(E7) Hello! Please help me answer this one. Please refer to the given picture/s below for the questions. Please read the instructions and directions very carefully. Double and triple check your answers, previous tutors got it wrong. NOTE: Type only your answers. Please do not handwritten your answers. Make sure your formulas, solutions and answers' format are all correct. Answer no 2 only! 1. Choose from the two machines which is more economical.Machine AFirst CostP8,000.00Salvage ValueAnnual Operation3,000Annual Maintenance1,200Taxes and Insurance3%Life Years10Money is worth at least 16%. Prove your answer using three methods.2. A chemical plant needs a generating set. After evaluating several offers, the choice wasnarrowed down to two offers a Diesel engine and a gasoline engine. The EngineeringStaff made estimate of life salvage value, operating cost and maintenance cost asfollows:Diesel EngineGasoline EnginePurchase PriceP360,000P205,000Annual Fuel Cost40,00060,000Maintenance Cost10,00015,000Salvage Value30,0005,000Life Years128Using the cost of money as 10% and using the straight-line depreciation, calculate the totalannual cost for each generating set. Which is preferable? Explain the answer usimg Rate ofReturn Method.Machine BP14,000.002,0002,4001,0003%15

Straight line method depreciation = (cost of asset - salvage value) / useful life of an asset 1.…

2. A chemical plant needs a generating set. After evaluating several offers, the choice was narrowed down to two offers a Diesel engine and a gasoline engine. The Engineering Staff made estimate of life salvage value, operating cost and maintenance cost as follows: Diesel Engine Gasoline Engine Purchase Price P360,000 P205,000 Annual Fuel Cost 40,000 60,000 Maintenance Cost 10,000 15,000 Salvage Value 30,000 5,000 Life Years 12 8 Using the cost of money as 10% and using the straight-line depreciation, calculate the total annual cost for each generating set. Which is preferable? Explain the answer usimg Rate of Return Method,

2. A chemical plant needs a generating set. After evaluating several offers, the choice was narrowed down to two offers a Diesel engine and a gasoline engine. The Engineering Staff made estimate of life salvage value, operating cost and maintenance cost as follows: Diesel Engine Gasoline Engine Purchase Price P360,000 P205,000 Annual Fuel Cost 40,000 60,000 Maintenance Cost 10,000 15,000 Salvage Value 30,000 5,000 Life Years 12 8 Using the cost of money as 10% and using the straight-line depreciation, calculate the total annual cost for each generating set. Which is preferable? Explain the answer usimg Rate of Return Method,

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...

See similar textbooks

Similar questions

Jonfran Company manufactures three different models of paper shredders including the waste container, which serves as the base. While the shredder heads are different for all three models, the waste container is the same. The number of waste containers that Jonfran will need during the following years is estimated as follows: The equipment used to manufacture the waste container must be replaced because it is broken and cannot be repaired. The new equipment would have a purchase price of 945,000 with terms of 2/10, n/30; the companys policy is to take all purchase discounts. The freight on the equipment would be 11,000, and installation costs would total 22,900. The equipment would be purchased in December 20x4 and placed into service on January 1, 20x5. It would have a five-year economic life and would be treated as three-year property under MACRS. This equipment is expected to have a salvage value of 12,000 at the end of its economic life in 20x9. The new equipment would be more efficient than the old equipment, resulting in a 25 percent reduction in both direct materials and variable overhead. The savings in direct materials would result in an additional one-time decrease in working capital requirements of 2,500, resulting from a reduction in direct material inventories. This working capital reduction would be recognized at the time of equipment acquisition. The old equipment is fully depreciated and is not included in the fixed overhead. The old equipment from the plant can be sold for a salvage amount of 1,500. Rather than replace the equipment, one of Jonfrans production managers has suggested that the waste containers be purchased. One supplier has quoted a price of 27 per container. This price is 8 less than Jonfrans current manufacturing cost, which is as follows: Jonfran uses a plantwide fixed overhead rate in its operations. If the waste containers are purchased outside, the salary and benefits of one supervisor, included in fixed overhead at 45,000, would be eliminated. There would be no other changes in the other cash and noncash items included in fixed overhead except depreciation on the new equipment. Jonfran is subject to a 40 percent tax rate. Management assumes that all cash flows occur at the end of the year and uses a 12 percent after-tax discount rate. Required: 1. Prepare a schedule of cash flows for the make alternative. Calculate the NPV of the make alternative. 2. Prepare a schedule of cash flows for the buy alternative. Calculate the NPV of the buy alternative. 3. Which should Jonfran domake or buy the containers? What qualitative factors should be considered? (CMA adapted)
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)?
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
The operation manager at Sebago manufacturing is considering three proposals for supplying a critical component for its new line of electric watercraft. Proposal 1 is to purchase the component; proposal 2 is to make the component in house rebuilt equipment; and proposal 3 is to purchase new, highly automated equipment. The costs associated with each proposals are provided. At what quantity range will each option be preferred? propsal 1 annual cost of capital = 0 variable cost of each $22.00 proposal 2 annual cost of capital = $150,000 variable cost = $14.00 prosal 3 annual cost of capital = $450,000 variable cost = $12.50
You have two machines under consideration for an improved automated wrapping process for Snickers Fun Size candy bars as detailed below. (a) Using an AW analysis, determine which should be selected at i = 15% per year. (b) Assume you want machine D to be selected and are willing to extend its estimated life, if necessary. Perform this analysis to ensure D’s selection using factors or a spreadsheet. Machine C D First cost, $ −40,000 −65,000 Annual cost, $/year −10,000 −12,000 Salvage value, $ 12,000 25,000 Life, years 3 6
Mowbot's management is evaluating new proposals for production machines from three companies: Brawn Up front cost Annual cost saving Life (years) $ $ Apex (150,000) $ 63,000 $ 4 (200,000) $ 81,000 $ Cameo (250,000)102,000 4 4 Use incremental present worth analysis to decide which alternative should be recommended. MARR is 18%.
Tulips Ltd is considering the purchase of a new machine that is expected to save labor on an existing project. The estimated data for the two machines available on the market are as follows: Machine A (000) Machine B (000) Initial cost (year 0) 120 120 Annual labor cost savings: Year 1 40 20 2 40 30 3 40 50 4 20 70 5 40 50 Required: Which machine will be selected under the following criteria? NPV, assuming a cost of finance of 9 percent p.a. IRR ARR PBP
A company with a MARR of 15% must install one of two production machines, X or Y. Machine X has an initial cost of $40,000 with an annual operating and maintenance (O&M) cost of $30,000 and a salvage value of $5,000 after its 5-year life. It will generate an annual benefit of $150,000. Machine Y’s benefits and costs differ from machine X’s. Hint: NPW = PW (benefits) − PW (costs) Group of answer choices NPW = [$150,000(P/A, 15%, 5)] + [$40,000 + $30,000(P/A, 15%, 5) + $5,000(P/F, 15%, 5)] NPW = [$150,000(P/A, 15%, 5)] − [$40,000 + $30,000(P/A, 15%, 5) − $5,000(P/F, 15%, 5)] NPW = [$150,000(P/A, 15%, 5)] − [$40,000 + $30,000(P/A, 15%, 5) + $5,000(P/F, 15%, 5)] NPW = [$150,000(P/A, 15%, 5)] − [$40,000 − $30,000(P/A, 15%, 5) + $5,000(P/F, 15%, 5)]
The cost characteristics of a CO testing machine that was purchased 5 years ago for $100,000 are shown below. The equation to determine the AW of retaining the tester one more year and then replacing it is: (a) AW = −15,000(A/P,i,1) − 54,000 + 10,000(A/F,i,1) (b) AW = −100,000(A/P,i,6) − 54,000 + 10,000(A/F,i,6) (c) AW = −60,000(A/P,i,1) − 42,000 + 40,000(A/F,i,1) (d ) AW = −100,000(A/P,i,5) − 42,000 + 15,000(A/F,i,5) Machine Age, Years from Purchase M&O Costs, $ per Year Salvage Value at End of Year, $ 1 42,000 60,000 2 47,000 40,000 3 49,000 31,000 4 50,000 24,000 5 52,000 15,000 6 54,000 10,000 7 63,000 10,000 8 67,000 10,000
Poly-Chem Plastics is considering two types of injection molding machines: hydraulic and electric. The hydraulic press (HP) will have a first cost of $605,000, annual costs of $200,000, and a salvage value of $70,000 after 5 years. Electric machine technology (EMT) will have a first cost of $800,000, annual costs of $122,000, and a salvage value of $130,000 after 5 years The ROR on the extra investment for the EMT alternative is
Please solve without using Excel and show work... An assembly machine to reduce labor costs $65,000 to buy and $4,000 to operate. Salvage value is $5,000 after 6 years. To get a 12% return on investment, what is the minimum required annual saving in labor?
Two machines are being taken into consideration for the manufacturing of a selected component for which there's a protracted term-demand. Machine A value P50,000.00 and is anticipated to final three years and feature a P10,000 salvage value. Machine B expenses P75,000.00 and is anticipated to final 6 years and feature 0 salvage value. Machine A can produce a component in 18 seconds; Machine B calls for simplest 12 seconds in step with component. The out-of-pocket hourly value of operation is P38.00 for A and P30.00 for B. Monthly Maintenance value are P200.00 for A and P220.00 for B. If interest invested is 15%, decide the range of components in step with yr. at which the machines are similarly economical. If the anticipated range of components in parts per year is extra than this break-even quantity, which gadget might be favored?