Crane Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided here. Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Click here to view PV table. Net present value Machine A Profitability index $75,700 8 years 0 $20,300 $4,870 Machine A Machine B $182,000. 8 years Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative, use either a negative sign preceding the number eg-45 or parentheses eg (45). Round answer for present value to 0 decimal places, e.g. 125 and profitability index to 2 decimal places, e.g. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) 0 $39,700 $10,050 Machine B

Crane Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided here. Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Click here to view PV table. Net present value Machine A Profitability index $75,700 8 years 0 $20,300 $4,870 Machine A Machine B $182,000. 8 years Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative, use either a negative sign preceding the number eg-45 or parentheses eg (45). Round answer for present value to 0 decimal places, e.g. 125 and profitability index to 2 decimal places, e.g. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) 0 $39,700 $10,050 Machine B

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 1MAD: San Lucas Corporation is considering investment in robotic machinery based upon the following...

See similar textbooks

Similar questions

Current Attempt in Progress Sandhill Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided here. Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Net present value Profitability index Machine A $77,300 8 years 0 Click here to view the factor table. Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round answer for present value to O decimal places, e.g. 125 and profitability index to 2 decimal places, e.g. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Which machine should be purchased? eTextbook and Media Save for Later $20,200 $4,970 Machine A…
Use the following information provided to answer the question below: INFORMATION Zeda Enterprises has the option to invest in machinery in projects A and B but finance is only available to invest in one of them. You ar given the following projected data: Initial cost Scrap value Depreciation per year Net profit Year 1 Year 2 Year 3 Year 4 Year 5 Net cash flows Year 1 Year 2 Year 3 Year 4 Year 5 Project A R300 000 R40 000 R52 000 R20 000 R30 000 R50 000 R60 000 R10 000 Project B R300 000 0 R60 000 R90 000 R90 000 R90 000 R90 000 R90 000
Net Present Value Analysis; Uncertain Future Cash Flows; Postaudit Saxon Products, Inc., is investigating the purchase of a robot for use on the company’s assembly line. Selected data relating to the robot are provided below: In addition to the data above, engineering studies suggest that use of the robot will result in a savings of 25,000 direct labor-hours each year. The labor rate is $16 per hour. Also, the smoother work flow made possible by the use of automation will allow the company to reduce the amount of inventory on hand by $400,000. This inventory reduction will take place at the end of the first year of operation; the released funds will be available for use elsewhere in the company. Saxon Products has a 20% required rate of return. Required: 1. Determine the annual net cost savings if the robot is purchased. (Do not include the $400,000 inventory reduction or the salvage value in this computation.) 2. Compute the net present value of the proposed investment in the robot.…
Payback, Accounting Rate of Return, Net Present Value, Internal Rate of Return Follow the format shown in Exhibit 12B.1 and Exhibit 12B.2 as you complete the requirement below. Blaylock Company wants to buy a numerically controlled (NC) machine to be used in producing specially machined parts for manufacturers of trenching machines. The outlay required is $730,671. The NC equipment will last five years with no expected salvage value. The expected after-tax cash flows associated with the project follow: Year Cash Revenues Cash Expenses 1 $1,300,000 $1,000,000 1,300,000 1,000,000 1,000,000 1,000,000 1,000,000 2 3 4 5 1,300,000 1,300,000 1,300,000 Required: Compute the Investment's Internal Rate of return. Enter as a percent. If required, round your answer to the nearest whole percent. IRR = %
An engineering company is evaluating two different options for buying a triaxial testing machine. The expected cash flow for two different options and other required data are given in Table. By considering data given in Table, which option should be preferred by the engineering company. Give all calculation steps. First Cost (TL) Annual Operating COsts (TL) Annual Revenue (TL) Salvage Value (TL) Economic Life (TL) Option A 120000 14000 50000 30000 5 Option B 150000 10000 60000 350000 5 Interest Rate - 0.05 Discount Rate - 0.05
Dogwood Company is considering a capital investment in machinery: (Click the icon to view the data.) 8. Calculate the payback. 9. Calculate the ARR. Round the percentage to two decimal places. 10. Based on your answers to the above questions, should Dogwood invest in the machinery? 8. Calculate the payback. Amount invested Expected annual net cash inflow Payback 1,500,000 24 500,000 3 years 9. Calculate the ARR. Round the percentage to two decimal places. Average annual operating income Average amount invested ARR Data Table Initial investment $ 1,500,000 Residual value 350,000 Expected annual net cash inflows 500,000 Expected useful life 4 years Required rate of return 15%
1 Applecross Dental Services is investigating expanding its operations by acquiring additional teeth cleaning equipment. The equipment would cost $146,000 and management has estimated that it would result in net cash inflows of $14,400 per year. The equipment would have a 15-year useful life with an expected salvage value of $14,200. (Ignore income taxes.) Required: 1. Compute the equipment's IRR. (Hint: Use Microsoft Excel to calculate the discount factor(s).) (Do not round intermediate calculations and round your final answer to 1 decimal place.) Internal rate of return % 2-a. Assume that instead of $14,400, the salvage value in 15 years for the new equipment will be $0. Compute the IRR under this new assumption. (Do not round intermediate calculations and round your final answer to 1 decimal place.) Internal rate of retum % 2-b. This part of the question is not part of your Connect assignment.
Payback, Accounting Rate of Return, Net Present valde, Internal Rate of Retum Follow the format shown in Exhibit 12B.1 and Exhibit 12B.2 as you complete the requirements below. Woodard Company wants to buy a numerically controlled (NC) machine to be used in producing specially machined parts for manufacturers of tractors. The outlay required is $460,800. The NC equipment will last 5 years with no expected salvage value. The expected after-tax cash flows associated with the project follow: Year 1 2 3 4 5 Required: Cash Revenues $612,000 612,000 612,000 612,000 612,000 Cash Expenses $432,000 432,000 432,000 432,000 432,000 1. Compute the payback period for the NC equipment. Round your answer to two decimal places. 2.56 ✓ years Check My Work 2. Compute the NC equipment's ARR. Round the percentage to one decimal place. Assume straight-line depreciation. 19.1 ✓ % 3. Compute the investment's NPV, assuming required rate of return of 10%. Round present value calculations and your final answer…
bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided here. Machine A $75,500 8 years Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Click here to view the factor table. Net present value Profitability index 0 $20,000 $5,000 Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round answer for present value to 0 decimal places, e.g. 125 and profitability index to 2 decimal places, e.g. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Machine A 706 Machine B $180,000 8 years 0 89 $40,000 $10,000 Machine B 161642.40 1.04
Bailey Corporation is considering purchasing one of two new processing machines. Either machinewould make it possible for the company to produce its products more efficiently than it is currentlyequipped to do. Estimates regarding each machine are provided below:Machine A Machine BInitial Investment $113,250 $270,000Estimated life 10 years 10 yearsSalvage value -0- -0-Estimated annual cash inflows $30,000 60,000Estimated annual cash outflows $ 7,500 $15,000Instructions1. Calculate the net present value and profitability index of each machine. Assume an 8% discountrate. Which machine should be purchased?Bailey Corporation did some further research and found one other possible machine that would producethe same type of production efficiencies. The information regarding Machine C is below:Machine CInitial Investment $250,000Estimated life 10 yearsSalvage value $ 30,000Estimated annual cash inflows $ 45,000Estimated annual cash outflows $ 10,0002. Calculate the net present value and…
1. Use the information below for the next two questions. Leaky Pipe Inc. is considering a new machine for its largest product line. The cash flows Lastalled Purchase Price S40, 000 Roduced Cost of Materials S 6,000 per year Labor Savings S9, 000 per year locrease in Working Capital $5, 000 (for Year 0 and I only) Depreciable Life (zero salvage value) 4 years Economic Life 8 years Required Return 12% Tax Rate 40% a . What is the NPV of this machine if it does not replace any other?. b. Suppose the machine replaces another machine with the following characteristics: Book Value of Old Machine $6.000 Market Value of Old Machine $4,000 Remaining Depreciable Life of Old Machine 6years Assume the old machine was not expected to have any salvage value and compute the NPV of the New Machine.
Consider two air-conditioning systems with the cash flow estimates as given below. Use AW analysis to determine the sensitivity of the economic decision to MARR values of 4%, 6%, and 8% per year. Air-Conditioning System 1 System First cost, $ AOC, $ per year Salvage value, $ New compressor and motor cost at midlife, $ Life, years -10,000 -500 -100 -1,850 8 The annual worth of air-conditioning system 1 when the MARR is 4% is $ The annual worth of air-conditioning system 2 when the MARR is 4% is $ The annual worth of air-conditioning system 1 when the MARR is 6% is $ The annual worth of air-conditioning system 2 when the MARR is 6% is $ The annual worth of air-conditioning system 1 when the MARR is 8% is $ The annual worth of air-conditioning system 2 when the MARR is 8% is $ Air-Conditioning System 2 -14,000 -85 -300 -2,540 12