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Question 17 Teagyn corp. produces PITAs and has a choice of upgrading or replacing a piece of equipment. The upgrade would cost $25M and have an operating cost per unit of $62,000. Replacing the equipment would cost $39M and would reduce operating costs per unit from the upgrade estimate by 10%. Replacing would also allow the current machine to be sold for $3M now. Regardless of the choice, Teagyn forecasts sales of 460 units at $80,000 per unit and expects unit sales to grow at 10% per year over the next four years (five years in total, selling price and costs would remain the same). Use a WACC of 12% and to compare these choices. What would the salvage (resale) value of the old machine be to change the decision on an NPV basis? Please consider the changes in steps of $100,000 (i.e. $1,100,000 to $1,200,000). Please enter your response with no units or commas and 1 decimal place in millions: "$2,110,000" would be "2.1" (note: NO units and use 5/4 rounding). Your Answer: Answer

Question 17 Teagyn corp. produces PITAs and has a choice of upgrading or replacing a piece of equipment. The upgrade would cost $25M and have an operating cost per unit of $62,000. Replacing the equipment would cost $39M and would reduce operating costs per unit from the upgrade estimate by 10%. Replacing would also allow the current machine to be sold for $3M now. Regardless of the choice, Teagyn forecasts sales of 460 units at $80,000 per unit and expects unit sales to grow at 10% per year over the next four years (five years in total, selling price and costs would remain the same). Use a WACC of 12% and to compare these choices. What would the salvage (resale) value of the old machine be to change the decision on an NPV basis? Please consider the changes in steps of $100,000 (i.e. $1,100,000 to $1,200,000). Please enter your response with no units or commas and 1 decimal place in millions: "$2,110,000" would be "2.1" (note: NO units and use 5/4 rounding). Your Answer: Answer

Managerial Accounting
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 13E
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Question 17 Teagyn corp. produces PITAs and has a choice of upgrading or replacing a piece of equipment. The upgrade would cost $25M and have an operating cost per unit of $62,000. Replacing the equipment would cost $39M and would reduce operating costs per unit from the upgrade estimate by 10%. Replacing would also allow the current machine to be sold for $3M now. Regardless of the choice, Teagyn forecasts sales of 460 units at $80,000 per unit and expects unit sales to grow at 10% per year over the next four years (five years in total, selling price and costs would remain the same). Use a WACC of 12% and to compare these choices. What would the salvage (resale) value of the old machine be to change the decision on an NPV basis? Please consider the changes in steps of $100,000 (i.e. $1,100,000 to $1,200,000). Please enter your response with no units or commas and 1 decimal place in millions: "$2,110,000" would be "2.1" (note: NO units and use 5/4 rounding). Your Answer: Answer
Transcribed Image Text:Question 17 Teagyn corp. produces PITAs and has a choice of upgrading or replacing a piece of equipment. The upgrade would cost $25M and have an operating cost per unit of $62,000. Replacing the equipment would cost $39M and would reduce operating costs per unit from the upgrade estimate by 10%. Replacing would also allow the current machine to be sold for $3M now. Regardless of the choice, Teagyn forecasts sales of 460 units at $80,000 per unit and expects unit sales to grow at 10% per year over the next four years (five years in total, selling price and costs would remain the same). Use a WACC of 12% and to compare these choices. What would the salvage (resale) value of the old machine be to change the decision on an NPV basis? Please consider the changes in steps of $100,000 (i.e. $1,100,000 to $1,200,000). Please enter your response with no units or commas and 1 decimal place in millions: "$2,110,000" would be "2.1" (note: NO units and use 5/4 rounding). Your Answer: Answer
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