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 is planning to invest $40,000 on a milling machine at year 0. The net cash flows generated from year 1 to year 6 is: $8000, and $10,000 equally in the following 5 years. The machine needs to be maintained at an annual cost of $2000. The machine has a 6-year service life and can be resold at the price at $6000 then. The MARR is 12%. (a) Draw the cash flow diagram. b) Determine the equivalent present and annual revenue of the machine.c) Determine the annual cost of owning the machine. d) Determine if this is a good investment using AE.
To maintain a machine the company has to pay 3500$ annually for the 8 years, if the rate of interest is 9% what will be the present worth? Select one: a. 18840$ b. 19843$ c. 19372$
The management of River Corporation is considering the purchase of a new machine costing $380,000. 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 O 10.5% O 5.5% O 25.5% Operating O 15.5% Income $20,000 20,000 20,000 20,000 20,000 Net Cash Flow $95,000 95,000 The average rate of return (rounded to one decimal place) for this investment is 95,000 95,000 95,000
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
A manufacturing plant manager has purchased a new bologna slicing machine for $24,500. The new machine is expected to produce an extra $8,000 of revenue and have an annual operating expense of $3,000. If the useful life is expected at 6 years and i = 7% per year, what is the PW? Select one: a. $50000 b. $23835 36 c. $35000 d. $ 25000
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
A machine was purchased 4 years ago. Its current market value is $14,000. Estimated future market values and annual operating costs for the next 5 years are given in the following table. What is the Economic service life of the machine if a 12% per year return is required? YearMarket Value,$Annual Operating cost,$ 10084 2 2684 2700 3000 3500 4900 1 8084 6000 3 4 2000 5
A replacement electric motor is being considered for purchase. It is capable of providing 200 hp. The pertinent data are follows: Cost - 3200 dollars Maintenance Cost per year - 50 dollars Life expectancy - 14years Salvage value after - 1,429.93 dollars The motor is used for 400 h/year and the cost of electricity is 0.0 dollars/kWh. What is most nearly the effective annual cost using an interest rate of 10%
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

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