Another Company has just invested in a new Machining Center that cost $550,000. The company believes that it will be able to use this new piece of equipment for the next 10 years. At the end of this 10 year period, the company thinks that they can sell this equipment for $75,000. The company's MARR value is 10% ycy. (P/F%.n) (A/F %.n) (F/A %.n) (A/P %.n) (P/A%n) 10 0.3855 0.06275 15.9374 0.16275 6.1446 Assume: The Annual Capital Recovery & Return Value (CR) for this new equipment $-84,806 The Annual Labor Costs $50,000 The Annual Material Costs $23,000 The Annual Overhead Costs $45,000 Annual Sales Revenue resulting from the purchase of the new machine $220,000 Question: What is the Annual Profit Amount the company can expect from the purchase of the new machine? O $15,194 O $-1,706 O $12,514 O $17,194 O $3.206

Another Company has just invested in a new Machining Center that cost $550,000. The company believes that it will be able to use this new piece of equipment for the next 10 years. At the end of this 10 year period, the company thinks that they can sell this equipment for $75,000. The company's MARR value is 10% ycy. (P/F%.n) (A/F %.n) (F/A %.n) (A/P %.n) (P/A%n) 10 0.3855 0.06275 15.9374 0.16275 6.1446 Assume: The Annual Capital Recovery & Return Value (CR) for this new equipment $-84,806 The Annual Labor Costs $50,000 The Annual Material Costs $23,000 The Annual Overhead Costs $45,000 Annual Sales Revenue resulting from the purchase of the new machine $220,000 Question: What is the Annual Profit Amount the company can expect from the purchase of the new machine? O $15,194 O $-1,706 O $12,514 O $17,194 O $3.206

Fundamentals of Financial Management, Concise Edition (MindTap Course List)

9th Edition

ISBN:9781305635937

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter12: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 10P: REPLACEMENT ANALYSIS The Dauten Toy Corporation currently uses an injection molding machine that was...

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REPLACEMENT CHAIN The Fernandez Company has an opportunity to invest in one of two mutually exclusive machines that will produce a product the company will need for the next eight years. Machine A costs 10 million but will provide after-tax inflows of 4 million per year for 4 years. If Machine A were replaced, its cost would be 12 million due to inflation and its cash inflows would increase to 4.2 million due to production efficiencies. Machine B costs 15 million and will provide after-tax inflows of 3.5 million per year for 8 years. If the WACC is 10%, which machine should be acquired? Explain.
REPLACEMENT ANALYSIS The Dauten Toy Corporation currently uses an injection molding machine that was purchased 2 years ago. This machine is being depreciated on a straight-line basis, and it has 6 years of remaining life. Its current book value is 2,100, and it can be sold for 2/500 at this time. Thus, the annual depreciation expense is 2,100/6 = 350 per year. If the old machine not replaced, it can be sold for 500 at the end of its useful life. Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6 years, and an estimated salvage value of 800. This machine falls into the MACRS 5-year class so the applicable depreciation rates are 20%, 32%, 19%, 12%, 11%, and 6%. The replacement machine would permit an output expansion, so sales would rise by 1,000 per year; even so, the new machine's much greater efficiency would cause operating expenses to decline by 1,500 per year. The new machine would require that inventories be increased by 2,000, but accounts payable would simultaneously increase by 500. Dauten's marginal federal-plus-state tax rate is 40%, and its WACC is 11%. Should it replace the old machine?
REPLACEMENT ANALYSIS The Dauten Toy Corporation currently uses an injection molding machine that was purchased 2 years ago. This machine is being depreciated on a straight-line basis, and it has 6 years of remaining life. Its current book value is 2,100, and it can be sold for 2,500 at this time. Thus, the annual depreciation expense is 2,100/6 = 350 per year. If the old machine is not replaced, it can be sold for 500 at the end of its useful life. Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6 years, and an estimated salvage value of 800. This machine falls into the MACRS 5-year class so the applicable depreciation rates are 20%, 32%, 19%, 12%, 11%, and 6%. The replacement machine would permit an output expansion, so sales would rise by 1,000 per year; even so, the new machines much greater efficiency would cause operating expenses to decline by 1,500 per year. The new machine would require that inventories be increased by 2,000, but accounts payable would simultaneously increase by 500. Dautens marginal federal-plus-state tax rate is 40%, and its WACC is 15%. Should it replace the old machine?
Jullo Company is considering the purchase of a new bubble packaging machine. If the machine will provide $20,000 annual savings for 10 years and can be sold for $50,000 at the end of the period, what is the present value of the machine investment at a 9% interest rate with savings realized at year end?