3 years. Method 2 will have an initial cost of $580,000, an operating cost of $110,000 per year, and a 6-year life. Assume 9% salvage values for both methods. Lego uses an MARR of 11% per year. Which method should it select on the basis of a present worth analysis? The present worth of method 1 is $ Method 2 is selected. and that of method 2 is $

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

For a 5-year tunnel digging project, 3 proposals are being considered for a tunnel boring machine. Proposal 1 from Hyundai of South Korea. First cost $20M, annual operating and maintenance cost $4M, salvage value $3M. Proposal 2 from Sumitomo of Japan. First cost $22M, annual O & M cost $ 3.5M, salvage value $3.5M. Proposal 3 from Asea Brown Boveri,ABB of Sweden. First cost $25M, annual O & M cost $3M, salvage value $5M. The company’s MARR is 30%. Which proposal is the best?
The Fence Company is setting up a new production line to create top rails. The relevant data for two alternatives are shown below. Flow Line Manufacturing Cell Installed Cost Expected Life Salvage Value Variable Cost per Top Rail Click here to access the TVM Factor Table Calculator $15,000 5 years $0 $6.00 $10,000 5 years $0 $7.00
A "standard" model of a dozer costs $20,000 and has an annual operating expense of $450. The dozer will be replaced in 6 years when the salvage value is expected to be $2,000. A "super" model can be purchased for $25,000, but will have a salvage value of $7,000 when retired in 6 years. Its operating expenses are also $450 a year. The purchaser's other investment opportunities are 5%. Compare these alternatives by using the annual equivalent method.
Oahu Inc. is considering an investment in new equipment that will be used to manufacture a smartphone. The phone is expected to generate additional annual sales of 5,100 units at $276 per unit. The equipment has a cost of $521,700, residual value of $39,300, and an 8-year life. The equipment can only be used to manufacture the phone. The cost to manufacture the phone follows: Line Item Description Amount Cost per unit: Direct labor $47.00 Direct materials 182.00 Factory overhead (including depreciation) 31.60 Total cost per unit $260.60 Determine the average rate of return on the equipment. If required, round to the nearest whole percent.
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 $495,000 cost with an expected four-year life and a $10,000 salvage value. Additional annual information for this new product line follows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Required: 1. Determine income and net cash flow for each year of this machine's life. $ 1,960,000 1,502,000 121,250 167,000 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 8%. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Determine income and net cash flow for each year of this machine's…
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 $1. EV of $1. PVA of $1, and EVA of $1) (Use appropriate factor(s) from the tables provided.) Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Required: 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%. $ 1,990,000 1,509,000 117,750 162,000 Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute net present value…
RLC Manufacturing is planning to purchase a cutting equipment. Information are as follows: Equipment 1 Equipment 2 First Cost P 12,000 P 18,000 Salvage Value P 600 P 2,000 Annual Operation P 3,200 P 2,500 Annual Maintenance P 1,200 P 1,000 Taxes & Insurance 3% 3% Life, years 10 15 Money is worth at least 16%. Which equipment should be selected? Use: Annual Cost Method
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?
Rework the given problem, assuming the following additional information:• The machine is classified as a seven-year MACRS recovery period. Thetax rate is 40%. and the after-tax MARR is 10%.