Murl Plastics Inc. purchased a new machine one year ago at a cost of $69,000. Although the machine operates well, the president of Murl Plastics is wondering if the company should replace it with a new electronic machine that has just come on the market. The new machine would slash annual operating costs by two-thirds, as shown in the comparative data below:      PresentMachine ProposedNew Machine   Purchase cost new $ 69,000   $ 103,500     Estimated useful life new   6  years   5  years   Annual operating costs $ 48,300   $ 16,100     Annual straight-line depreciation   11,500     20,700     Remaining book value   57,500     —     Salvage value now   11,500     —     Salvage value in five years   0     0        In trying to decide whether to purchase the new machine, the president has prepared the following analysis:         Book value of the old machine $ 57,500     Less: Salvage value   11,500             Net loss from disposal $ 46,000                “Even though the new machine looks good,” said the president, “we can’t get rid of that old machine if it means taking a huge loss on it. We’ll have to use the old machine for at least a few more years.”         Sales are expected to be $241,500 per year, and selling and administrative expenses are expected to be $144,900 per year, regardless of which machine is used.    Required: 1. Prepare a summary income statement covering the next five years, assuming the following:    a. The new machine is not purchased. b. The new machine is purchased.   (Leave no cells blank - be certain to enter "0" wherever required.)

Stockton Manufacturing Limited found out that after using only 2 years a machine for semi automation process, a more advanced model is now available in the market. This more advanced model will produce more output with greater efficiency as compare to existing machine. The cost of existing machine is $32,000 with life of 10 years, at the end of which it can be scrapped. The current market value of machine is $15,000 and there is a prospective buyer available to purchase it. The advanced model cost $123,500 with a useful life of 8 years and a scrap value of $20,500 at the end of life. The comparison of the two machines is as follows:   EXISTING MACHINE ADVANCED MODEL CAPACITY PER ANNUM 200,000 UNITS 230,000 UNITS SALE PRICE PER UNIT ($) 0.95 0.95 LABOR COST PER UNIT ($) 0.12 0.08 MATERIAL COST PER UNIT ($) 0.48 0.46 FIXED OVERHEADS (ALLOCATION OF PORTION OF COMPANY’S FIXED OVERHEADS) ($) 0.24 0.16 The sales director is of the opinion…

Dobbs Corporation is considering purchasing a new delivery truck. The truck has many advantages over the company's current truck (not the least of which is that it runs). The new truck would cost $55,981. Because of the increased capacity, reduced maintenance costs, and increased fuel economy, the new truck is expected to generate cost savings of $8,900. At the end of eight years, the company will sell the truck for an estimated $28,400. Traditionally, the company has used a general rule that it should not accept a proposal unless it has a payback period that is less than 50% of the asset's estimated useful life. Pavel Chepelev, a new manager, has suggested that the company should not rely only on the payback approach but should also use the net present value method when evaluating new projects. The company's cost of capital is 8%. 1. Calculate the cash payback period and net present value of the proposed investment.

Management of National Co. is considering whether to purchase a new model MX1 machine costing P460,000 or a new model MY2 machine costing P430,000 to replace a machine that was purchased 7 years ago for P258,000. The old machine was used to make product L360 until it broke down last week. Unfortunately, the old machine cannot be repaired. Management has decided to buy the new model MY2 machine. It has less capacity than the new model MX1 machine, but its capacity is sufficient to continue making product L360. Management also considered, but rejected, the alternative of simply dropping product L360. If that were done, instead of investing P430,000 in the new machine, the money could be invested in a project that would return a total of P411,000. In making the decision to buy the model MY2 machine rather than the model MX1 machine, the differential cost was: