Twelve years ago, an industrial facility bought a boring machine for P65,000. The estimated life of this machine is 25 years and a depreciation reserve had been placed based on this. The price of the latest model is P125,000 and the facility owner wants to replace the machine with this latest model. The old unit can be sold for P18,000. How much new capital will be required for the purchase?

Twelve years ago, an industrial facility bought a boring machine for P65,000. The estimated life of this machine is 25 years and a depreciation reserve had been placed based on this. The price of the latest model is P125,000 and the facility owner wants to replace the machine with this latest model. The old unit can be sold for P18,000. How much new capital will be required for the purchase?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 2E

See similar textbooks

Similar questions

A tractor costs $24,680, has an expected life of 12 years, and has a salvage value of $2,600. Use straight-line depreciation to find the yearly depreciation. Make a depreciation schedule for the first three years' depreciation. Complete the table. Year Depreciation 1 $ 2 3 $ $ Accumulated depreciation $ $ $ End-of-year book value $ $
A reactor of special design un the major item of equipment in a small chemical plant The initial cost of a Completely installed reactor is $ 60000 to the salvage value of the end of the useful life is estimated to be $ 10000. The total annual expenses for the plant are $100000. Excluding depreciation costs for the reactor. How many years of useful life should de estimated for the reactor if 12% of the total annual expenses for the Plant are due to the cost for reactor depreciation?
Wildhorse Company purchased a computer for $9,440 on January 1, 2019. Straight-line depreciation is used, based on a 5-year life and a $1,180 salvage value. On January 1, 2021, the estimates are revised. Wildhorse now feels the computer will be used until December 31, 2022, when it can be sold for $590. Compute the 2021 depreciation. (Round answer to 0 decimal places, eg. 45,892) Depreciation expense, 2021 $
31. The purchase of a motor for P6000 and a generator for P4000 will allow the company to produce its own energy. The configuration can be assembled for P500. The service will operate for 1600 hours per year for 10 years. The maintenance cost is P300 per year, and cost to operate is PO.85 per hour for fuel and related cost. Using straight line depreciation, what is the annual cost for the operation? There is a P400 salvage value for the system at the end of 10 year. a. P2,710 c. P2,630 b. P2,480 d. P2,670
An asset for drilling was purchased and place in service by a petroleum production company. Its initial investment is P50,000 and it has an estimated salvage value of P15,000 at the end of an estimated useful life of 10 years. Compute the book value at the end of the 5th year of life using Sinking Fund Method at 10% interest, using Declining Balance Method and Double Declining Balance Method.
A new shoe production line is being designed at a cost of $245,000 and operating costs areexpected to be $84,000 per year. Planned annual production is 2500 pairs and the price of a pair ofshoes is $110. The line's service life is 14 years, the depreciation rate is 25%. Use a 19% annual interestrate for the base case. Using the interval [-20%, -10%, +10%, +20%], perform a present worthsensitivity analysis using a sensitivity graph with respect to the following variables in terms of theirimpact on the Present worth.a) First Costb) Operative costc) Annual Productiond) Salvage Value
A manufacturing company purchased 10 years a milling machine for ₽60,000. A straight-linedepreciation reserve had been provided on the 20-year life of the machine. The owner of themachine shop desires to replace the old milling machine with a modern unit of manyadvantages costing ₽100,000. It can sell the old unit for ₽20,000. How much new capital will berequired for the purchase?
9.16 You purchased a molding machine at a cost of $88,000. It has an estimated useful life of 12 ycars with a salvage value of $8,000. Determine the following: (a) The amount of annual depreciation computed by the straight-line method. (b) The amount of depreciation for the third year computed by using the double- declining-balance method.
Quèstion 25 An equipment costing P 360 000 has an estimated scrap value of P 25,000 at the end of its economic life of 11 years. Using Double-Declining Balance Method, what is the book value after 7 years? Exprees your answer in whole number. « > A Moving to another question will save this response. acer Prtsc Pause Del Home F8 F9 F10 F11 F12 F4 F5 F6 F7 Scr Lk SysRq Break F3 Coca-Cla % & -Backspac € 6 7 8 9 5 W R Y H
An existing factory must be enlarged or replaced to accommodate new production machinery.The structure was built at a cost of ₱ 2.6 million. Its present book value, based on straight linedepreciation is₱ 700,000 but it has been appraised at ₱ 800,000. If the structure is altered, thecost will be ₱ 1.6 million and its service life will be extended 8 years with a salvage value of ₱600,000.A new factory could be purchased or built for ₱ 5.0 million. It would have a life of 20 years and asalvage value of ₱ 700,000. Annual maintenance of the new building would be ₱ 160,000 comparedwith ₱ 100,000 in the enlarged structure. However, the improved layout in the new building wouldreduce annual production cost by ₱ 240,000. All other expenses for the new structure are estimated asbeing equal. Using an investment rate of 8 percent, determine which is the more attractive investmentfor this firm. Use the following method:a) Annual Cost Method
A new machine costs $899,090 and falls in a 29.50% CCA class. The machine will have zero value after 5 years of use but will save $417,680 annually in operating costs before taxes in those five years. Assume a tax rate of 34.17%. Using a required return of 15.11%, what is the equivalent annual cost (EAC) of the machine purchase, considering the annual cash flow, initial purchase, and CCA tax shield? Options $59,682 $61,252 $62,823 $64,393 $65,964
An existing factory must be enlarged or replaced to accommodate new production machinery.The structure was built at a cost of ₱ 2.6 million. Its present book value, based on straight linedepreciation is₱ 700,000 but it has been appraised at ₱ 800,000. If the structure is altered, thecost will be ₱ 1.6 million and its service life will be extended 8 years with a salvage value of ₱600,000.A new factory could be purchased or built for ₱ 5.0 million. It would have a life of 20 years and asalvage value of ₱ 700,000. Annual maintenance of the new building would be ₱ 160,000 comparedwith ₱ 100,000 in the enlarged structure. However, the improved layout in the new building wouldreduce annual production cost by ₱ 240,000. All other expenses for the new structure are estimated asbeing equal. Using an investment rate of 8 percent, determine which is the more attractive investmentfor this firm. Use the following method: a) Equivalent Uniform Annual Cost (EUAC) Method