NUBD Co. has an opportunity to acquire a new machine to replace one of its present machines. The new machine would cost P90,000, have a five year life, and no salvage value. Variable operating costs would be P100,000 per year. The present machine has a book value of P50,000, a remaining life of five years and disposal value now of P5,000. Variable operating costs would be P125,000 per year. Ignoring present value calculations and income taxes, and considering five years in total, what would be the increase (decrease) in profit before income taxes by acquiring the new machine as opposed to retaining the present one? P10,000 decrease P15,000 decrease P35,000 increase P40,000 increase

NUBD Co. has an opportunity to acquire a new machine to replace one of its present machines. The new machine would cost P90,000, have a five year life, and no salvage value. Variable operating costs would be P100,000 per year. The present machine has a book value of P50,000, a remaining life of five years and disposal value now of P5,000. Variable operating costs would be P125,000 per year. Ignoring present value calculations and income taxes, and considering five years in total, what would be the increase (decrease) in profit before income taxes by acquiring the new machine as opposed to retaining the present one? P10,000 decrease P15,000 decrease P35,000 increase P40,000 increase

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter11: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 4P: Although the Chen Company’s milling machine is old, it is still in relatively good working order and...

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NUBD Co. has an opportunity to acquire a new machine to replace one of its present machines. The new machine would cost P90,000, have a five year life, and no salvage value. Variable operating costs would be P100,000 per year. The present machine has a book value of P50,000, a remaining life of five years and disposal value now of P5,000. Variable operating costs would be P125,000 per year. Ignoring present value calculations and income taxes, and considering five years in total, what would be the increase (decrease) in profit before income taxes by acquiring the new machine as opposed to retaining the present one? *
NUBD Co. has an opportunity to acquire a new machine to replace one of its present machines. The new machine would cost P90,000, have a five year life, and no estimated salvage value. Variable operating costs would be P100,000 per year. The present machine has a book value of P50,000 and a remaining life of five years. Its disposal value now is P5,000, but it would be zero after five years. Variable operating costs would be P125,000 per year. Ignore present value calculations and income taxes. Considering the five years in total, what would be the difference in profit before income taxes by acquiring the new machine as opposed to retaining the present one?
Ysabelle Industries, Inc. has an opportunity to acquire a new equipment to replace one of its existing equipments. The new equipment would cost P900,000 and has a five-year useful life, with a zero terminal disposal price. Variable operating costs would be P1 million per year. The present equipment has a book value of P500,000 and a remaining life of five years. Its disposal price now is P50,000 but would be zero after five years. Variable operating costs would be P1,250,000 per year. Considering the five years in total, but ignoring the time value of money and income taxes. Ysabelle should Select the correct response: Replace due to P350,000 advantage. Not replace due to P100,000 disadvantage. Not replace due to P100,000 disadvantage. Not replace due to P150,000 disadvantage.
Maxwell Company has an opportunity to acquire a new machine to replace one of its present machines. The new machine would cost $90,000, have a 5-year life, and no estimated salvage value. Variable operating costs would be $100,000 per year. The present machine has a book value of $50,000 and a remaining life of 5 years. Its disposal value now is $5,000, but it would be zero after 5 years. Variable operating costs would be $125,000 per year. Ignore income taxes. Considering the 5 years in total, what would be the difference in profit before income taxes by acquiring the new machine as opposed to retaining the present one? * A. $10,000 decrease B. $15,000 decrease C. $35,000 increase D. $40,000 increase
Bata Company is considering replacing a machine with a book value of P100,000, a remaining useful life of 5 years, and annual straight-line depreciation of P20,000. The existing machine has a current market value of P100,000. The replacement machine would cost P150,000, have a 5-year life, and save P50,000 per year in cash operating costs. If the replacement machine would be depreciated using the straight-line method and the tax rate is 40%, what would be the net investment required, the annual net cash flows, and annual net incremental taxes, respectively?
Winneconne Company is considering replacing a machine with a book value of P400,000, a remaining useful life of 5 years, and annual straight-line depreciation of P80,000. The existing machine has a current market value of P400,000. The replacement machine would cost P550,000, have a 5-year life, and save P75,000 per year in cash operating costs. If the replacement machine would be depreciated using the straight-line method, the tax rate is 30%, inventory shall increase by P10,000, payables by P5,000, what would be the net investment required to replace the existing machine? a. P165,000 b. P160,000 c. P155,000 d. P150,000 e. P90,000
Bata Company is considering replacing a machine with a book value of P100,000, a remaining useful life of 5 years, and annual straight-line depreciation of P20,000. The existing machine has a current market value of P100,000. The replacement machine would cost P150,000, have a 5-year life, and save P50,000 per year in cash operating costs. If the replacement machine would be depreciated using the straight-line method and the tax rate is 40%, what would be the net investment required, the annual net cash flows, and annual net incremental taxes, respectively? Group of answer choices P150,000; P42,000; P8,000 P150,000; P34,000; P8,000 P50,000; P34,000; P16,000 P50,000; P42,000; P16,000
The Fine Clothing Factory wants to replace an old machine with a new one. The old machine can be sold to a small factory for R10 000. The new machine would increase annual revenue by R150 000 and annual operating expenses by R60 000. The new machine would cost R360 000. The estimated useful life of the machine is 12 years with zero salvage value. Using Average rate of return (ARR), Should Fine Clothing Factory purchase the machine if management desired rate of return of 15% on all capital investments? Show all the calculations and motivate your answer.
Green Company can purchase a new machine for $100,000. The new machine will have a five-year life with no salvage value. The machine should reduce labor costs by $22,000 per year. Green Company would have to scrap its existing machine, receiving no cash. The existing machine has a book value of $15,000. Should Green purchase the new machine? Yes, as the decreased labor costs are greater than the cost of the new machine. No, as the decreased labor costs are less than the cost of the new machine plus the book value of the existing machine. No, as the decreased labor costs are less than the cost of the new machine. Yes, as the decreased labor costs are greater than the cost of the new machine plus the book value of the existing machine.
Diamond Company is considering purchasing a machine that would cost $756,000 and have a useful life of 8 years. The machine would reduce cash operating costs by $132,632 per year. The machine would have a salvage value of $151,200 at the end of the project. Compute: Net present value Internal rate of return Profitability index Payback period Simple rate of return Should the company purchase the machine? Why or why not?
JKL Company is considering replacing a machine with a book value of P100,000, a remaining useful life of 4 years, and annual straight-line depreciation of P25,000. The existing machine has a current value of P80,000. The replacement machine would cost P160,000, have a4-year useful life, save P50,000 per year in cash operating costs. If there placement machine would be depreciated using straight-line method and the tax rate is 40%, what would be the increases in annual income taxes if the company replaces the machine? P21,000 P14,000 P32,000 P20,000
Diamond Company is considering purchasing a machine that would cost $756,000 and have a useful life of 8 years. The machine would reduce cash operating costs by $132,632 per year. The machine would have a salvage value of $151,200 at the end of the project. Compute: Payback period Simple rate of return Should the company purchase the machine? Why or why not?