Only typed explanation otherwise leave it Tim Smunt has been asked to evaluate two machines. After some investigation, he determines that they have the costs shown in the following table:Machine AMachine B$12,000$28,000$2,200$4,800$4,300$800$2,400$7,500He is told to assume that:Original CostLabor per yearMaintenance per yearSalvage value1. The life of each machine is 3 years.2. The company thinks it knows how to make 14% on investments no more risky than this one.3. Labor and maintenance are paid at the end of the year.The NPV for Machine A = $The NPV for Machine B = $Using the net present value as the basis of comparing the machines, Tim should recommend(round your response to the nearest whole number and include a minus sign if necessary).(round your response to the nearest whole number and include a minus sign if necessary).

Net Present Value calculation is used to evaluate the investment and financing decisions that…

Answered: Tim Smunt has been asked to evaluate…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

A manufacturing company is trying to decide between the two machines shown below. Determine which machine should be selected on the basis of rate of return. Assume the MARR is 20% per year. Machine A Machine B Initial Cost, $ -18,000 -35,000 Annual operating cost, $/year -4,000 -3,600 Salvage value, $ 1,000 2,700 Life, years 3 6
PARC Co. has asked you to recommend a new nutcracker machine. After months of hard research, you have collected the following data: Data Life, Years First Cost (FC) Benefit, Yearly (AB) Benefit Gradient (ABG) O&M cost Gradient (M&OG) O&M Cost uniform annual Salvage Value O 21 years O 12 years O 18 years KRAX 6 O 24 years $202,000 73,000 1,200 600 18,000 42,000 SPLIT-NUT 9 $285,000 88,000 PARC Co. assumes MARR = 15%. Using the Net Present Worth (NPW) analysis: The analysis period if you are going to use NPW is close to: 1,300 1,100 34,000 48,000
You are asked to select the best purchase option: there are two machines. You are only given data on the costs, because the sales will be exactly the same for both alternatives. Therefore, you have to select the equipment that generates the lowest costs! The MARR is 12% annual nominal, compounded annually for both machines. Machine AMachine B $62,000 $77,000 Annual Net Cash Flows$15,000 $21,000 $8,000 4 years Initial Investment Salvage Value Useful life $10,000 б уеars
You need to select a machine for the robotized welding process at your factory. There are two machines in market that can do this job, machine A and machine B. Machine A: First cost is $63,000 , Annual Operating Cost is $4,000, and Salvage value of $15,000 with useful life of 3 years. If the life of machine B is 9 years, the NPV of machine A needed for the sake of comparison at MARR 15% per year is closest to:
i need to find the average cost per unit? if : the machine to produce the units cost $400,000 the monthly operating and maintenance cost is: $1,000 cost of material and labour is: $60/unit defective unit at a cost: $60/unit nominal production of: 2,800 units/month nominal defect rate: 3% MARR is 10% compounded monthly period of time 5 years
To make an item inhouse, equipment costing $250,000 must be purchased. It will have a life of 4 years, an annual cost of $80,000, and each unit will cost $40 to manufacture. Buying the item externally will cost $100 per unit. At i = 15% per year, it is cheaper to make the item inhouse if the number per year needed is:a. above 1047 unitsb. above 2793 unitsc. equal to 2793 unitsd. below 2793 units
P1: Compute payback period and describe its use.. FasTrac is considering buying a new machine: Cost.. $16,000 Useful life.. 8 years Salvage value. $ 0 Expected production.. 30,000 units Product selling price per unit.. $ 30 Calculate the payback period.
An engineer of a manufacturing company has determined the costs of producing a new product to be as follows: Equipment cost: $300,000/year Variable cost per unit of production: $15.00 Overhead cost: $50,000/year The company is planning to run this project for 5 years and estimated that the product can be sold for a unit price of $40. How many units must be produced and sold each year to break even? [Hints: no interest is given, so no consideration of time value of money. Use the knowledge you learnt in chapter 2]
A machine, costing $25000 to buy and $ 3000 per year to operate, will save mainly labor expenses in packaging over 6 years. The anticipated salvage value of the machine at the end of 6 years is $5000. To desire a 10% return on investment (rate of return), what is the minimum required annual savings in labor from this machine? Select one: a. $8092 b. $4050 c. $9010 d. $6092 12
You are considering two types of machines fora manufacturing process.◼◼ Machine A has a first cost of $75,200, and itssalvage value at the end of six years of estimatedservice life is $21,000. The operating costs ofthis machine are estimated to be $6,800 per year.Extra income taxes are estimated at $2,400 peryear.◼◼ Machine B has a first cost of $44,000, and itssalvage value at the end of six years’ service isestimated to be negligible. The annual operatingcosts will be $11,500.Compare these two mutually exclusive alternativesby the present-worth method at i = 13%
Two machines are being considered for the production of a particular part for which there is a long term-demand. Machine A cost P50,000.00 and is expected to last 3 years and have a P10,000 salvage value. Machine B costs P75,000.00 and is expected to last 6 years and have zero salvage value. Machine A can produce a part in 18 seconds; Machine B requires only 12 seconds per part. The out-of-pocket hourly cost of operation is P38.00 for A and P30.00 for B. Monthly Maintenance cost are P200.00 for A and P220.00 for B. If interest on invested capital is 25%, determine the number of parts per year at which the machines are equally economical. If the expected number of parts per year is greater than this break-even quantity, which machine would be favored?
2. Choose from the two machines which is more economical? Machine A Machine B P 8,000 P 14,000 15 15 0 2,000 P 3,000 P 1,200 3% First Cost Life Salvage Value Annual Operation P 2,400 Annual Maintenance P 1,000 Taxes and Insurance 3% Which will you choose if minimum required profit is 16%. Use Rate of Return on Additional Investment, Annual Cost Method and Present Worth Method

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS