Concord Company has a factory machine with a book value of $88,100 and a remaining useful life of 7 years. It can be sold for $33,800. A new machine is available at a cost of $510,700. This machine will have a 7-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $576,600 to $470,500. Prepare an analysis showing whether the old machine should be retained or replaced. (In the first two columns, enter costs and expenses as positive amounts, and any amounts received as negative amounts. In the third column, enter net income increases as positive amounts and decreases as negative amounts. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Retain Replace Equipment Net Income Increase (Decrease) Equipment Variable manufacturing costs $ $ New machine cost Sell old machine Total $ The old factory machine should be $ $ $

Concord Company has a factory machine with a book value of $88,100 and a remaining useful life of 7 years. It can be sold for $33,800. A new machine is available at a cost of $510,700. This machine will have a 7-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $576,600 to $470,500. Prepare an analysis showing whether the old machine should be retained or replaced. (In the first two columns, enter costs and expenses as positive amounts, and any amounts received as negative amounts. In the third column, enter net income increases as positive amounts and decreases as negative amounts. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Retain Replace Equipment Net Income Increase (Decrease) Equipment Variable manufacturing costs $ $ New machine cost Sell old machine Total $ The old factory machine should be $ $ $

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)

10th Edition

ISBN:9781337902571

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter12: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 10P: Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6...

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Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6 years, and an estimated salvage value of 800. The replacement machine is eligible for 100% bonus depreciation at the time of purchase- The replacement machine would permit an output expansion, so sales would rise by 1,000 per year; even so, the new machines much greater efficiency would cause operating expenses to decline by 1,500 per year The new machine would require that inventories be increased by 2,000, but accounts payable would simultaneously increase by 500. Dautens marginal federal-plus-state tax rate is 25%, and its WACC is 11%. Should it replace the old machine?
Although the Chen Company’s milling machine is old, it is still in relatively good working order and would last for another 10 years. It is inefficient compared to modern standards, though, and so the company is considering replacing it. The new milling machine, at a cost of $110,000 delivered and installed, would also last for 10 years and would produce after-tax cash flows (labor savings and depreciation tax savings) of $19,000 per year. It would have zero salvage value at the end of its life. The project cost of capital is 10%, and its marginal tax rate is 25%. Should Chen buy the new machine?
Ivanhoe Company has a factory machine with a book value of $88,100 and a remaining useful life of 7 years. It can be sold for $33,800. A new machine is available at a cost of $510,700. This machine will have a 7-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $576,600 to $470,500. Prepare an analysis showing whether the old machine should be retained or replaced. (In the first two columns, enter costs and expenses as positive amounts, and any amounts received as negative amounts. In the third column, enter net income increases as positive amounts and decreases as negative amounts. Enter negative amounts using either a negative sign preceding the number eg. -45 or parentheses e.g. (45).) Variable manufacturing costs $ New machine cost Sell old machine Total Retain Equipment The old factory machine should be replaced Replace Equipment 000 Net Income Increase (Decrease)
Oriole Company has a factory machine with a book value of $88,900 and a remaining useful life of 7 years. It can be sold for $31,600. A new machine is available at a cost of $484,500. This machine will have a 7-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $613,200 to $508,100. Prepare an analysis showing whether the old machine should be retained or replaced. (In the first two columns, enter costs and expenses as positive amounts, and any amounts received as negative amounts. In the third column, enter net income increases as positive amounts and decreases as negative amounts. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Variable manufacturing costs New machine cost Sell old machine Total Retain Equipment The old factory machine should be replaced eTextbook and Media 613200 i i 613200 $ $ Replace Equipment 508,100 484,500 -31,600 961000 $ $ Net Income Increase…
Bryant Company has a factory machine with a book value of $90,000 and a remaining useful life of 5 years. It can be sold for $30,000. A new machine is available at a cost of $400,000. This machine will have a 5-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $600,000 to $500,000. Prepare an analysis showing whether the old machine should be retained or replaced. (In the first two columns, enter costs and expenses as positive amounts, and any amounts received as negative amounts. In the third column, enter net income increases as positive amounts and decreases as negative amounts. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) RetainEquipment ReplaceEquipment Net IncomeIncrease (Decrease) Variable manufacturing costs $enter a dollar amount $enter a dollar amount $enter the difference between the two previous amounts in the row New…
Pharoah Company has a factory machine with a book value of $90.800 and a remaining useful life of 7 years. It can be sold for $27.200. A new machine is available at a cost of $407 400. This machine will have a 7-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $640,100 to $581.800 Prepare an analysis showing whether the old machine should be retained or replaced. (In the first two columns, enter costs and expenses as positive amounts, and any amounts received as negative amounts. In the third column, enter net income increases as positive amounts and decreases as negative amounts. Enter negative amounts using either a negative sign preceding the number eg. -45 or parentheses eg. (45)) Variable manufacturing costs New machine cost Sell old machine Total S The old factory machine should be Retain Equipment $ Replace Equipment $ $ Net Income Increase (Decrease)
Blossom Company has a factory machine with a book value of $85,000 and a remaining useful life of 5 years. It can be sold for $25,000. A new machine is available at a cost of $345,000. This machine will have a 5-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $550,000 to $450,000. Prepare an analysis showing whether the old machine should be retained or replaced. (In the first two columns, enter costs and expenses as positive amounts, and any amounts received as negative amounts. In the third column, enter net income increases as positive amounts and decreases as negative amounts. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Variable manufacturing costs New machine cost Sell old machine Total The old factory machine should be Retain Equipment replaced 500000 345000 25000 870000 $ $ Replace Equipment Net Income Increase (Decrease)
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Blossom Company has a factory machine with a book value of $85,000 and a remaining useful life of 5 years. It can be sold for $25,000. A new machine is available at a cost of $345,000. This machine will have a 5-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $550,000 to $450,000. Prepare an analysis showing whether the old machine should be retained or replaced. (In the first two columns, enter costs and expenses as positive amounts, and any amounts received as negative amounts. In the third column, enter net income increases as positive amounts and decreases as negative amounts. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Retain Equipment Variable manufacturing costs $ Replace Equipment $ Net Income Increase (Decrease) New machine cost Sell old machine Total $ The old factory machine should be tA $ $
Nighthawk Inc. is considering disposing of an old machine with a book value of $22,500 and an estimated remaining life of three years. The old machine can be sold for $6,250. A new machine with a purchase price of $68,750 is being considered a replacement. It will have a useful life of three years and no residual value. It is estimated that the annual variable manufacturing costs will be reduced from $43,750 to $20,000 if the new machine is purchased. The three-year differential effect on profit from replacing the machine is a(n)
Xinhong Company is considering replacing one of its manufacturing machines. The machine has a book value of $45,000 and a remaining useful life of five years, at which time its salvage value will be zero. It has a current market value of $52,000. Variable manufacturing costs are $36,000 per year for this machine. Information on two alternative replacement machines follows. Should Xinhong keep or replace its manufacturing machine? If the machine should be replaced, which alternative new machine should Xinhong purchase?
Starling Co. is considering disposing of a machine with a book value of $21,200 and estimated remaining life of five years. The old machine can be sold for $5,100. A new high-speed machine can be purchased at a cost of 69,500. It will have a useful life of five years and no residual value. It is estimated that the annual variable manufacturing costs will be reduced from $22,600 to $19,100 if the new machine is purchased. The five-year differential effect on profit from replacing the machine is a(n) a. decrease of $60,970 Ob. increase of $60,970 O c. increase of $46,900 Od. decrease of $46,900