The line incorporate is considering a new piece ofequipment that cost $60,000 the company can get6000 for the trading on their old machine follow isfinancial data relevant to the new machine $24,000revenue of $13,000 cash expenses peaceful life eightyears appreciation expense $5500 per year internalrate of return is approximately

Step 1:To evaluate the new equipment purchase, we need to calculate the net present value (NPV),…

Answered: The line incorporate is considering a…

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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Explansion Project: ABC is planning to buy a new heavy duty printing machine. You were hired to assist KFUPM on this decision. So you gathered the following information. The new machine has a life of 3 years. New Machine: Life of machine: 3 years The cost of the new machine is SAR 1,134 The machine will increase the gross profit every year by SAR 314 The market value of the machine when sold at the end of its life is SAR 191 If replaced, then the net working capital (NOWC) will increase every year by SAR 22 ABC will recover all investments in working capital at the end of the new machine's life (after 3 years). WACC is 9.49% Tax rate is 40% ABC uses straight-line Depreciation. Calculate the follwoing: Notes: 1. Use 2 Decimals
A company must purchase a new machine to increase production. The machine will cost $50,000 to purchase. The following are the remaining cash flows of the machine and its probabilities. The machine is supposed to be used for 6 years and the MARR is 10%. Annual Cost Annual Revenue Calculate the Present Worth. Probability .2 .6 .2 .6 .4 Outcome $3,000 $4,500 $5,500 $35,000 $40,000
A three-year-old small crane is being considered for early replacement. Its current market value is $17,500. Estimated future market values and annual operating costs for the next five years are given in the table below. What is the economic life for this crane if the interest rate is 5.1% per year? Year 0 Market Value Annual Operating Cost $17,500 1 $15,110 $4,700 2 $12,930 $4,809 3 $10,110 $4,883 4 $7,400 $4,997 5 $- $5,095
The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment: Operating Net Cash Year Income Flow 1 $18,750 $93,750 2 18,750 93,750 3 18,750 93,750 4 18,750 93,750 5 18,750 93,750 The cash payback period for this investment a. 4 years Xb. 3 years c. 5 years d. 20 years
The production department is proposing the purchase ONE automatic insertion machine. It has identified three machines (A, B and C). Each machine has an estimated useful life of 10 years. minimum desired rate of return of 10%. The accountant has identified the following data: Machine A Machine B Machine C Present value of future cash flows computed using 10% rate of return $305,000 $295,000 $300,500 Amount of initial investment 300,000 300,000 300,000 Based on net present value method, which machine do you recommend?
A company purchase a piece of manufacturing equipment for an additional income. The expected income is $4,500 per semester. Its useful ife is 9 years. Expenses are estimated to be $500 semiannually if the purchase price is $44,000 and there is a salvage value of $4,500, what is the prospective rate of return (RR) of this investment? The MARR is 10% compounded semiannually Oa IRR-602% semiannual Oh IRR-3% semiannual ORR-12% semiannual Od IRR-6.23% semiannual
The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment: Year 1 2 $18,750 18,750 18,750 18,750 18,750 The average rate of return for this investment 3 4 Operating Income 5 Net Cash Flow $93,750 93,750 93,750 93,750 93,750
Gardner Denver Company is considering the purchase of a new piece of factory equipment that will cost $402,240 and will generate $120,000 per year for 5 years. Calculate the IRR for this piece of equipment. Present value and future values table: https://openstax.org/books/principles-managerial-accounting/pages/time-value-of-money ________%
MNO company is evaluating a proposal for purchase of equipment which will cost $180,000. The cash inflows from the use of equipment is given below: Year Cash flow $60,000 $40,000 $70,000 $125,000 $35,000 4. Payback period for the proposal is: a. 3 years b. 2 years c. 4 years d. 3.08 years DELL 123 45
A company is considering buying a new machine. Specific details: Initial Investment $400,000 Annual Cash Revenues $375,000 Annual Cash Expense $262,000 Expected Life 5 Years Salvage Value $0 Discount Rate 10% All cash flows are after tax. 1 Prepare a schedule that shows the applicable cash flows and other relevant items for this decision 2 Compute the payback period for the new machine 3 Compute the Accounting Rate of Return (ARR) for the new machine
You are building a new facility and are trying to determine which vendor you are going to use to install new windows. You get quotes from two vendors-Vendor A and Vendor B. The useful life of the windows is 9.1 years and the MARR is 14%. The annual worth from the quotes are given below. What should you do? Vendor A B AW Save for Later -$6300 -$3200 O Purchase windows from Vendor B. O Purchase windows from Vendor A O Do nothing. Attempts: 0 of 1 used Sand

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