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INSTRUCTIONS: Help me answer the given question. Do not round off answer when solving, instead just the final answer will be rounded off to two decimal places
2. White Oaks Properties builds strip shopping centers and small malls. The company plans to replace its refrigeration, cooking, and HVAC equipment with newer models in one entire center built 10 years ago. 10 years ago, the original purchase price of the equipment was $700,000 and the operating cost has averaged $220,000 per year. Determine the equivalent annual cost of the equipment if the company can now sell it for $204,000. The company’s MARR is 21% per year.
The equivalent annual cost of the equipment, (in $)
Round off to the nearest two (2) decimal places, include sign
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- Jonfran Company manufactures three different models of paper shredders including the waste container, which serves as the base. While the shredder heads are different for all three models, the waste container is the same. The number of waste containers that Jonfran will need during the following years is estimated as follows: The equipment used to manufacture the waste container must be replaced because it is broken and cannot be repaired. The new equipment would have a purchase price of 945,000 with terms of 2/10, n/30; the companys policy is to take all purchase discounts. The freight on the equipment would be 11,000, and installation costs would total 22,900. The equipment would be purchased in December 20x4 and placed into service on January 1, 20x5. It would have a five-year economic life and would be treated as three-year property under MACRS. This equipment is expected to have a salvage value of 12,000 at the end of its economic life in 20x9. The new equipment would be more efficient than the old equipment, resulting in a 25 percent reduction in both direct materials and variable overhead. The savings in direct materials would result in an additional one-time decrease in working capital requirements of 2,500, resulting from a reduction in direct material inventories. This working capital reduction would be recognized at the time of equipment acquisition. The old equipment is fully depreciated and is not included in the fixed overhead. The old equipment from the plant can be sold for a salvage amount of 1,500. Rather than replace the equipment, one of Jonfrans production managers has suggested that the waste containers be purchased. One supplier has quoted a price of 27 per container. This price is 8 less than Jonfrans current manufacturing cost, which is as follows: Jonfran uses a plantwide fixed overhead rate in its operations. If the waste containers are purchased outside, the salary and benefits of one supervisor, included in fixed overhead at 45,000, would be eliminated. There would be no other changes in the other cash and noncash items included in fixed overhead except depreciation on the new equipment. Jonfran is subject to a 40 percent tax rate. Management assumes that all cash flows occur at the end of the year and uses a 12 percent after-tax discount rate. Required: 1. Prepare a schedule of cash flows for the make alternative. Calculate the NPV of the make alternative. 2. Prepare a schedule of cash flows for the buy alternative. Calculate the NPV of the buy alternative. 3. Which should Jonfran domake or buy the containers? What qualitative factors should be considered? (CMA adapted)White Oaks Properties builds strip shopping centers and small malls. The company plans to replace its refrigeration, cooking and HVAC equipment with newer models in one entire center but 9 years ago. 9 years ago the original purchase price of the equipment was $675.000 and the operating cost has averaged $230,000 per year. Determine the equivalent annual cost of the equipment the company can now set it for $184,000. The company's MARRs 215 per year. The equivalent annual cost of the equipment is determined to be sFlyingbird Learning Ltd. is a company located in Virginia. The company develops online training platforms for corporate clients and provides content support on a subscription basis. Suppose during the summer, you started a part-time job at this company. The company is considering upgrading the computers used by its graphic design department. The five computers being replaced cost $12,000 two years ago and now have a net book value of $4,000 based on using straight-line depreciation, a three-year useful life, and $0 salvage value. Your analysis indicates that you can likely get about $500 per computer if you advertise them online. The new computers being considered will cost $15,000 in total and will also have a three-year useful life, with an estimated salvage value of $0. The new computers each include annual licences for graphic design software for which the company is currently paying a total of $500 per year, per computer. Required: a) You prepared an analysis of the financial…
- Required information [The following information applies to the questions displayed below.] Wendell's Donut Shoppe is investigating the purchase of a new $18,600 donut-making machine. The new machine would permit the company to reduce the amount of part- time help needed, at a cost savings of $3,800 per year. In addition, the new machine would allow the company to produce one new style of donut, resulting in the sale of 1,000 dozen more donuts each year. The company realizes a contribution margin of $1.20 per dozen donuts sold. The new machine would have a six-year useful life. (Ignore income taxes.) Requirement 2: Using Excel, calculate the internal rate of return promised by the new machine. (Round your answer to two decimal places. Omit the "%" sign in your response.) 16.00 % Internal rate of returnBlossom Inc. manufactures snowsuits. Blossom is considering purchasing a new sewing machine at a cost of $2.45 million. Its existing machine was purchased 5 years ago at a price of $1.8 million; six months ago, Blossom spent $55,000 to keep it operational. The existing sewing machine can be sold today for $241,705. The new sewing machine would require a one-time, $85,000 training cost. Operating costs would decrease by the following amounts for years 1 to 7: " Year 1 $390,100 2 400,600 3 410,600 4 425,000 5 432,900 6 434,500 7 436,400 The new sewing machine would be depreciated according to the declining-balance method at a rate of 20%. The salvage value is expected to be $379,900. This new equipment would require maintenance costs of $94,600 at the end of the fifth year. The cost of capital is 9%. Click here to view the factor table. Use the net present value method to determine the following: (If net present value is negative then enter with negative sign preceding the number e.g.-45…The manager at a Sherwin-Williams store has decided to purchase a new $30,000 paint mixing machine with high-tech instrumentation for matching color and other components. The machine may be paid for in one of two ways: (1) pay the full price now, less a 3% discount, or (2) pay $5,000 now,$8,000 one year from now, and $6,000 at the end of each of the next 4 years. If interest is 12% compounded annually, determine which way is best for themanager to make the purchase.
- Auto Shoppe is considering the purchase of a new engine computer code reader for $65,000. Auto Shoppe can charge $75 for the service of reading the codes from a single car engine, while the actual cost of the reading would only be $10 per car engine. Please answer the following two questions, based on this information. Suppose that the manager of Auto Shoppe is concerned about this purchase, and has stated that if Auto Shoppe were to buy the new engine computer code reader, “.the machine needs to pay for itself by the time we use it to read the codes of 200 car engines." The manager says this is because, “...those sorts of engine computer code readers go out of date very quickly, so if we don't get our money back soon, we will probably just wind up replacing the machine before it ever breaks even." What would Auto Shoppe need to charge for the service of reading each car engine, to break-even when it reads the codes from 200 car engines? a. $45 b. $150 Oc. $205 d. $335 Oe. $75Oriole Inc. manufactures snowsuits. Oriole is considering purchasing a new sewing machine at a cost of $2.45 million. Its existing machine was purchased 5 years ago at a price of $1.8 million; six months ago, Oriole spent $55,000 to keep it operational. The existing sewing machine can be sold today for $211,855. The new sewing machine would require a one-time, $85,000 training cost. Operating costs would decrease by the following amounts for years 1 to 7: Year 1 2 3 4 5 6 7 $390,600 399,400 411,000 425.900 432,000 434,600 436,400 The new sewing machine would be depreciated according to the declining-balance method at a rate of 20%. The salvage value is expected to be $379,400. This new equipment would require maintenance costs of $94,200 at the end of the fifth year. The cost of capital is 9%. Click here to view PV tableBobwhite Laundromat is trying to enhance the services it provides to customers, mostly college students. It is looking into the purchase of new high-efficiency washing machines that will allow for the laundry's status to be checked via smartphone. Bobwhite estimates the cost of the new equipment at $191,000. The equipment has a useful life of 9 years. Bobwhite expects cash fixed costs of $77,000 per year to operate the new machines, as well as cash variable costs in the amount of 5% of revenues. Bobwhite evaluates investments using a cost of capital of 10%. Present Value of $1 table Present Value of Annuity of $1 table Future Value of $1 table Future Value of Annuity of $1 table Read the requirements. Requirement 1. Calculate the payback period and the discounted payback period for this investment, assuming Bobwhite expects to generate $150,000 in incremental revenues every year from the new machines. (Round your answer to two decimal places.) The payback period in years, for the…
- 0/4 E ! Crane Inc. manufactures snowsuits. Crane is considering purchasing a new sewing machine at a cost of $2.45 million. Its existing machine was purchased 5 years ago at a price of $1.8 million; six months ago, Crane spent $55,000 to keep it operational. The existing sewing machine can be sold today for $241,835. The new sewing machine would require a one-time, $85,000 training cost. Operating costs would decrease by the following amounts for years 1 to 7: Year 1 $389,500 2 399,400 3 411,000 4 425,400 5 433,700 6 435,300 7 437,300 The new sewing machine would be depreciated according to the declining-balance method at a rate of 20%. The salvage value is expected to be $379,500. This new equipment would require maintenance costs of $94,500 at the end of the fifth year. The cost of capital is 9%. Click here to view PV table. Use the net present value method to determine the following: (If net present value is negative then enter with negative sign preceding the number eg.-45 or…A company intends to install new management software for its warehouse. The software will cost $47,000 to buy and will cost an additional $148,000 to install and implement. It is anticipated that it will save the company $44,000 through reductions in staff and $69,000 in general inventory costs in the first year after installation. What is the total benefit to the company in the first year if they choose to install the software?Sage Laundromat is trying to enhance the services it provides to customers, mostly college students. It is looking into the purchase of new highefficiency washing machines that will allow for the laundry’s status to be checked via smartphone. Sage estimates the cost of the new equipment at $159,000. The equipment has a useful life of 9 years. Sage expects cash fixed costs of $80,000 per year to operate the new machines, as well as cash variable costs in the amount of 5% of revenues. Sage evaluates investments using a cost of capital of 10%. Q. Calculate the payback period and the discounted payback period for this investment, assuming Sage expects to generate $140,000 in incremental revenues every year from the new machines.
