An old machine costing P 50,000 will be traded in for a new machine costing P 120,000 inclusive of freight charges of P 1,200. The trade in value of the old machine is P 7,000. If the new machine is acquired, overhauling costs of P 6,000 can be avoided. Income taxes are 40%. Additional working capital of P 10,000 will be needed to support the planned operation of the new machine. What is the net investment for decision making purposes? P 107,000 P 117,000 P 119,400 P 120,600
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- An old machine costing P 50,000 will be traded in for a new machine costing P 120,000 inclusive of freight charges of P 1,200. The trade in value of the old machine is P 7,000. If the new machine is acquired, overhauling costs of P 6,000 can be avoided. Income taxes are 40%. Additional
working capital of P 10,000 will be needed to support the planned operation of the new machine.
What is the net investment for decision making purposes?
P 107,000
P 117,000
P 119,400
P 120,600
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Solved in 2 steps
- XYZ Company is looking to invest in some new machinery to replace its current malfunctioning one. The new machine, which costs P420,000, would increase annual revenue by P200,000 and annual cash expenses by P50,000. The machine is estimated to have a useful life of 12 years and P30,000 salvage value. A. Accounting rate of return on initial investment B. Accounting rate of return on average investment.An existing machine in a factory has an annual maintenance cost of P40,000. A new and more efficient machine will require an investment of P90,000 and is estimated to have salvage value of P30,000 at the end of 8 years. Its annual expenses for maintenance and upkeep etc. is total of P 22,000. if the company expects to earn 12% on its investment, will it be worthwhile to purchase the new machine using the present worth. Use PW MethodAn existing machine in a factory has an annual maintenance cost of P40,000. A new and more efficient machine will require an investment of P90,000 and is estimated to have salvage value of P30,000 at the end of 8 years. Its annual expenses for maintenance and upkeep etc. is total of P 22,000. if the company expects to earn 12% on its investment, will it be worthwhile to purchase the new machine using the present worth. Use PW Method Write it on paper with clear solution. Thanks
- XYZ Company is looking to invest in some new machinery to replace its current malfunctioning one. The new machine, which costs P420,000, would increase annual revenue by P200,000 and annual cash expenses by P50,000. The machine is estimated to have a useful life of 12 years and P30,000 salvage value. A. Payback period in years B. Payback period reciprocal C. Accounting rate of return on average investment.The Fine Clothing Factory wants to replace an old machine with a new one. The old machine can be sold to a small factory for R10 000. The new machine would increase annual revenue by R150 000 and annual operating expenses by R60 000. The new machine would cost R360 000. The estimated useful life of the machine is 12 years with zero salvage value. Using Average rate of return (ARR), Should Fine Clothing Factory purchase the machine if management desired rate of return of 15% on all capital investments? Show all the calculations and motivate your answer.A firm is considering purchasing equipment that will reduce annual costs by P 40,000. The equipment costs P 300,000 and has a salvage value of P 50,000 and a life of 7 yrs. The annual maintenance cost is P 6,000. While not in use by the firm, the equipment can be rented to others to generate an income of P 10,000 per year. If money can be invested for an 8% return, is the firm justified in buying the equipment? Use annual cost method.
- A Company is considering adding a new machine to its production line. Its base price is Rs.10,00,000, and it would cost Rs. 30,500 to install it. The would be depreciated on a straight-line basis, and it would be sold after 3 years for Rs. 600,000. The machine would require an increase in net working capital (inventory) of Rs.15,000. This machine is expected to save the company Rs. 300,000 per year in after-tax operating costs. The company’s tax rate is 30%. What is the Year-0 net cash flow? What are the net operating cash flows in Years 1, 2, and 3? What is the additional Year-3 cash flow (i.e., the after-tax salvage and the return of working capital)? If the project’s cost of capital is 12%, should the machine be purchased?An existing machine in a factory has an annual maintenance cost of Php 40,000. A new and more efficient machine will require an investment of Php 90,000 and is estimated to have salvage value of Php 30,000 at the end of 8 years. Its annual expenses for maintenance and upkeep etc. is total of Php 22,000. If the company expects to earn 12% on its investment, will it be worthwhile to purchase the new machine using the present worth? Use the PW method. Show the cash flow diagram if necessary and complete solution. Do not use excel please. Thank you.An existing machine in a factory has an annual maintenance cost of Php 40,000. A new and more efficient machine will require an investment of Php 90,000 and is estimated to have salvage value of Php 30,000 at the end of 8 years. Its annual expenses for maintenance and upkeep etc. is total of Php 22,000. If the company expects to earn 12% on its investment, will it be worthwhile to purchase the new machine using the present worth? Use the PW method. Show the cash flow diagram and complete solution. Do not use excel please. Thank you.
- Rafieza restaurant is considering the installation of a new processing machine that will cost RM54,000. The cooker has an installation cost of RM1,200. Networking capital of RM 800 is required at the time of installation. The decision will warrant an operating cost of RM8,500. What is the amount of initial outlay for the project?XYZ Company is looking to invest in some new machinery to replace its current malfunctioning one. The new machine, which costs P420,000, would increase annual revenue by P200,000 and annual cash expenses by P50,000. The machine is estimated to have a useful life of 12 years and P30,000 salvage value. Solve for the: A. Payback period in years B. Payback period reciprocal C. Accounting rate of return on initial investment D. Accounting rate of return on average investment.A firm has an opportunity to invest in a new device that will replace two of the firm'solder machines. The new device costs Sh.570,000 and requires an additional outlay ofSh.30,000 to cover installation and shipping. The new device will cause the firm toincrease its net working capital by Sh.20,000. Both of the old machines can be sold-thefirst for Sh.100,000 (book value equals Sh.95,000) and the second for Sh.150,000 (bookvalue equals Sh.75,000). The original cost of the first machine was Sh.200,000, and theoriginal cost of the second machine was Sh.140,000. The firm's marginal tax bracket is40 percent.Required:Compute the net investment for this project.