You are asked to select the best purchase option: there are two machines. You are only given data on the costs, because the sales wil 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 Initial Investment Annual Net Cash Flows$15,000 $21,000 Salvage Value $8,000 4 years $10,000 б уеars Useful life

You are asked to select the best purchase option: there are two machines. You are only given data on the costs, because the sales wil 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 Initial Investment Annual Net Cash Flows$15,000 $21,000 Salvage Value $8,000 4 years $10,000 б уеars Useful life

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 7EB: An auto repair company needs a new machine that will check for defective sensors. The machine has an...

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Your boss has told you to evaluate the cost of two machines.After some questioning, you are assured that they have thecosts shown at the right. Assume:a) The life of each machine is 3 years.b) The company thinks it knows how to make 14% oninvestments no riskier than this one.Determine via the present value method which machine topurchase. MACHINE A MACHINE BOriginal cost $13,000 $20,000Labor cost per year 2,000 3,000Floor space per year 500 600Energy (electricity) per year 1,000 900Maintenance per year 2,500 500Total annual cost $ 6,000 $ 5,000Salvage value $ 2,000 $ 7,000
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
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Stone Manufacturing sells a marble slab for $1.500 Fixed costs are 130,000, while the variable costs are $500 per wish. The company currently plans to sell 100 sise this month. What is the margin of safety assuming 75 slabs are actually sold? (Round a unit calculations up to the rarest whole nutter) A $30,000 B. $102,000 C. $64,500 D. $47,000 Only typing answer Please explain step by step
An auto repair company needs a new machine that will check for defective sensors. The machine has an Initial investment of $224,000. Incremental revenues, including cost savings, are $120,000, and Incremental expenses, including depreciation, are $50,000. There is no salvage value. What is the accounting rate of return (ARR)?
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Calculate the profitability of the following proposal using Average rate of return (ARR) method Proposal I Automatic machine Cost OMR 320000 Estimated life 6.5 years Estimated sales P.A160000 Cost : Material OMR 60000 Labour OMR 22000 Variable overheads OMR 14000 O a. All the options are wrong Оь. 16.53% О С.3.42% O d. 4.62%
Two alternative machines will produce the same product, but one is capable of higher-quality work, which can be expected to return greater revenue. The following are relevant data. Determine which is the better alternative, assuming repeatability and using SL depreciation, an income-tax rate of 27%, and an after-tax MARR of 11%. Capital investment Life Calculate the AW value for the Machine A. Machine A $23,000 12 years $4,000 Terminal BV (and MV) Annual receipts Annual expenses Click the icon to view the interest and annuity table for discrete compounding when the MARR is 11%er year. AWA (11%) = $ (Round to the nearest dollar.) Machine B $33,000 6 years $1,500 $197,000 $176,000 $152,000 $130,000
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A manufacturer of plastic traffic cones sells the cones at a wholesale cost of £8 pounds per cone. The variable cost for each cone is £3. The annual overhead cost for the production line is £100,000. Current production is 30,000 cones/units per annum. What is the annual profit generated by this production line? O £50,000 £240,000 £90,000 £150,000 £50,000 Hide hint for Question 1 Tho que icackina for thn annualprofit and not tho contrribution. tin DELL
1. Use the information below for the next two questions. Leaky Pipe Inc. is considering a new machine for its largest product line. The cash flows Lastalled Purchase Price S40, 000 Roduced Cost of Materials S 6,000 per year Labor Savings S9, 000 per year locrease in Working Capital $5, 000 (for Year 0 and I only) Depreciable Life (zero salvage value) 4 years Economic Life 8 years Required Return 12% Tax Rate 40% a . What is the NPV of this machine if it does not replace any other?. b. Suppose the machine replaces another machine with the following characteristics: Book Value of Old Machine $6.000 Market Value of Old Machine $4,000 Remaining Depreciable Life of Old Machine 6years Assume the old machine was not expected to have any salvage value and compute the NPV of the New Machine.