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- SUBJECT: ENGINEERING ECONOMYTOPIC: DEPRECIATION SHOW THE COMPLETE AND DETAILED SOLUTION OF THIS PROBLEM. THANK YOU EXPERTS. C) Five years ago, NANOTech, Inc. bought an mainframe for P580,000. It was to enjoy a useful life of 15 years and a salvage value of 10% of its original cost. On its tenth year, the firm plans to buy a new mainframe to meet its growing computing needs – the projected amount for its acquisition is P870,000. If the old mainframe will be sold on its tenth year, how much should the firm raise in order to purchase the new mainframe? Use SUM OF THE YEARS DIGITS METHOD (SYD) methodDexter Inc. is considering replacing its existing computer system with a new computer system. The new system can offer considerable savings in computer processing and inventory management costs. Information about the existing system and the new system follow: Existing Computer New Computer Original cost $20,000 $15,000 Annual operating cost $ 3,500 $ 2,000 Current salvage value of the existing system $ 4,000 --- Remaining life in 5 years 5 years 5 years Salvage value in 5 years $ 0 $ 0 Should Dexter replace the existing computer system with the new system? What are the cash flow savings or additional cost over the 5 years? Ignore income taxes. Group of answer choices Yes replace, net savings of $5,000. No do not replace, additional costs of $3,500. Yes replace, net savings of $15,000. No do not replace, additional costs of $5,000.The Telephone Company of America purchased a numerically controlled production machine 5 years ago for $300,000. The machine currently has a trade-in value of $70,000. If the machine is continued in use, another machine, X, must be purchased to supplement the old machine. Machine X costs $200,000, has annual operating and maintenance costs of $40,000, and will have a salvage value of $30,000 in 10 years. If the old machine is retained, it will have annual operating and maintenance costs of $55,000 and will have a salvage value of $15,000 in 10 years. As an alternative to retaining the old machine, it can be replaced with Machine Y. Machine Y costs $400,000, has anticipated annual operating and maintenance costs of $70,000, and has a salvage value of $140,000 in 10 years. Using a MARR of 15%, a cash flow approach, and a present worth comparison, determine the preferred economic alternative.
- A company owns a machine that is currently lying unused in the factory. The machine was bought five years ago at a cost of C60000 and has now been depreciated down to a book value of C10000. It could be sold now for \pm 3000. Alternatively, it could be rented out for a year at E2,500. The company's chief engineer believes the machine will be totally obsolete in 12 months' time and would then have a scrap value of \pm 800. The company is considering using the machine to undertake a one-year project. If it did, the machine's scrap value at the end of the year, net of dismantling costs, would be zero. Ignoring the time value of money, what is the cost of using the machine on the project?Anna 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 below. Machine AMachine B Original cost$106,000$ 175,000 Estimated life8 years8 years Salvage value-0--0- Estimated annual cash inflows$30,000$45,000 Estimated annual cash outflows$10,000$15,000 Instructions Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. Which machine should be purchased? Machine B has a negative net present value, and also a lower profitability index. Machine B should be rejected and machine A should be purchased.Metlock Inc. wants to replace its current equipment with new high-tech equipment. The existing equipment was purchased 5 years ago at a cost of $121,000. At that time, the equipment had an expected life of 10 years, with no expected salvage value. The equipment is being depreciated on a straight-line basis. Currently, the market value of the old equipment is $43.500. The new equipment can be bought for $173,440, including installation. Over its 10-year life, it will reduce operating expenses from $190,600 to $148,700 for the first six years, and from $202,600 to $191,800 for the last four years. Net working capital requirements will also increase by $20,900 at the time of replacement. It is estimated that the company can sell the new equipment for $24,100 at the end of its life. Since the new equipment's cash flows are relatively certain, the project's cost of capital is set at 10%, compared with 15% for an average-risk project. The firm's maximum acceptable payback period is 5 years.…
- Swifty Corp. is considering purchasing one of two new processing machines. Either machine would make it possible for the company to produce its products more efficiently than it is currently equipped to do. Estimates regarding each machine are provided below: Machine A Machine B Original cost $113,400 $270,000 Estimated life 10 years 10 years Salvage value -0- -0- Estimated annual cash inflows $29,700 $60,400 Estimated annual cash outflows $7,500 $15,000 (a) Calculate the net present value and profitability index of each machine. Assume an 8% discount rate. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 2 decimal places e.g. 589.71. Enter negative amounts using either a negative sign preceding the number e.g. -45.35 or parentheses e.g. (45.35).) Machine A Machine BCrane Corp. is considering purchasing one of two new processing machines. Either machine would make it possible for the company to produce its products more efficiently than it is currently equipped to do. Estimates regarding each machine are provided below: Machine A Machine B Original cost $113,900 $278,300 Estimated life 10 years 10 years Salvage value -0- -0- Estimated annual cash inflows $29,700 $60,100 Estimated annual cash outflows $7,600 $14,800 Calculate the net present value and profitability index of each machine. Assume an 8% discount rate. Machine A Machine B Net present value top row, profitability index bottom row Which machine should be purchased? Crane Corp. should purchase select a machine .Elis-elis Corp., a manufacturer of ID cards, was considering the replacement of one of its machine. The machine has a book value of P500,000 and still had a five remaining years of useful life.. The company had been using straight line method for the depreciation of machines. The scrap value of this machine was P50,000 and this can be sold now for P350,000. If management opted to continue using this machine, a repair cost of P80,000 will be incurred.. The replacement machine is a computerized-controlled and more energy-efficient. It has a price tag of P950,000 with an economic life of 5 years and a market value of P150,000 after the life of the asset. The machine which is a product of rapid technological changes required further testing and setting up, that would cost P50,000 (not to be capitalized) but would decrease working capital by P75,000. The accountant wants to depreciate this asset using a 5-year MACRS (1st year, 20%; 2nd year, 27%; 3rd year, 19%; 4th year, 12%;; 5th year,…
- A company purchased a machine 6 years ago for $500m and a salvage value of $30m. The machine has a useful life of 18 years. Now, the company has found another machine with a price of $700m which generates $25m in cost savings and $12m in revenue. This machine has a useful life of 10 years with no salvage value. If the company chooses to purchase the new equipment, it can sell the old equipment for $400m. The company's tax rate is 21% and the discount rate is 17%. Calculate the cash flow in year 0 assuming the company purchases the new equipment, calculate the incremental cash flow per year and calculate the IRR and NPV of the equipment.Dell is considering replacing one of its material handling systems. The old system was purchased 7 years agofor $130,000 and was depreciated as MACRS-GDS 5-year property since the system is used in the manufactureof electronic components. It has an annual O&M cost of $48,000, a remaining operational life of 8 years, and anestimated 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 thenew system is purchased, the old system will be traded in for $55,000, even though the old system can be sold536 CHAPTER 11 / REPLACEMENT ANALYSISfor only $45,000 on the open market. Leasing a new system will cost $31,000 per year, payable at the beginningof the year, plus operating costs of $15,000 per year payable at year-end. If the new system is leased, theexisting material handling system will be sold for its market value of $45,000.Use an…Sunland Inc. wants to replace its current equipment with new high-tech equipment. The existing equipment was purchased 5 years ago at a cost of $122,000. At that time, the equipment had an expected life of 10 years, with no expected salvage value. The equipment is being depreciated on a straight-line basis. Currently, the market value of the old equipment is $40,100. The new equipment can be bought for $175,880, including installation. Over its 10-year life, it will reduce operating expenses from $193,900 to $145,000 for the first six years, and from $204,800 to $191,300 for the last four years. Net working capital requirements will also increase by $20,700 at the time of replacement. It is estimated that the company can sell the new equipment for $24,900 at the end of its life. Since the new equipment's cash flows are relatively certain, the project's cost of capital is set at 9 %, compared with 15% for an average - risk project. The firm's maximum acceptable payback period is 5…