General Motors is considering two different processes for battery manufacturing for its hybrid vehicles. Process A has initial cost of 205,000, AOC: 29,000, salvage value of 2,000 after 2 years. Process B has initial cost of 235,000, AOC: 27,000, salvage value of 20,000 after 4 years. Which process should be selected based on present worth analysis at 10% interest? Draw Cash flow diagram.

General Motors is considering two different processes for battery manufacturing for its hybrid vehicles. Process A has initial cost of 205,000, AOC: 29,000, salvage value of 2,000 after 2 years. Process B has initial cost of 235,000, AOC: 27,000, salvage value of 20,000 after 4 years. Which process should be selected based on present worth analysis at 10% interest? Draw Cash flow diagram.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 1MAD: San Lucas Corporation is considering investment in robotic machinery based upon the following...

See similar textbooks

Similar questions

ABC Service can purchase a new assembler for $15,052 that will provide an annual net cash flow of $6,000 per year for five years. Calculate the NP of the assembler if the required rate of return is 12%. Show calculation. Would you accept/reject a project based on NPV decision criteria? Why? Based on NPV calculated in part A, determine Profitability Index (PI). Show calculation. Would you accept/reject a project based on PI decision criteria? Why?
carl's Earthmoving is considering the purchase of a piece of heavy equipment. What is the cash flow diagram if the following cash flows are anticipated? First Cost = $120,000; O&M =30,000 per year; Overhaul cost =$35,000 in year 3; Salvage Value = $40,000 after 5 years.
Pablo Company is considering buying a machine that will yield income of $3,100 and net cash flow of $17,600 per year for three years. The machine costs $50,100 and has an estimated $6,600 salvage value. Pablo requires a 10% return on its investments. Compute the net present value of this investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Negative amounts should be indicated by a minus sign. Round your present value factor to 4 decimals.) Years 1-3 Totals Net present value Net Cash Flows PV Factor = = Present Value of Net Cash Flows
Pablo Company is considering buying a machine that will yield Income of $3,400 and net cash flow of $16,500 per year for three years. The machine costs $45,600 and has an estimated $6,300 salvage value. Pablo requires a 15% return on Its Investments. Compute the net present value of this Investment. (PV of $1, FV of $1. PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Negative amounts should be indicated by a minus sign. Round your present value factor to 4 decimals.) Years 1-3 Year 3 salvage Totals Initial investment Net present value Net Cash Flows x PV Factor = = = = Present Value of Net Cash Flows $ 0 0
Pablo Company is considering buying a machine that will yield income of $2,700 and net cash flow of $18,400 per year for three years. The machine costs $58,500 and has an estimated $11,400 salvage value. Pablo requires a 5% return on its investments. Compute the net present value of this investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Negative amounts should be indicated by a minus sign. Round your present value factor to 4 decimals.) Years 1-3 Totals Net present value Present Value of Net Cash Flows X PV Factor Net Cash Flows $ 0 = 0 = = =
Pablo Company is considering buying a machine that will yield income of $3,300 and net cash flow of $16,000 per year for three years. The machine costs $45,000 and has an estimated $6,900 salvage value. Pablo requires a 10% return on its investments. Compute the net present value of this investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Negative amounts should be indicated by a minus sign. Round your present value factor to 4 decimals.) Net Cash Flows X PV Factor Present Value of Net Cash Flows Years 1-3 Totals Net present value = = = = =
Peng Company is considering buying a machine that will yield income of $2,400 and net cash flow of $15,100 per year for three years. The machine costs $46,200 and has an estimated $8,100 salvage value. Compute the accounting rate of return for this investment. Accounting Rate of Return Numerator: Denominator: Accounting Rate of Return Accounting rate of return
Use the following data to answer questions (a) to (d). A company is considering the purchase of a copier that costs RM 50,000. Assume the required rate of return is 10% and the following is cash flow schedule: Year 1: RM 20,000 Year 2: RM 30,000 Year 3: RM 20,000 What is the project’s payback period? What is the project’s NPV? What is the project’s IRR? What is the project’s profitability index (PI)?
Jasmine Manufacturing is considering a project that will require an initial investment of $52,000 and is expected to generate future cash flows of $10,000 for years 1 through 3, $8,000 for years 4 and 5 and $2,000 for years 6 through 10. Assume the cost of capital is 10%. What is the payback, npv, irr & pi? Determine whether we should do based on payback, npv, irr or pi
Tyler, Inc., is considering switching to a new production technology. The cost of the required equipment will be $3,529,783 . The discount rate is 13.99 percent. The cash flows that the firm expects the new technology to generate are as follows. a. Compute the payback and discounted payback periods for the project. b. What is the NPV for the project? Should the firm go ahead with the project? c. What is the IRR, and what would be the decision based on the IRR? Years CF 0 $(3,529,783) 1-2 0 3-5 $916,204 6-9 $1,590,056
Peng Company is considering buying a machine that will yield income of $2,400 and net cash flow of $16,000 per year for three years. The machine costs $48,900 and has an estimated $8,100 salvage value. Compute the accounting rate of return for this investment. Numerator: Accounting Rate of Return Denominator: = Accounting Rate of Return Accounting rate of return
You must calculate the value of a container handling equipment for a terminal, which produces year end annual cash flows of $1,200 the first year, $2,000 the second year, $3,000 the third year, and $4,000 the fourth year.A) Assuming a weighted average cost of capital of 15 percent, what is the value of this equipment using the net present value (NPV) approach? B) If the cost of this equipment is $5,200 for the terminal, calculate the net present value. Would you buy this equipment for your terminal?