Esquire Company needs to acquire a molding machine to be used in its manufacturing process. Two types of machines that would be $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Machine A could be purchased for $48,000. It will last 10 years with annual maintenance costs of $1,000 per year. After 10 years the machine can be sold for $5,000. Machine B could be purchased for $40,000. It also will last 10 years and will require maintenance costs of $4,000 in year three, $5,000 in year six, and $6,000 in year eight. After 10 years, the machine will have no salvage value. Required: Assume an interest rate of 8% properly reflects the time value of money in this situation and that maintenance costs are paid at the end of each year. Ignore income tax considerations. Calculate the present value of Machine A & Machine B. Which machine Esquire should purchase? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount.) Answer is complete but not entirely correct. PV 52,394 8 Machine A Machine B Esquire should purchase 49,568 Machine B
Esquire Company needs to acquire a molding machine to be used in its manufacturing process. Two types of machines that would be $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Machine A could be purchased for $48,000. It will last 10 years with annual maintenance costs of $1,000 per year. After 10 years the machine can be sold for $5,000. Machine B could be purchased for $40,000. It also will last 10 years and will require maintenance costs of $4,000 in year three, $5,000 in year six, and $6,000 in year eight. After 10 years, the machine will have no salvage value. Required: Assume an interest rate of 8% properly reflects the time value of money in this situation and that maintenance costs are paid at the end of each year. Ignore income tax considerations. Calculate the present value of Machine A & Machine B. Which machine Esquire should purchase? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount.) Answer is complete but not entirely correct. PV 52,394 8 Machine A Machine B Esquire should purchase 49,568 Machine B
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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