Use the following to answer ques (Ignore income taxes in this problem.) Carlson Manufacturing has some equipment that s to be rebuilt or replaced. The following information has been gathered relative to this decision: Purchase cost new. Remaining book value.. Cost to rebuild now. Major maintenance at the end of 3 years Annual cash operating costs. Salvage value at the end of 5 years. Salvage value now...... New Present Equipment Equipment $50,000 $48,000 A) $(48,000) B) $(39,000) $30,000 $25,000 $8,000 $10,000 $3,000 $9,000 Carlson uses the total cost approach and a discount rate of 12%. Regardless of which option chosen, rebuild or replace, at the end of five years Carlson Manufacturing plans to close its domestic manufacturing operations and to move these operations to foreign countries. A) $(28,840) B) $(19,160) C) $(14,420) D) $(36,050) Answer: A Level: Medium LO: 1 $5,000 $8,000 $7,000 93. If the new equipment is purchased, the present value of all cash flows that occur now is: C) $(41,000) D) $(37,000) Answer: B Level: Easy LO: 1 94. If the new equipment is purchased, the present value of the annual cash operating costs associated with this alternative is: Use th (Ignes desir optic Opti $60 $20 cas The $30 88 3300 th
Use the following to answer ques (Ignore income taxes in this problem.) Carlson Manufacturing has some equipment that s to be rebuilt or replaced. The following information has been gathered relative to this decision: Purchase cost new. Remaining book value.. Cost to rebuild now. Major maintenance at the end of 3 years Annual cash operating costs. Salvage value at the end of 5 years. Salvage value now...... New Present Equipment Equipment $50,000 $48,000 A) $(48,000) B) $(39,000) $30,000 $25,000 $8,000 $10,000 $3,000 $9,000 Carlson uses the total cost approach and a discount rate of 12%. Regardless of which option chosen, rebuild or replace, at the end of five years Carlson Manufacturing plans to close its domestic manufacturing operations and to move these operations to foreign countries. A) $(28,840) B) $(19,160) C) $(14,420) D) $(36,050) Answer: A Level: Medium LO: 1 $5,000 $8,000 $7,000 93. If the new equipment is purchased, the present value of all cash flows that occur now is: C) $(41,000) D) $(37,000) Answer: B Level: Easy LO: 1 94. If the new equipment is purchased, the present value of the annual cash operating costs associated with this alternative is: Use th (Ignes desir optic Opti $60 $20 cas The $30 88 3300 th
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Use the following to answer questions 93-95:
(Ignore income taxes in this problem.) Carlson Manufacturing has some equipment that n
to be rebuilt or replaced. The following information has been gathered relative to this
decision:
Purchase cost new
Remaining book value..
Cost to rebuild now
Major maintenance at the end of 3 years
Annual cash operating costs.
Salvage value at the end of 5 years.
Salvage value now.......
New
Present
Equipment Equipment
$48,000
A) $(48,000)
B) $(39,000)
C) $(41,000)
D) $(37,000)
$50,000
$30,000
$25,000
$8,000
$10,000
$3,000
$9,000
Carlson uses the total cost approach and a discount rate of 12%. Regardless of which option is
chosen, rebuild or replace, at the end of five years Carlson Manufacturing plans to close its
domestic manufacturing operations and to move these operations to foreign countries.
A) $(28,840)
B) $(19,160)
C) $(14,420)
D) $(36,050)
$5,000
$8,000
$7,000
93. If the new equipment is purchased, the present value of all cash flows that occur now
is:
Answer: B Level: Easy LO: 1
94. If the new equipment is purchased, the present value of the annual cash operating costs
associated with this alternative is:
Answer: A Level: Medium LO: 1
95. If the equipment is rebuilt, the present value of all cash flows that occur now is:
A) $(55,000)
B) $(25,000)
C) $(16,000)
D) $(23,000)
Answer: B Level: Easy LO: 1
Chap
Use th
(Igne
desir
optic
Opti
$60
$20
cas
The
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