Starling Co. is considering disposing of a machine with a book value of $21,600 and estimated remaining life of five years. The old machine can be sold for $5,600. A new high-speed machine can be purchased at a cost of 73,800. It will have a useful life of five years and no residual value. It is estimated that the annual variable manufacturing costs will be reduced from $22,800 to $20,700 if the new machine is purchased. The five-year differential effect on profit from replacing the machine is a(n)

Alliance Manufacturing Company is considering the purchase of a new automated drill press to replace an older one. The machine now in operation has a book value of zero and a salvage value of zero. However, it is in good working condition with an expected life of 10 additional years. The new drill press is more efficient than the existing one and, if installed, will provide an estimated cost savings (in labor, materials, and maintenance) of $6,000 per year. The new machine costs $25,000 delivered and installed. It has an estimated useful life of 10 years and a salvage value of $1,000 at the end of this period. The firm’s cost of capital is 14 percent, and its marginal income tax rate is 40 percent. The firm uses the straight-line depreciation method.a. What is the net cash flow in year 0 (i.e., initial outlay)?b. What are the net cash flows after taxes in each of the next 10 years?c. What is the NPV of the investment?d. Should Alliance replace its existing drill press?

Ivanhoe 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 $57,186. Because of the increased capacity, reduced maintenancecosts, and increased fuel economy, the new truck is expected to generate cost savings of $8,100. At the end of eight years, thecompany will sell the truck for an estimated $27,500. Traditionally, the company has used a general rule that it should not accept aproposal unless it has a payback period that is less than 50% of the asset's estimated useful life. Gary Smith, a new manager, hassuggested that the company should not rely only on the payback approach but should also use the net present value method whenevaluating new projects. The company's cost of capital is 8%.Calculate net present value and cash payback period

An assembly operation at a software company now requires $250,000 per year in labor costs. A robot can be purchased and installed to automate the operation. The robot will cost $800,000, have an economic life of ten years, and have no residual value at the end of its life. Maintenance and operating expenses of $64,000 per year for the robot are estimated. MARR is 15%. Determine whether this is a viable project. Solve the problem by: (a) Present worth analysis (b) Annual cash flow analysis+- (c) Rate of return analysis

A machine with a book value of $246,000 has an estimated six-year life. A proposal is offered to sell the old machine for $217,100 and replace it with a new machine at a cost of $280,000. The new machine has a six-year life with no residual value. The new machine would reduce annual direct labor costs from $49,800 to $39,800. Prepare a differential analysis dated October 3 on whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2). If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) October 3   Continue withOld Machine(Alternative 1) Replace OldMachine(Alternative 2) Differential Effecton Income(Alternative 2) Revenues:       Proceeds from sale of old machine $fill in the blank 8104d10e9fd9003_1 $fill in the blank 8104d10e9fd9003_2 $fill in the blank…

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The Susan Company is debating if they should purchase a new machine for its factory operations at a cost of $745,200. The investment is expected to generate $150,000 in annual cash flows for a period of eight years. The required rate of return is 10%. The old machine has a remaining life of eight years. The new machine is expected to have zero value at the end of the eightminus-year period. The disposal value of the old machine at the time of replacement is zero. (Click the icon to view the Future Value of $1 factors.) (Click the icon to view the Future Value of Annuity of $1 factors.) (Click the icon to view the Present Value of $1 factors.) (Click the icon to view the Present Value of Annuity of $1 factors.) Requirement 1: What is the Internal Rate of Return of this investment that Susan Company is making? O A. 14% В. 8% С. 10% D. 12% Requirement 2: Should Susan Company purchase the new machine? Why? O A. Yes, as the internal rate of return is more than their required rate return B.…

The Bruin's Den Outdoor Gear is considering a new 7-year project to produce a new tent line. The equipment necessary would cost $1.83 million and be depreciated using straight-line depreciation to a book value of zero. At the end of the project, the equipment can be sold for 10 percent of its initial cost. The company believes that it can sell 29,000 tents per year at a price of $75 and variable costs of $34 per tent. The fixed costs will be $505,000 per year. The project will require an initial investment in net working capital of $237,000 that will be recovered at the end of the project. The required rate of return is 11.8 percent and the tax rate is 21 percent. What is the NPV?

Geary Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new machine press for $576,036 is estimated to result in $255,756 in annual pretax cost savings. The press falls in the MACRS five-year class (Refer to the MACRS table on page 277), and it will have a salvage value at the end of the project of $106,549. The press also requires an initial investment in spare parts inventory of $73,540, along with an additional $7,848 in inventory for each succeeding year of the project. If the shop's tax rate is 0.26 and its discount rate is 0.09, what is the total cash flow in year 4? (Do not round your intermediate calculations.) (Make sure you enter the number with the appropriate +/- sign)

BRAC is considering investing $100000 in a new machine with an expected life of 5 years. The machine will have no scrap value at the end of the 5 years. It is expected that 20000 units will be sold each year at a selling prices of $6.00 per unit. Variable production costs are expected to $2.30 per unit, while incremental fixed costs, mainly the wages of a maintenance engineer, are expected to be $10000 per years. BRAC uses a discount rate of 11% for investment appraisal purposes and expects investment projects to recover their initial investment within two years. Required: (1) Explain why risk and uncertainty should be considered in the investment appraisal process.                                                                                            (2) Calculate and comment on the payback period of the project.  (3) Evaluate the sensitivity of the projects net present value to a change in the following project variables: sales volume sales price variable cost and discuss the…