A certain machine has book value of P173,205.08 after 5 years and P82,187.59 after 8 years. The book value is computed using Declining Balance Method. Determine the initial cost of the equipment and its salvage value in its economic life of 10 years.
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- An auto-part manufacturer is faced with the prospect of replacing its old robot, which has been used in stamping operation for 10 years. This particular robot was installed at a cost of $100,000 and was assumed to have a 15-year life with no appreciable salvage value. The current annual operating costs are $20,000 for this old robot, and these costs are presumed to be the same for the rest of its life. A sales representative from Advanced Robotic Systems is trying to sell this company a new-highly efficient robot. The new system would require an investment of $200,000 for installation. The economic life of this new robot is estimated to be IO years with a salvage value of $18,000, and the robot will reduce annual operating costs to $5,000. No detailed agreement has been made with the sales representative about the disposal of the old robot. Determine therange of resale values associated with the old system that would justify installation of the new system at a MARR of 14%.Atlantic Control Company purchased a machine two years ago at a cost of $70,000. At that time, the machine’s expected economic life was six years and its salvage value at the end of its life was estimated to be $10,000. It is being depreciated using the straight line method so that its book value at the end of six years is $10,000. In four years, however, the old machine will have a market value of $0. A new machine can be purchased for $80,000, including shipping and installation costs. The new machine has an economic life estimated to be four years. Three-year MACRS depreciation will be used. During its four-year life, the new machine will reduce cash operating expenses by $20,000 per year. Sales are not expected to change. But the new machine will require net working capital to be increased by $4,000. At the end of its useful life, the machine is estimated to have a market value of $2,500. What is the NPV of this project? Should Atlantic replace the old machine (assuming a…Gordon Inc. has a number of copiers that were bought four years ago for $20,000. Currently maintenance costs $2,000 a year, but the maintenance agreement expires at the end of two years and thereafter the annual maintenance charge will rise to $8,000. The machines have a current resale value of $8,000, but at the end of year 2 their value will have fallen to $3,500. By the end of year 6 the machines will be valueless and would be scrapped. Gordon is considering replacing the copiers with new machines that would do essentially the same job. These machines cost $25,000, and the company can take out an eight-year maintenance contract for $1,000 a year. The machines have no value by the end of the eight years and would be scrapped. Both machines are depreciated by using seven-year MACRS, and the tax rate is 35 percent. Assume for simplicity that the inflation rate is zero. The real cost of capital is 7 percent. When should Gordon replace its copiers, now, the end of year 2, or the end of…
- The Boston Toy Corporation (BTC) currently uses an injection moulding machine that was purchased two years ago. This machine is being depreciated on a straight line basis towards a K5000 salvage value, and it has six years of remaining life. Its current book value is K26000, and it can be sold at K30000 at this point. BTC is offered a replacement machine which has a cost of K80000, an estimated useful life of six years, and an estimated salvage value of K8000. The replacement machine would permit an output expansion, so that sales would rise by K10 000 per year, even so, the new machine with much greater efficiency would still cause operating expenses to decline by K15000 per year. The new machine would require that inventories be increased by K20000 and accounts payable would simultaneously increase by K5000. BTC’s effective tax rate is 46% and its cost of capital is 15%. Required By using the Net Present Value Technique, determine whether BTC should replace the old machine.A stamping machine is classified as seven-year MACRS property. The costbasis for the machine is $120,000, and the expected salvage value is $10,000 at the end of 12 years. Compute the book value at the end of three years for tax purposes.Using the asset description and table below, find the economic service life (ESL) of the asset, assuming MARR = 8%. The company is committed to using the asset for the upcoming year, but is unsure about the following years. Today's market value is $70,000, and it will last another 4 years before failure. Each year, the after-tax market value decreases by $10,000. The operating cost of the asset in year 1 is expected to be $30,000, and it will increase by $5,000 each year through year 4. a. 3 yearsb. 1 yearc. 4 yearsd. 2 years
- An earth moving equipment that cost P 94,822 will have an estimated life of 10 years. Using double-declining balance method, compute the book value at the end of the year 3.Acme-Denver Corporation is considering the replacement of an old, relatively inefficient surface-grinder machine that was purchased seven years ago at a cost of $12,000. The machine had an original expected life of 10 years and a zero estimated salvage value at the end of that period. The current market value of the machine is $2,000. The divisional manager reports that a new machine can be bought and installed for $14,000. Over its five-year life, this machine will expand sales from $10,000 to $12,500 a year and, furthermore, will reduce labor and raw materials usage sufficiently to cut annual operating costs from $7,000 to $5,000. The new machine has an estimated salvage value of $4,000 at the end of its five-year life. The firm's MARR is 12%.(a) Should the new machine be purchased now?(b) What current market value of the new machine would make the two options equal?A certain equipment costs P7,000 has an economic life of n years and a salvage value P350 at the end of n years. If the book value at the end of 4 years is equal to P2197.22, compute for the economic life of the equipment using the sum of years digit method.
- A certain copier machine cost P150000 with a trade-in value of P15000 after making 800,000 copies. Using declining balance method. What is the book value when the machine had made 300,000 copies?It is desired to determine the resent economic Value of an old machine by considering of how it compares with the best modern machine that could replace it. The old machine is expected to require out of pocket cost of 85,000 each year for 4 years and then be scared for 5,000 residual value. The new machine requires an investment of 40,000 and would have out of the pocket costs of 79,000 a year for 8 years and the zero-salvage value. Invested capital should earn a minimum return of 15% before taxes. Determine the present value of an old machine.A company is currently producing chemical compounds by a process installed 10 years ago at a cost of $100,000. It was assumed that the process would have a 20-year life with a zero salvage value. The current market value of the equipment, however, is $60,000, and the initial estimate of its economic life is still good. The annual operating costs associated with this process are $18,000. A sales representative from U.S. Instrument Company is trying to sell a new chemical compound-making process to the company. This new process will cost $200,000 have a service life of IO years with a salvage value of $20,000, and reduce annual operating costs to $4,000. Assuming the company desires a return of 12% on all investments, should it invest in the new process?