Sandhill Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided here. Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Machine A $77,300 8 years Net present value Profitability index $20,200 $4,970 Which machine should be purchased? Click here to view the factor table. Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative, use either a negative sign preceding the number eg-45 or parentheses eg (45). Round answer for present value to 0 decimal places, e.g. 125 and profitability index to 2 decimal places, e.g. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Machine A Machine B $180,000 8 years 0 should be purchased. $40,000 $9,860 Machine B

Sandhill Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided here. Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Machine A $77,300 8 years Net present value Profitability index $20,200 $4,970 Which machine should be purchased? Click here to view the factor table. Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative, use either a negative sign preceding the number eg-45 or parentheses eg (45). Round answer for present value to 0 decimal places, e.g. 125 and profitability index to 2 decimal places, e.g. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Machine A Machine B $180,000 8 years 0 should be purchased. $40,000 $9,860 Machine B

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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Tassie Ltd is considering replacing an old management system with a new one. Use the following information to determine the feasibility of this replacement plan and explain your decision in detail. Costs of new system: $80,000 Costs of old system: $95,000 Depreciations of new system: Prime cost to zero Depreciations of old system: $5,000 per year Life of old system: will be written off in 5 years if no replacement Life of new system: 5 years Salvage value of new system at the end of its life: $18,000 Salvage value of old system at the end of its life: $0 Market value of the old system now: $55,000 Total savings from the new system:…
Sandhill Corp, is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided here. Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Machine A $77,300 8 years 0 $20,200 $4,970 Machine B $180,000 8 years 0 $40,000 $9,860
Jarett Motors is trying to decide whether it should keep its existing car washing machine or purchase a new one that has technological advantages (which translate into cost savings) over the existing machine. Information on each machine follows: Old machine New machine Original cost $9,000 $20,000 Accumulated depreciation 5,000 0 Annual cash operating costs 9,000 4,000 Current salvage value of old machine 2,000 Salvage value in 10 years 500 1,000 Remaining life 10 yrs 10 yrs Refer to Jarett Motors. The estimated $500 salvage value of the existing machine in 10 years represents a(n) Select one: a. opportunity cost of keeping the existing machine for 10 years b. opportunity cost of keeping the existing machine and buying the new machine c. opportunity cost of selling the existing machine now d. sunk cost
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Alliance Manufacturing Company is considering the purchase of a new automated drill press to replace an older one. The machine now in operation has a book value of zero and a salvage value of zero. However, it is in good working condition with an expected life of 10 additional years. The new drill press is more efficient than the existing one and, if installed, will provide an estimated cost savings (in labor, materials, and maintenance) of $6,000 per year. The new machine costs $25,000 delivered and installed. It has an estimated useful life of 10 years and a salvage value of $1,000 at the end of this period. The firm’s cost of capital is 14 percent, and its marginal income tax rate is 40 percent. The firm uses the straight-line depreciation method.a. What is the net cash flow in year 0 (i.e., initial outlay)?b. What are the net cash flows after taxes in each of the next 10 years?c. What is the NPV of the investment?d. Should Alliance replace its existing drill press?
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Please answer net present value and profitability index:
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