Gumamela Company is considering replacing a machine with one that will save P50,000 per year in cash operating costs and has P20,000 more depreciation expense per year than the existing machine. The tax rate is 40%. Buying the new machine will increase annual net cash flows of the company by Select one: a. P20,000 b. P30,000 c. P12,000 d. P38,000   Old equipment with a book value of P15,000 will be replaced by new equipment with a purchase price of P50,000, exclusive of freight charges of P2,000. The market value of the old equipment is P11,000. Repair costs of P2,000 can be avoided if the new equipment is acquired. Assume a tax rate of 35%. What is the initial (net)investment of the project? Select one: a. P33,800 b. 52,000 c. P38,300 d. P39,700

Q: The Holly Tree Company plans to purchase a new machine that will increase its manufacturing  speed…

A: Net present value can be calculated by difference between present value of cash flow and initial…

Q: Maya Industries is considering a new product that will sell for P100 and has a variable cost of P60.…

A: Initial cost = 1500000 Annual cash inflows = (C * Q - F)(1-t) + Dt Where C = contribution per unit…

Q: Win Corporation is considering to replace its old equipment with a new one. The old equipment had a…

A: The net amount of investment is equal to original amount of investment minus cash inflow at the time…

Q: Envoy Textiles Limited is considering purchasing a new machine that costs $37500. The machine is…

A: Capital budgeting indicates the evaluation of the profitability of possible investments and projects…

Q: A new machine costing $100,000 is expected to save the McKaig Brick Company $15,000 per year for 12…

A: Annual net cash flows is calculated as the difference between the annual cash flows and cash…

Q: Daily Enterprises is purchasing a $4.1 million machine. It will cost $66,000 to transport and…

A: Before investing in new asset or project, profitability is evaluated by considering future generated…

Q: Palmer Corp. is considering the purchase of a new piece of equipment. The cost savings from the…

A: Solution: Annual net income after taxes = $164,900 Initial investment = $485,000 Expected salvage…

Q: The Bokawkan company is considering to purchase a new machine. Annual cash returns on investment…

A: Calculation of Payback Period= Initial Investment / Annual Cash Inflow= P1,200,000 / P220,000= 5.455…

Q: Acme is considering the sale of a machine with a book value of P160,000 and 3 years remaining in its…

A: The cash flow from machine is calculated as sale proceeds minus tax on gain on sale of machine

Q: A corporation is considering purchasing a machine that costs $120,000 andwill save $X per year after…

A: Saving after tax can be calculated by this formula. X= saving after tax  .i = Interest rate .n=…

Q: You arc interested in purchasing a machine that will save $200,000 per yearbefore taxes. The cost of…

A: Net present value (NPV) is the difference between the present values of cash inflows and cash…

Q: A company will invest in a machine worth 50000$ to produce a new product. The economic life of the…

A: Net cash flows from purchase of machine will be total cash inflows generated by use of machine and…

Q: Venice Co. is considering a new product that will sell for P100 and has a variable cost of P60.…

A: New equipment cost (C) = P 1,500,000 Salvage value (S) = 0 Selling cost = P 100 Variable cost = P 60…

Q: Daily Enterprises is purchasing a $9.8 million machine. It will cost $47,000 to transport and…

A: Free cash flow Free cash flow is the net earnings plus the depreciation as cashflow considers only…

Q: Berry Products is considering two pieces of machinery. The first machine costs P50,000 more than the…

A: When the present value of both the machines would be the same, that discount rate would be…

Q: What is the equivalent annual saving from the purchase

A: Equivalent annual savings is the cost of operating and maintaining an asset annually. It is also…

Q: NUBD Co. is considering a new product that will sell for P100 and has a variable cost of P60.…

A: To get an assured 12% return, we should compute the no of units at which PV of outflow is equal to…

Q: Blues Bros. Inc. is considering an investment in a computer that is capable of producing various…

A: Annual Depreciation (straight line method) = (Cost of the assets - Residual value) / Expected life…

Q: 19

A: The formula to calculate annual depreciation using straight line is given below:

Q: Scott Corporation has a new line of jewelry that will generate sales of $380,000 per year.  The…

A: The cash flow that is generated by a company from its primary business operation is term as the…

Q: A company is considering a machine with one that will save P 50,000 per year for five years in cash…

A: NPV means PV of net benefits which will arise in the future from the project. It is computed by…

Q: Daily Enterprises is purchasing a $9.5 million machine. It will cost $50,000 to transport and…

A: Incremental earnings can be defined as additional rise in earning due to additional expenses of the…

Q: epreciated (straight-line to a salvage value of $120,000 in 10 years.  The extra oven would increase…

A: Given  Barbarian Pizza is analyzing the prospect of purchasing an additional fire brick oven. The…

Q: Quorum Corp. wants to replace a 5-year-old machine with a new machine that is more efficient. The…

A: Solution:- Calculation of the cash flow impact from the sale of the old machine on the initial…

Q: A firm is considering purchasing equipment that will reduce cost by P 400, 000. The equipment costs…

A: Present worth method is one of a valuation method used in capital budgeting. It is calculated by…

Q: Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball…

A: Initial investment of the company is the sum of the cost of high pressure glueball plus after tax…

Q: A company is considering the purchase of a new printer. It can purchase the printer for $900 and…

A: Depreciation = Cost of the printer / Useful life Depreciation = $900 / 6 Depreciation = $150 Tax…

Q: Homer Corp. is considering the purchase of a new piece of equipment. The cost savings from the…

A: Income after tax = $ 169650 Initial cost = $ 585000 Life = 5 Years Salvage value = $ 25000 Annual…

Q: How many units per year the firm must sell for the investment to earn 12% internal rate of return?

A: Internal Rate of Return is the rate at which present value of cash inflow is equal to present value…

Q: uemon Company is taking into account the replacement of an old machine now in use with a new machine…

A: solution : given: annual cash savings before taxes        =P 22,500 tax rate…

Q: Beta Company plans to replace its company car with a new one. The new car costs P120,000 and its…

A: Cost of new car = 120,000 N = 5 years Proceeds from old car = 12,000 Initial Outflow = Cost of new…

Q: The Sip & Dip Donut company is considering the acquisition of a new automatic donut dropper for…

A: Given the information: Acquisition of a new automatic donut dropper: $600,000 Life of machine: 6…

Q: The Lesseig Company has an opportunity to invest in one oftwo mutually exclusive machines that will…

A: Therefore, the NPV of Machine A is $5,678,739.45.

Q: Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball…

A: Here, Purchase price of Glueball is $170,000 Selling Price of Old low-pressure glueball is $30,000…

Q: You are interested in purchasing a machine that will save $200,000 per yearbefore taxes. The cost of…

A: Net present value (NPV) is the difference between the present values of cash inflows and cash…

Q: Van Nuys Company is considering the purchase of a new machine which will cost $7,370. The machine…

A: Given, Purchase cost = $ 7370   Annual cash flows: Revenue = $ 4000 Cost = $ 2000 Net Cash flows…

Q: Help Seve &Eit Submi Homer Corp. is considering the purchase of a new piece of equipment. The cost…

A: Annual Depreciation (straight line method) = (Cost of the assets - Residual value) / Expected life…

Q: Win Corporation is considering the purchase of a P100,000 machine that i expected to result in a…

A: Accounting rate of return: The accounting rate of return is the percentage of return of a particular…

Q: The Jacob Chemical Company is considering building a new potassium sulfate plant. The following cash…

A: Period Cash outlay ($) Discount Factor @12% Net investment ($) 0 4,000,000 1 4,000,000 1…

Q: Homer Corp. is considering the purchase of a new piece of equipment. The cost savings from the…

A: Formula: Annual Net cash flow = Annual income after-tax + Annual depreciation where, Annual…

Q: Belmont Corp. is considering the purchase of a new piece of equipment. The cost savings from the…

A: Formulas:-               Rate of Return = (Net benefit or loss generated by new equipment /…

Q: Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball…

A: Equivalent annual savings is the annual savings made by operating and maintaining the assets over…

Q: Beta Company plans to replace its company car with a new one. The new car costs P120,000 and its…

A: Net investment is the entire amount spent by a firm on capital assets less the cost of obsolescence.…

Q: NUBD Co. is considering a new product that will sell for P100 and has a variable cost of P60.…

A: Here, we should compute the PV of outflows. This PV of inflows should be such that both PV are…

Q: Sampaguita Company is considering the sale of a machine with a book value of P80,000 and 3 years…

A: Following is the answer to the given question

Q: Frank Co. has the opportunity to introduce a new product. Frank expects the product to sell for P60…

A: a) The equipment is to be depreciated using straight line method of depreciation. Depreciation =…

Q: Van Nuys Company is considering the purchase of a new machine which will cost $7,370. The machine…

A: Net present value: It is the difference between the present value of cash inflow and the present…

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.