Blooper Industries must replace its magnoosium purification system. Quick & Dirty Systems sells a relatively cheap purification system for $12 million. The system will last 4 years. Do-It-Right sells a sturdier but more expensive system for $13 million; it will last for 5 years. Both systems entail $2 million in operating costs; both will be depreciated straight-line to a final value of zero over their useful lives; neither will have any salvage value at the end of its life. The firm's tax rate is 30%, and the discount rate is 12%. a. What is the equivalent annual cost of investing in the cheap system? Note: Do not round intermediate calculations. Enter your answer as a positive value. Enter your answer in millions rounded to 2 decimal places. b. What is the equivalent annual cost of investing in the more expensive system? Note: Do not round intermediate calculations. Enter your answer as a positive value. Enter your answer in millions rounded to 2 decimal places. c. Which system should Blooper install?
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- GiGi Industries must replace its magnesium purification system. Quick & Dirty Systems sells a relatively cheap purification system for $10 million. The system will last 6 years. Do-It-Right sells a sturdier but more expensive system for $12 million; it will last for 8 years. The cheaper system will require $1.1 million in operating costs per year which is 10% higher than the more expensive system. Both will be depreciated straight-line to a final value of zero over their useful lives; neither will have any salvage value at the end of its life. The firm’s tax rate is 30 percent and the discount rate is 11 percent. Which system should GiGi install?Dell is considering replacing one of its material handling systems. It has an annual O&M cost of $48,000, a remaining operational life of 8 years, and an estimated salvage value of $6,000 at that time. A new system can be purchased for $175,000. It will be worth $50,000 in 8 years, and it will have annual O&M costs of only $17,000 per year due to new technology. If the new system is purchased, the old system will be traded in for $55,000, even though the old system can be sold for only $45,000 on the open market. Leasing a new system will cost $31,000 per year, payable at the beginning of the year, plus operating costs of $15,000 per year payable at the end of the year. If the new system is leased, the existing material handling system will be sold for its market value of $45,000. Use a planning horizon of 8 years, an annual worth analysis, and MARR of 15% to decide which material handling system to recommend: (i) keep existing, (ii) trade in existing and purchase new, or (iii)…Tyrell Corp. is considering replacing a machine. The old one is currently being depreciated at $70,000 per year (straight-line), and is scheduled to end in five years with no remaining book value. If you don’t replace it, you will be lucky to get it removed for the amount you could salvage it for, so you don’t expect any profit in five years. If you replace the old machine now, you believe you can salvage it for $375,000 and buy a new machine for $850,000, plus $25,000 shipping fee and another $25,000 for installation. The new machine will not change the revenue or NOWC, but it will reduce the operating costs of the company by $145,000 per year. The new machine will be depreciated using the three-year MACRS schedule (the table is provided on the Moodle for your convenience). The useful life of this machine is five years, and it is expected that the machine can be sold at $20,000 at the end of the five years. Assume a tax rate of 25% and the cost of capital for the company is 8%.…
- Tyrell Corp. is considering replacing a machine. The old one is currently being depreciated at $70,000 per year (straight-line), and is scheduled to end in five years with no remaining book value. If you don't replace it, you will be lucky to get it removed for the amount you could salvage it for, so you don't expect any profit in five years. If you replace the old machine now, you believe you can salvage it for $375,000 and buy a new machine for $850,000, plus $25,000 shipping fee and another $25,000 for installation. The new machine will not change the revenue or NOWC, but it will reduce the operating costs of the company by $145,000 per year. The new machine will be depreciated using the three-year MACRS schedule (the table is provided on the Moodle for your convenience). The useful life of this machine is five years, and it is expected that the machine can be sold at $20,000 at the end of the five years. Assume a tax rate of 25% and the cost of capital for the company is 8%.…Blooper Industries must replace its magnoosium purification system. Quick & Dirty Systems sells a relatively cheap purification system for $16 million. The system will last 4 years. Do-It-Right sells a sturdier but more expensive system for $18 million; it will last for 5 years. Both systems entail $3 million in operating costs; both will be depreciated straight-line to a final value of zero over their useful lives; neither will have any salvage value at the end of its life. The firm’s tax rate is 30%, and the discount rate is 12%. Either machine will be replaced at the end of its life. a. What is the equivalent annual cost of investing in the cheap system? (Do not round intermediate calculations. Enter your answer as a positive value. Enter your answer in millions rounded to 2 decimal places.) b. What is the equivalent annual cost of investing in the more expensive system? (Do not round intermediate calculations. Enter your answer as a positive value. Enter your answer in…A company is considering replacing a machine (defender) that was boughtsix years ago for $50,000 and has now malfunctioned. The machine can be repaired toextend its life by Öve more years. If repaired, the machine will require an operating costof $10,000 per year. If it is replaced, the new machine (challenger) will cost $44,000, willlast for six years, and will have operating expenses of $5,000 per year. The challengerwill have zero salvage value at the end of its six year life. The malfunctioned defendercan be sold at a current market value of $15,000. If MARR is 12% per year, what isthe maximum amount that the company should spend to repair the existing machineinstead of switching to the challenger? Use the outsider viewpoint method. (Note: Allvalues are before taxes, not tax calculations are necessary). please dont use excell
- Blooper Industries must replace its magnoosium purification system. Quick & Dirty Systems sells a relatively cheap purification system for $10 million. The system will last 5 years. Do-It-Right sells a sturdier but more expensive system for $12 million, it will last for 8years. Both systems entail $1 million in operating costs; both will be depreciated in an asset class that has a CCA rate of 30%; neither will have any salvage value at the end of its life. The firm's tax rate is 35%, and the discount rate is 12%. Which system should blooper install? The answer should be in excel with details, please?Aerotron Electronics is considering the purchase of a water filtration system to assist in circuit board manufacturing. The system costs $40,000. It has an expected life of 7 years at which time its salvage value will be $7,500. Operating and maintenance expenses are estimated to be $2,000 per year. If the filtration system is not purchased, Aerotron Electronics will have to pay Bay City $12,000 per year for water purification. If the system is purchased, no water purification from Bay City will be needed. Aerotron Electronics must borrow half of the purchase price, but they cannot start repaying the loan for 2 years. The bank has agreed to three equal annual payments, with the first payment due at end of year 2. The loan interest rate is 8% compounded annually. Aerotron Electronics’ MARR is 10% compounded annually. Solve, a. What is the internal rate of return of this investment? b. What is the decision rule for judging the attractiveness of investments based on internal rate of…Aerotron Electronics is considering the purchase of a water filtration system to assist in circuit board manufacturing. The system costs $40,000. It has an expected life of 7 years at which time its salvage value will be $7,500. Operating and maintenance expenses are estimated to be $2,000 per year. If the filtration system is not purchased, Aerotron Electronics will have to pay Bay City $12,000 per year for water purification. If the system is purchased, no water purification from Bay City will be needed. Aerotron Electronics must borrow half of the purchase price, but it cannot start repaying the loan for 2 years. The bank has agreed to three equal annual payments, with the first payment due at the end of year 2. The loan interest rate is 8% compounded annually. Aerotron Electronics’ MARR is 10% compounded annually. Solve, a. What is the annual worth of this investment? b. What is the decision rule for judging the attractiveness of investments based on annual worth? c. Should…
- QRW Corp, needs to replace an old machine with a new, more efficient model. The new machine being considered will result in an increase in camings before interest and taxes of $70,000 per year. The purchase price is $200,000, and it would cost an additional $10,000 to properly install the machine. In addition, to properly operate the machine, inventory must be increased by S10,000. This machine has an expected life of 10 years, with no salvage value. Assume that a straight-line depreciation method being used and that this machine is being depreciated down to zero, the marginal tax rate is 34%, and a required rate of return of 15%. (i) Solve for the value of the initial outlay associated with this project. (ii) Solve for the value of annual after-tax cash flows for this project from 1 through 9QRW Corp, needs to replace an old machine with a new, more efficient model. The new machine being considered will result in an increase in camings before interest and taxes of $70,000 per year. The purchase price is $200,000, and it would cost an additional $10,000 to properly install the machine. In addition, to properly operate the machine, inventory must be increased by S10,000. This machine has an expected life of 10 years, with no salvage value. Assume that a straight-line depreciation method being used and that this machine is being depreciated down to zero, the marginal tax rate is 34%, and a required rate of return of 15%. (i)Solve for the value to show whether this machine should be purchase or not (ii) Solve for the value of terminal cash flow in year 10 (annual after-tax cash flow in year 10 plus any additional cash flows associated with the termination of the project).Bailey, Inc., is considering buying a new gang punch that would allow them to produce circuit boards more efficiently. The punch has a first cost of $135,000 and a useful life of 15 years. At the end of its useful life, the punch has no salvage value. Annual labor costs would increase $4,500 using the gang punch, but annual raw material costs would decrease $9,000. MARR is 3.75 %/year. a.)What is the present worth of this investment?