7) purchase a new one or upgrade the existing machine. The existing machine has a remaining life of 5 years and is expected to have a salvage value of $20,000 at the end of its useful life. Operating and maintenance costs have been $25,000 per year. The company uses an MARR of 10% per year compounded annually for making economic decisions. Alternative 1. Á new machine is purchased, and the existing machine is sold at its market value of $50,000. A new machine costs $150,000, has an annual O&M cost of $15,000, and a salvage value of $25,000 at the end of 5 years. Alternative 2. The existing machine is upgraded, and the upgrades are expected to cost $60,000 now. The upgraded machine's salvage value and annual O&M costs are expected to remain the same as that of the existing machine. To meet increased demand for its product, a company can either sell the existing machine and a) Compute the present worth for Alternative 1. b) Compute the present worth for Alternative 2. c) Based on the above calculations, which option would you recommend? Why?

A land development company is considering the purchase of earth-moving equipment. The equipment will have a first cost of $190,000 and a salvage value of $70000 when the company sells it in 10 years. A service contract for maintenance on the equipment will cost $40000 per year. The operating cost is expected to be $260 per day. Alternatively, the company can rent the necessary equipment for $1100 per day and hire a driver at $180 per day. If the company's MARR is 10% per year, how many days per year must the company need the equipment in order to justify its purchase? Alternatively

You must evaluate a proposal to buy a new milling machine. Thebase price is $135,000 and shipping and installation costs would add another $8,000. Themachine falls into the MACRS 3-year class, and it would be sold after 3 years for $94,500.The applicable depreciation rates are 33%, 45%, 15%, and 7% as discussed in Appendix 12A.The machine would require a $5,000 increase in net operating working capital (increasedinventory less increased accounts payable). There would be no effect on revenues, but pretaxlabor costs would decline by $52,000 per year. The marginal tax rate is 35%, and the WACCis 8%. Also, the firm spent $4,500 last year investigating the feasibility of using the machine.a. How should the $4,500 spent last year be handled?b. What is the initial investment outlay for the machine for capital budgeting purposes,that is, what is the Year 0 project cash flow? c. What are the project’s annual cash flows during Years 1, 2, and 3?d. Should the machine be purchased? Explain your…

Palmer Corporation is considering the purchase of a new plece of equipment. The cost savings from the equipment would result in an annual increase in net income of $152,000. The equipment will have an initial cost of $494,000 and a 8 year useful life. If the salvage value of the equipment is estimated to be $78,000, what is the payback period? Multiple Choice 2.42 years 3.25 years 8.00 years 4.00 years