Trademill Co. is planning to replace its existing machinery with newand better technology ones with higher capacity. Old machinerybought 4 years ago, with a price of 900,000, life of 10 years, zerosalvage value, and can be sold in the market for 280,000. Newmachinery has a total cost of 1,800,000, no salvage value and 6 yearslife. It is expected to increase sales by 1,200,000, CGS stays at its 40%level, and additional working capital of 380,000 required. Tax is 25%,discount rate 12%. Should the replacement be made? Use NPV fordecision making.LETS SOLVE TOGETHER!

NPV. Net present value method. It is a capital budgeting technique used to make investment…

Answered: • Trademill Co. is planning to replace…

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

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NUBD Co. is considering a new product that will sell for P100 and has a variable cost of P60. Expected volume is 20,000 units. New equipment costing P1,500,000 and having a five-year useful life and no salvage value is needed, and will be depreciated using the straight-line method. The machine has fixed cash operating costs of P200,000 per year. The firm is in the 40% tax bracket and has cost of capital of 12%. Use 5 decimal places for the PV factors. How many units per year the firm must sell for the investment to earn 12% internal rate of return?
Bradford Inc. is considering replacing one of its old factory equipment with a new one. The following data are available: Old equipment: Purchase cost $50,000 Remaining useful life in years 5 years Current book value $25,000 Annual operating costs $8,000 per year Current expected selling price $10,000 Expected sales commission 5% of the selling price New equipment: Purchase cost $52,000 Useful life in years 5 years Residual value $0 Annual operating costs $3,000 per year What would be the differential impact on income from replacing the equipment in five years? Group of answer choices $17,000 decrease $25,000 increase $17,500 decrease $27,500 increase
5.
A company is considering replacing an old piece of machinery, which cost $600,000and has $350,000 of accumulated depreciation to date, with a new machine that has apurchase price of $545,000. The old machine could be sold for $231,000. The annualvariable production costs associated with the old machine are estimated to be $61,000per year for eight years. The annual variable production costs for the new machine areestimated to be $19,000 per year for eight years. a.) Prepare and show in solution a differential analysis dated September 13 on whetherto continue with the old machine (Alternative 1) or replace the old machine (Alternative 2). b.) What is the sunk cost in the scenario?
K Company has purchased a new machine costing $27,000 and the machine is expected to reduce the operating expenses by $7,000 every year. The useful life of machine is 5 years and the machine is expected to have a zero-scrap! value at the end of its useful life. The company's required rate of return is 12%. Calculate the Net Present Value (NPV) of the machine. (Round intermediate calculations to 3 decimal places and final answer to the nearest dollar.)
37. Starling Co. is considering disposing of a machine with a book value of $23,400 and estimated remaining life of five years. The old machine can be sold for $5,000. A new high-speed machine can be purchased at a cost of $66,700. 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 $23,500 to $19,200 if the new machine is purchased. The differential effect on income for the new machine for the entire five years is a(n) a.increase of $40,200 b.decrease of $40,200 c.decrease of $52,260 d.increase of $52,260
The management of Kanban Company is considering the purchase of a $27,000 machine that would reduce operating costs by $6,000 per year. At the end of the machine's six-year useful life, it will have zero salvage value. The company's required rate of return is 10%. ---------------------------------------- What is the total 'undiscounted' cash savings that this machine will provide over its useful life?
Attached is question, USE EXCEL AS ITS REQUIRED WILL DOWNVOTE IF WORK NOT SHOWN IN EXCEL!
. Flexsteel Industries manufactures furniture for the retail, contract, and recreational vehicle furniture markets. The company is considering the purchase of a new piece of equipment, which would have an initial cost of $1,000,000 and a 5-year life. There is no salvage value for the equipment. The increase in cash flow each year of the equipment's life would be as follows: Year 1 Year 2 Year 3 Year 4 Year 5 $395,000 $ 370,000 $ 305,000 $ 250,000 $ 205,000 What is the payback period?
Murl Plastics Inc. purchased a new machine one year ago at a cost of $69,000. Although the machine operates well, the president of Murl Plastics is wondering if the company should replace it with a new electronic machine that has just come on the market. The new machine would slash annual operating costs by two-thirds, as shown in the comparative data below: PresentMachine ProposedNew Machine Purchase cost new $ 69,000 $ 103,500 Estimated useful life new 6 years 5 years Annual operating costs $ 48,300 $ 16,100 Annual straight-line depreciation 11,500 20,700 Remaining book value 57,500 — Salvage value now 11,500 — Salvage value in five years 0 0 In trying to decide whether to purchase the new machine, the president has prepared the following analysis: Book value of the old machine $ 57,500 Less: Salvage value 11,500 Net loss from disposal $ 46,000…
There is old machinery with a value of $95,565, with an expected life of 20 years. There is a sale of old equipment with a book value of $30,000 and a market value of $66,000.It is intended to replace that machine with a new one worth $145,000 with a useful life of 10 years. It will ultimately be sold at market value for $90,000, to generate salvage value.Old operating costs are $95,565 and new costs are $56,984. There is an initial working capital of $35,000, with movements of 15% of the initial working capital untilyear 6. From year 7 and 8 they are 20% of the initial working capital and in the ninth year 14% of the initial working capital.The WACC required for this project is 17% with a tax rate of 38.5%. The following table shows the depreciation of the new equipment.Depreciation1 20%2 15%3 15%4 10%5 10%6 10%7 7%8 5%9 5%10 3%Calculate your PV, NPV, IRR, TIRM, PAYBACK, IR and ROIPlease if you can send me the excel to: 0229275@up.edu.mxor tell me the steps to follow and if you can…
MACHINE A, NOT MACHINE B.

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