Starling Co. is considering disposing of a machine with a book value of $24,500 and estimated remaining life of five years. The old machine can be sold for $5,200. A new high-speed machine can be purchased at a cost of 72,700. 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 $22,500 to $19,900 if the new machine is purchased. The differential effect on income for the new machine for the entire five years is a.decrease of $54,500 b.increase of $70,850 c.increase of $54,500 d.decrease of $70,850

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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.…

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…

Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $46,000 and a remaining useful life of five years. It can be sold now for $56,000. Variable manufacturing costs are $44,000 per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is five years. Machine A Machine B Purchase price $ 116,000 $ 129,000 Variable manufacturing costs per year 21,000 13,000 (a) Compute the income increase or decrease from replacing the old machine with Machine A. (b) Compute the income increase or decrease from replacing the old machine with Machine B. (c) Should Lopez keep or replace its old machine? (d) If the machine should be replaced, which new machine should Lopez purchase?

Yoyo, Inc. is considering the purchase of a new machine that will reduce manufacturing costs by P15,000 annually. Yoyo will use MACRS to depreciate the machine, and it expects to sell the machine at the end of its 5-year operating life for P10,000. The firm expects to be able to reduce net operating working capital by P15,000 when the machine is installed, but required operating working will reduce to its original level when the machine is sold after 5 years. Yoyo's tax rate is 30% and it uses 12% cost of capital. The applicable depreciation rates are 20%, 19%, 12%, 11%, and 6%. If the machine costs P60,000, a. What is the project's NPV b. What is the project's MIRR

Geary Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new machine press for $697,448 is estimated to result in $179,470 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 $129,270. The press also requires an initial investment in spare parts inventory of $59,897, along with an additional $ 9,967 in inventory for each succeeding year of the project. If the shop's tax rate is 0.28 and its discount rate is 0.14, 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)

Janko Wellspring Incorporated has a pump with a book value of $26,000 and a four-year remaining life. A new, more efficient pump is available at a cost of $47,000. Janko can receive $8,200 for trading in the old pump. The old machine has variable manufacturing costs of $27,000 per year. The new pump will reduce variable costs by $11,100 per year over its four-year life. Should the pump be replaced? Multiple Choice No, because the company will be $5,600 worse off in total. Yes, because income will increase by $5.500 per year No, because income wit decrease by $100 per year. Yes, because income will increase by $5.600 in total No, Janko will record a loss of $16,400 r they replace the pump

Bailey, Inc., is considering buying a new gang punch that would allow them to produce circuit boards more efficiently. The punch has a first cost of $105,000 and a useful life of 15 years. At the end of its useful life, the punch has no salvage value. Annual labor costs would increase $3,000 using the gang punch, but annual raw material costs would decrease $16,000. MARR is 4.0 %/year. a)What is the present worth of this investment? b)What is the decision rule for judging the attractiveness of investments based on present worth? c)Should Bailey buy the gang punch?