White Oaks Properties builds strip shopping centers and small malls. The company plans to replace its refrigeration, cooking, andHVAC equipment with newer models in one entire center built 10 years ago. 10 years ago, the original purchase price of the equipmentwas $675,000 and the operating cost has averaged $265,000 per year. Determine the equivalent annual cost of the equipment if thecompany can now sell it for $174,000. The company's MARR is 24% per year.The equivalent annual cost of the equipment is determined to be $

A financial statistic called equivalent annual cost is used to assess an investment's or project's…

Answered: White Oaks Properties builds strip…

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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Inc. uses fine-tuned equipment to produce electronic products. Each one of its machines costs $10,000,000 to purchase plus an additional $900,000 a year to operate. The machines have a 6-year (6) life after which they are worthless. What is the equivalent annual cost of one these machines if the required return is 11.4 percent?
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 $224,000. The company's MARR is 17% per year. The equivalent annual cost of the equipment is determined to be $
Required: 1. Prepare a comparative income statement covering the next five years, assuming: a. The new machine is not purchased. b. The new machine is purchased. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations.) Total expenses w Transcribed Text of purchasing the new machine Keep Old Machine S Minimum saving in costs 5 Years Summary Buy New Machine Ĉ Difference 2. Compute the net advantage of purchasing the new machine using only relevant costs in your analysis. (Do not round intermediate calculations.) Check my work 3. What is the minimum saving in annual operating costs that must be achieved in order for the president to consider buying the new machine?
Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $46,000 and a remaining useful life of five years. It can be sold now for $56,000. Variable manufacturing costs are $44,000 per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is five years. Machine A Machine B Purchase price $ 116,000 $ 129,000 Variable manufacturing costs per year 21,000 13,000 (a) Compute the income increase or decrease from replacing the old machine with Machine A. (b) Compute the income increase or decrease from replacing the old machine with Machine B. (c) Should Lopez keep or replace its old machine? (d) If the machine should be replaced, which new machine should Lopez purchase?
Janko Wellspring Incorporated has a pump with a book value of $26,000 and a four-year remaining life. A new, more efficient pump is available at a cost of $47,000. Janko can receive $8,200 for trading in the old pump. The old machine has variable manufacturing costs of $27,000 per year. The new pump will reduce variable costs by $11,100 per year over its four-year life. Should the pump be replaced? Multiple Choice No, because the company will be $5,600 worse off in total. Yes, because income will increase by $5.500 per year No, because income wit decrease by $100 per year. Yes, because income will increase by $5.600 in total No, Janko will record a loss of $16,400 r they replace the pump
GiGi Industries must replace its magnesium purification system. Quick & Dirty Systems sells a relatively cheap purification system for $10 million. The system will last 6 years. Do-It-Right sells a sturdier but more expensive system for $12 million; it will last for 8 years. The cheaper system will require $1.1 million in operating costs per year which is 10% higher than the more expensive system. Both will be depreciated straight-line to a final value of zero over their useful lives; neither will have any salvage value at the end of its life. The firm’s tax rate is 30 percent and the discount rate is 11 percent. Which system should GiGi install?
Crazy Burger Shop has the following investment opportunity: Burger machinery at t=0 costs $6,000. The cost of making burgers is $2,000 per year at t=1, t=2, and t=3. The burger machinery is depreciated using the straight-line method to $1,500 over 3 years. The market value of the burger machinery after three years is $2,600. Estimated annual sales are $4,500 per year at t=1, t=2, and t=3. The required return is 15%. The tax rate is 18%. Assume no working capital requirements. What is the NPV of this project? A. $259.97 B. $1,006.62 C. $876.44 D. $-702.92
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Nikul
Cameron Industries is purchasing a new chemical vapor depositor in order to make silicon chips. It will cost $6,000,000 to buy the machine and $20,000 to have it delivered and installed Building a clean room in the plant for the machine will cost an additional $3 million. The machine is expected to raise gross profits by $3,000,000 per year, starting at the end of the first year, with associated costs of $1 million for each of those years. The machine is expected to have a working life of six years and will be depreciated over those six years. The marginal tax rate is 20%. What are the incremental free cash flows associated with the new machine in year 0? OA-$6,000,000 OB. -$8,118,000 C. $1,003,333 OD. -$9.020,000
Salty Nuts, Inc. must buy a new nut-shelling machine. The industrial engineer has collected the following information concerning the apparent best alternative. Calculate the net future worth of the alternative if the MARR is 6%.
Need-Based Accounting Corp. has just purchased 10 photocopiers for a total cost of $500,000. The CCA rate for these photocopiers is 20%. The company plans to use these photocopiers for 10 years. By the end of the 10th year, the company expects to move into new imaging system that will no longer require the photocopiers, and the asset pool will then be closed. If the company can sell the photocopiers for $50,000 in 10 years’ time, what amount of terminal loss/CCA recapture can be claimed after the photocopiers have been sold? Assume that half-year rule applies. Please show all calculation steps:

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