In order to increase production capacity, Global Industries is considering replacement an existingproduction machine with a new technologically improved machine effective January 1. The followinginformation is being considered by Global Industries:• The new machine would purchased for P160,000 in cash. Shipping, installation, and testingwould cost additional P30,000•The new machine is expected to increase annual sales by 20,000 units at a sales price of P40 perunit. Incremental operating costs include P30 per unit in variable costs and total fixed costs ofP40,000 per year.•The investment in the new machine will require an immediate increase in working capital ofP35,000. This cash outflow will be recovered at the end of year 5•Global uses straight-line depreciation for financial reporting and tax reporting purposes. The newmachine has an estimated useful life of 5 years and zero salvage valueGlobal is subject to a 40% corporate income tax rateGlobal uses the net present value method to analyze investments and will employ the following+ factors and rates:Present Value of anPresent Value of P1 Ordinary Annuity of P1PeriodAt 10%At 10%10.9090.90920.8261.73630.7512.48740.6833.17050.6213.791Global Industries' net cash outflow in a capital budgeting decision isa. P190,000b. P195,000c. P204,525d. P225,000

Net cash outflow is the amount of initial investment in equipment and installation and investment in…

In order to increase production capacity, Global Industries is considering replacement an ex production machine with a new technologically improved machine effective January 1. The foll information is being considered by Global Industries: The new machine would purchased for P160,000 in cash. Shipping, installation, and to would cost additional P30,000 • The new machine is expected to increase annual sales by 20,000 units at a sales price of P unit. Incremental operating costs include P30 per unit in variable costs and total fixed co P40,000 per year. • The investment in the new machine will require an immediate increase in working cap P35,000. This cash outflow will be recovered at the end of year 5 • Global uses straight-line depreciation for financial reporting and tax reporting purposes. The machine has an estimated useful life of 5 years and zero salvage value Global is subject to a 40% corporate income tax rate • Global uses the net present value method to analyze investments and will employ the foll factors and rates: Present Value of an Present Value of P1 Ordinary Annuity of P1 Period At 10% At 10%

In order to increase production capacity, Global Industries is considering replacement an ex production machine with a new technologically improved machine effective January 1. The foll information is being considered by Global Industries: The new machine would purchased for P160,000 in cash. Shipping, installation, and to would cost additional P30,000 • The new machine is expected to increase annual sales by 20,000 units at a sales price of P unit. Incremental operating costs include P30 per unit in variable costs and total fixed co P40,000 per year. • The investment in the new machine will require an immediate increase in working cap P35,000. This cash outflow will be recovered at the end of year 5 • Global uses straight-line depreciation for financial reporting and tax reporting purposes. The machine has an estimated useful life of 5 years and zero salvage value Global is subject to a 40% corporate income tax rate • Global uses the net present value method to analyze investments and will employ the foll factors and rates: Present Value of an Present Value of P1 Ordinary Annuity of P1 Period At 10% At 10%

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter26: Capital Investment Analysis

Section: Chapter Questions

Problem 5MAD: Home Garden Inc. is considering the construction of a distribution warehouse in West Virginia to...

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