ss Waterways puts much emphasis on cash flow when it plans for capital investments. The company chose its discount rate of 8% basedon the rate of return it must pay its owners and creditors. Using that rate, Waterways then uses different methods to determine thebest decisions for making capital outlays.This year Waterways is considering buying five new backhoes to replace the backhoes it now has. The new backhoes are faster, costless to run, provide for more accurate trench digging, have comfort features for the operators, and have 1-year maintenanceagreements to go with them. The old backhoes are working just fine, but they do require considerable maintenance. The backhoeoperators are very familiar with the old backhoes and would need to learn some new skills to use the new backhoes.The following information is available to use in deciding whether to purchase the new backhoes.Purchase cost when newSalvage value nowInvestment in major overhaul needed in next yearSalvage value in 8 yearsRemaining lifeNet cash flow generated each yearNet Present ValueClick here to view PV table.(a) Evaluate in the following ways whether to purchase the new equipment or overhaul the old equipment. (Hint: For the old machine,the initial investment is the cost of the overhaul. For the new machine, subtract the salvage value of the old machine to determine theinitial cost of the investment.)Waterways should(1) Using the net present value method for buying new or keeping the old. (For calculation purposes, use 5 decimal places as displayed inthe factor table provided. If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45).Round final answer to O decimal places, e.g. 5,275.)$Payback PeriodNew BackhoesOld Backhoes$90,000$41,700$54,964$14,7008 years$30,200New BackhoesNew Backhoes$204,187$equipment.years$88,0008 years$43,100(2) Using the cash payback method for each choice. (Hint: For the old machine, evaluate the payback of an overhaul.) (Round answers to2 decimal places, e.g. 1.25)Old BackhoesOld Backhoesyears Waterways should(3) Comparing the profitability index for each choice. (Round answers to 2 decimal places, e.g. 1.25)Old BackhoesProfitability IndexWaterways shouldIRR FactorNew BackhoesCalculate the internal rate of return factor for the new and old blackhoes. (Round answers to 5 decimal places, e.g. 5.27647.)Waterways shouldequipment.New BackhoeseTextbook and Mediaequipment.(4) Comparing the internal rate of return for each choice to the required 8% discount rate.Old Backhoesequipment.

Net Present Value (NPV): It is the difference between the present value of cash inflows and the…

(1) Using the net present value method for buying new or keeping the old. (For calculation purposes, use 5 decimal places as displayed in the factor table provided. If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round final answer to O decimal places, e.g. 5,275.) New Backhoes Net Present Value Waterways should Payback Period equipment. (2) Using the cash payback method for each choice. (Hint: For the old machine, evaluate the payback of an overhaul.) (Round answers to 2 decimal places, e.g. 1.25) New Backhoes Old Backhoes years Old Backhoes years

(1) Using the net present value method for buying new or keeping the old. (For calculation purposes, use 5 decimal places as displayed in the factor table provided. If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round final answer to O decimal places, e.g. 5,275.) New Backhoes Net Present Value Waterways should Payback Period equipment. (2) Using the cash payback method for each choice. (Hint: For the old machine, evaluate the payback of an overhaul.) (Round answers to 2 decimal places, e.g. 1.25) New Backhoes Old Backhoes years Old Backhoes years

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 25P

See similar textbooks

Similar questions

Waterways puts much emphasis on cash flow when it plans for capital investments. The company chose its discount rate of 8% based on the rate of return it must pay its owners and creditors. Using that rate, Waterways then uses different methods to determine the best decisions for making capital outlays.This year Waterways is considering buying five new backhoes to replace the backhoes it now has. The new backhoes are faster, cost less to run, provide for more accurate trench digging, have comfort features for the operators, and have 1-year maintenance agreements to go with them. The old backhoes are working just fine, but they do require considerable maintenance. The backhoe operators are very familiar with the old backhoes and would need to learn some new skills to use the new backhoes.The following information is available to use in deciding whether to purchase the new backhoes. Old Backhoes New Backhoes Purchase cost when new $88,500 $204,128 Salvage value now…
Waterways puts much emphasis on cash flow when it plans for capital investments. The company chose its discount rate of 8% based on the rate of return it must pay its owners and creditors. Using that rate, Waterways then uses different methods to determine the best decisions for making capital outlays.This year Waterways is considering buying five new backhoes to replace the backhoes it now has. The new backhoes are faster, cost less to run, provide for more accurate trench digging, have comfort features for the operators, and have 1-year maintenance agreements to go with them. The old backhoes are working just fine, but they do require considerable maintenance. The backhoe operators are very familiar with the old backhoes and would need to learn some new skills to use the new backhoes.The following information is available to use in deciding whether to purchase the new backhoes. Old Backhoes New Backhoes Purchase cost when new $90,000 $202,784 Salvage value now…
Waterways puts much emphasis on cash flow when it plans for capital investments. The company chose its discount rate of 8% based on the rate of return it must pay its owners and creditors. Using that rate, Waterways then uses different methods to determine the best decisions for making capital outlays.This year Waterways is considering buying five new backhoes to replace the backhoes it now has. The new backhoes are faster, cost less to run, provide for more accurate trench digging, have comfort features for the operators, and have 1-year maintenance agreements to go with them. The old backhoes are working just fine, but they do require considerable maintenance. The backhoe operators are very familiar with the old backhoes and would need to learn some new skills to use the new backhoes.The following information is available to use in deciding whether to purchase the new backhoes. Old Backhoes New Backhoes Purchase cost when new $90,000 $202,784 Salvage value now…
Waterways puts much emphasis on cash flow when it plans for capital investments. The company chose its discount rate of 8% based on the rate of return it must pay its owners and creditors. Using that rate, Waterways then uses different methods to determine the best decisions for making capital outlays.This year Waterways is considering buying five new backhoes to replace the backhoes it now has. The new backhoes are faster, cost less to run, provide for more accurate trench digging, have comfort features for the operators, and have 1-year maintenance agreements to go with them. The old backhoes are working just fine, but they do require considerable maintenance. The backhoe operators are very familiar with the old backhoes and would need to learn some new skills to use the new backhoes.The following information is available to use in deciding whether to purchase the new backhoes. Old Backhoes New Backhoes Purchase cost when new $90,000 $202,784 Salvage value now…
Waterways put much emphasis on cash flow when it plans for capital investments. The company chose its discount rate of 8% based on the rate of return it must pay its owners and creditors. Using that rate, Waterways then uses different methods to determine the best decisions for making capital outlays.This year Waterway is considering buying five new backhoes to replace the backhoes it now has. The new backhoes are faster, cost less to run, provide for more accurate trench digging, have comfort features for the operators, and have 1-year maintenance agreements to go with them. The old backhoes are working just fine, but they do require considerable maintenance. The backhoe operators are very familiar with the old backhoes and would need to learn some new skills to use the new backhoes. The following information is available to use in deciding whether to purchase the new backhoes. Old Backhoes New Backhoes Purchase cost when new $90,300 $197,860 Salvage value now…
Waterways puts much emphasis on cash flow when it plans for capital investments. The company chose its discount rate of 9% based on the rate of return it must pay its owners and creditors. Using that rate, Waterways then uses different methods to determine the best decisions for making capital outlays. This year Waterways is considering buying five new backhoes to replace the backhoes it now has. The new backhoes are faster, cost less to run, provide for more accurate trench digging, have comfort features for the operators, and have 1-year maintenance agreements to go with them. The old backhoes are working just fine, but they do require considerable maintenance. The backhoe operators are very familiar with the old backhoes and would need to learn some new skills to use the new backhoes. The following information is available to use in deciding whether to purchase the new backhoes. Purchase cost when new Salvage value now Investment in major overhaul needed in next year Salvage value…
Shoals Corporation puts significant emphasis on cash flow when planning capital investments. The company chose its discount rate of 8 percent based on the rate of return it must pay its owners and creditors. Using that rate, Shoals Corporation then uses different methods to determine the most appropriate capital outlays. This year, Shoals Corporation is considering buying five new backhoes to replace the backhoes it now owns. The new backhoes are faster, cost less to run, provide for more accurate trench digging, have comfort features for the operators, and have 1-year maintenance agreements to go with them. The old backhoes are working just fine, but they do require considerable maintenance. The backhoe operators are very familiar with the old backhoes and would need to learn some new skills to use the new backhoes. The following information is available to use in deciding whether to purchase the new backhoes: Old Backhoes New Backhoes Purchase cost when new…
Shoals Corporation puts significant emphasis on cash flow when planning capital investments. The company chose its discount rate of 8 percent based on the rate of return it must pay its owners and creditors. Using that rate, Shoals Corporation then uses different methods to determine the most appropriate capital outlays. This year, Shoals Corporation is considering buying five new backhoes to replace the backhoes it now owns. The new backhoes are faster, cost less to run, provide for more accurate trench digging, have comfort features for the operators, and have 1-year maintenance agreements to go with them. The old backhoes are working just fine, but they do require considerable maintenance. The backhoe operators are very familiar with the old backhoes and would need to learn some new skills to use the new backhoes. The following information is available to use in deciding whether to purchase the new backhoes: Old Backhoes New Backhoes Purchase cost when new…
Shoals Corporation puts significant emphasis on cash flow when planning capital investments. The company chose its discount rate of 8 percent based on the rate of return it must pay its owners and creditors. Using that rate, Shoals Corporation then uses different methods to determine the most appropriate capital outlays. This year, Shoals Corporation is considering buying five new backhoes to replace the backhoes it now owns. The new backhoes are faster, cost less to run, provide for more accurate trench digging, have comfort features for the operators, and have 1-year maintenance agreements to go with them. The old backhoes are working just fine, but they do require considerable maintenance. The backhoe operators are very familiar with the old backhoes and would need to learn some new skills to use the new backhoes. The following information is available to use in deciding whether to purchase the new backhoes: Old Backhoes New Backhoes Purchase cost when new…
PLEASE ASSIST ME WITH PARTS 1,2,3 Waterways put much emphasis on cash flow when it plans for capital investments. The company chose its discount rate of 8% based on the rate of return that it must pay its owners and creditors. Using that rate, Waterways then uses different methods to determine the best decisions for making capital outlays. This year, Waterways is considering buying five new backhoes to replace the backhoes it now has. The new backhoes are faster, cost less to run, provide for more accurate trench digging, have comfort features for the operators, and have 1-year maintenance agreements to go with them. The old backhoes are working just fine, but they do require considerable maintenance. The backhoe operators are very familiar with the old backhoes and would need to learn some new skills to use the new backhoes. The following information is available to use in deciding whether to purchase the new backhoes. Information Old Backhoes New Backhoes Purchase cost when new…
Scenario Shoals Corporation puts significant emphasis on cash flow when planning capital investments. The company chose its discount rate of 8 percent based on the rate of return it must pay its owners and creditors. Using that rate, Shoals Corporation then uses different methods to determine the most appropriate capital outlays. This year, Shoals Corporation is considering buying five new backhoes to replace the backhoes it now owns. The new backhoes are faster, cost less to run, provide for more accurate trench digging, have comfort features for the operators, and have 1-year maintenance agreements to go with them. The old backhoes are working just fine, but they do require considerable maintenance. The backhoe operators are very familiar with the old backhoes and would need to learn some new skills to use the new backhoes. The following information is available to use in deciding whether to purchase the new backhoes: Old Backhoes New Backhoes Purchase cost when new…
Scenario Shoals Corporation puts significant emphasis on cash flow when planning capital investments. The company chose its discount rate of 8 percent based on the rate of return it must pay its owners and creditors. Using that rate, Shoals Corporation then uses different methods to determine the most appropriate capital outlays. This year, Shoals Corporation is considering buying five new backhoes to replace the backhoes it now owns. The new backhoes are faster, cost less to run, provide for more accurate trench digging, have comfort features for the operators, and have 1-year maintenance agreements to go with them. The old backhoes are working just fine, but they do require considerable maintenance. The backhoe operators are very familiar with the old backhoes and would need to learn some new skills to use the new backhoes. The following information is available to use in deciding whether to purchase the new backhoes: Purchase cost when newSalvage value nowInvestment in major…