Managerial Accounting: Tools for Business Decision Making
7th Edition
ISBN: 9781118334331
Author: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Publisher: WILEY
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Chapter 12, Problem 12.4BE
Caine Bottling Corporation is considering the purchase of a new bottling machine. The machine would cost $200,000 and has an estimated useful life of 8 years with zero salvage value. Management estimates that the new bottling machine will provide net annual
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Caine Bottling Corporation is considering the purchase of a new bottling machine. The machine would cost $193,900 and has an
estimated useful life of 8 years with zero salvage value. Management estimates that the new bottling machine will provide net annual
cash flows of $30,600. Management also believes that the new bottling machine will save the company money because it is expected
to be more reliable than other rpachines, and thus will reduce downtime. Assume a discount rate of 7%.
Click here to view the factor table.
Calculate the net present value. (If the net present value is negative, use either a negative sign preceding the number eg-45 or parentheses eg
(45). For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round present value answer to 0 decimal places,
eg. 125)
Net present value $
How much would the reduction in downtime have to be worth in order for the project to be acceptable? (Round answer to 0 decimal
places, e.g. 125.)
Sarasota Bottling Corporation is considering the purchase of a new bottling machine. The machine would cost $450,000 and has an
estimated useful life of 8 years with zero salvage value. Management estimates that the new bottling machine will provide net annual
cash flows of $78,750. Management also believes that the new bottling machine will save the company money because it is expected
to be more reliable than other machines, and thus will reduce downtime.
Click here to view PV tables.
How much would the reduction in downtime have to be worth in order for the project to be acceptable? Sarasota's discount rate is
10%. (Use the above table.) (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to O decimal places, e.g. 5,275.)
Reduction in downtime would have to have a present value
$
Kingbird Bottling Corporation is considering the purchase of a new bottling machine. The machine would cost $200,000 and has an
estimated useful life of eight years with zero salvage value. Management estimates that the new bottling machine willprovide net
annual cash flows of $39,500. Management also believes that the new machine will save the company money because it is expected to
be more reliable than other machines, and thus will reduce downtime. Assume a discount rate of 12%.
Click here to view the factor table.
Calculate the net present value. (lf the net present value is negative, use either a negative sign preceding the number e.g. -45 or
parentheses e.g. (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided, e.8. 1.25124.
5
Round present value answer to 0 decimal places, e.8. 1,250.)
1. net present value?
2. How much would the reduction in downtime have to be worth in order for the project to be acceptable?
Present value of reduction…
Chapter 12 Solutions
Managerial Accounting: Tools for Business Decision Making
Ch. 12 - Prob. 1QCh. 12 - Prob. 2QCh. 12 - Tom Wells claims the formula for the cash payback...Ch. 12 - Prob. 4QCh. 12 - What is the decision rule under the net present...Ch. 12 - Discuss the factors that determine the appropriate...Ch. 12 - What simplifying assumptions were made in the...Ch. 12 - What are some examples of potential intangible...Ch. 12 - What steps can be taken to incorporate intangible...Ch. 12 - Prob. 10Q
Ch. 12 - Prob. 11QCh. 12 - Prob. 12QCh. 12 - Prob. 13QCh. 12 - What are the strengths of the annual rate of...Ch. 12 - Prob. 15QCh. 12 - Prob. 16QCh. 12 - Prob. 12.1BECh. 12 - Hsung Company accumulates the following data...Ch. 12 - Thunder Corporation, an amusement park, is...Ch. 12 - Caine Bottling Corporation is considering the...Ch. 12 - McKnight Company is considering two different,...Ch. 12 - Prob. 12.6BECh. 12 - Prob. 12.7BECh. 12 - Prob. 12.8BECh. 12 - Prob. 12.9BECh. 12 - Prob. 12.1DICh. 12 - Prob. 12.2DICh. 12 - Prob. 12.3DICh. 12 - Prob. 12.4DICh. 12 - Prob. 12.5DICh. 12 - Prob. 12.1ECh. 12 - Doug's Custom Construction Company is considering...Ch. 12 - Prob. 12.3ECh. 12 - BAK Corp. is considering purchasing one of two new...Ch. 12 - Bruno Corporation is involved in the business of...Ch. 12 - BSU Inc. wants to purchase a new machine for...Ch. 12 - Iggy Company is considering three capital...Ch. 12 - Prob. 12.8ECh. 12 - Legend Service Center just purchased an automobile...Ch. 12 - Vilas Company is considering a capital investment...Ch. 12 - Drake Corporation is reviewing an investment...Ch. 12 - U3 Company is considering three long-term capital...Ch. 12 - Prob. 12.2APCh. 12 - Brooks Clinic is considering investing in new...Ch. 12 - Jane's Auto Care is considering the purchase of a...Ch. 12 - Prob. 12.5APCh. 12 - Prob. 12CDCh. 12 - Luang Company is considering the purchase of a new...Ch. 12 - Prob. 12.2BYPCh. 12 - Tecumseh Products Company has its headquarters in...Ch. 12 - Prob. 12.4BYPCh. 12 - Prob. 12.5BYPCh. 12 - Prob. 12.6BYPCh. 12 - Prob. 12.8BYP
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