Assume that a company is choosing between two alternatives-keep an existing machine or replace it with a new machine. The costs associated with the two alternatives are summarized as follows: Purchase cost (new) Remaining book value $ 15,000 $ 22,000 $ 6,000 Overhaul needed now Annual cash operating costs Salvage value (now) Salvage value (eight years from now) $ 5,000 $ 10,500 $ 2,000 $7,000 $ 1,000 $ 6,000 Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided If the company overhauls its existing machine, it will be usable for eight more years. If it buys the new machine, it will be used for eight years. Assuming a discount rate of 23%, what is the net present value of the cash flows associated with keeping the existing machine?

Assume that a company is choosing between two alternatives-keep an existing machine or replace it with a new machine. The costs associated with the two alternatives are summarized as follows: Purchase cost (new) Remaining book value Overhaul needed now Existing Machine $ 15,000 $ 6,000 $ 5,000 New Machine $ 22,000 Annual cash operating costs Salvage value (now) Salvage value (eight years from now) $6,000 Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. If the company overhauls its existing machine, it will be usable for eight more years. If it buys the new machine, it will be used for eight years. Assuming a discount rate of 13%, what is the net present value of the cash flows associated with keeping the existing machine? $ 10,500 $ 2,000 $1,000 $ 7,000

RR

Fuller Industries is considering replacing a machine that is presently used in its production process. Which of the following amounts represents a sunk cost? Original cost Remaining useful life in years Current age in years Book value Current disposal value in cash Future disposal value in cash (in 5 years) Annual cash operating costs OA. $55,000 OB. $33,000 OC. $45,000 D. $9,000 Old Machine Replacement Machine $55,000 $45,000 5 5 5 0 $33,000 $9,000 $0 $0 $8,000 $4,000

A company has decided to buy a new machine. Two alternatives, A and B, are considered with the following data. Find the incremental rate of return between A and B. A B Cost new $850,000 $980,000 Annual O&M Cost $50,000/yr $45,000/yr Salvage value $180,000 $300,000 Annual income $230,000/yr $240,000/yr Estimated life (yr) 10 10

Bradley Industries is considering replacing a machine that is presently used in its production process. Which of the following is irrelevant to the replacement decision? Replacement Machine $46,000 Original cost Remaining useful life in years Current age in years Book value. Old Machine $60,000 5 5 OA. the current disposal value of the old machine OB. the original cost of the old machine OC. the sales price of the new machine OD. the annual cash operating costs for both machines 5 0 $30,000 Current disposal value in cash $9.000 Future disposal value in cash (in 5 years) $0 Annual cash operating costs $7,000 Which of the information provided in the table is irrelevant to the replacement decision? $0 $4,500 GETTI

A company is considering two alternatives with regards to equipment which it needs. The alternatives are as follows: Alternative A: Purchase Cost of Equipment 703,668700,000 Salvage Value 100,454100,000 Daily operating cost 501500 Economic life, years 10 Alternative B: Rental at 1,5751,500 per day. At 18% interest, how many days per year must the equipment be in use if Alternative A is to be chosen.

Crane Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided here. Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Click here to view PV table. Net present value Machine A Profitability index $75,700 8 years 0 $20,300 $4,870 Machine A Machine B $182,000- 8 years Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative, use either a negative sign preceding the number eg-45 or parentheses eg (45). Round answer for present value to 0 decimal places, e.g. 125 and profitability index to 2 decimal places, e.g. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) 0 $39,700 $10,050 Machine B

Salsa Co. is contemplating the replacement of an old machine with a new one. The following information has been gathered: Old Machine New Machine Price $300,000 $600,000 Accumulated Depreciation 89,300 Remaining useful life 10 years Useful life 10 years Annual operating costs $240,000 $180,600 If the old machine is replaced, it can be sold for $24,000. How much is the sunk cost?

Reference: Case Study S Dunn Manufacturing is considering the following two alternatives. The cost information for the two proposals for replacing an equipment are provided are in table below. Initial cost Benefits/year Machine X $120,000 $20,000 for the first 10 years and $9,000 for the next 10 years Life Salvage value $40,000 MARR 5.2. The NPW of machine X is A) $35,158 B) $48,192 C) $50,752 Machine Y $96,000 $12,000 per year for 20 years. 20 years 8% $20,000