Exercise 23-10 (Algo) Keep or replace Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $49,000 and a remaining useful life of four years. It can be sold now for $59,000. Variable manufacturing costs are $50,000 per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is four years. Purchase price Variable manufacturing costs per year Machine A $ 123,000 19,000 Machine B $ 137,000 14,000 (a) Compute the income increase or decrease from replacing the old machine with Machine A (b) Compute the income increase or decrease from replacing the old machine with Machine B (c) Should Lopez keep or replace its old machine? (d) If the machine should be replaced, which new machine should Lopez purchase?

Exercise 23-10 (Algo) Keep or replace Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $49,000 and a remaining useful life of four years. It can be sold now for $59,000. Variable manufacturing costs are $50,000 per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is four years. Purchase price Variable manufacturing costs per year Machine A $ 123,000 19,000 Machine B $ 137,000 14,000 (a) Compute the income increase or decrease from replacing the old machine with Machine A (b) Compute the income increase or decrease from replacing the old machine with Machine B (c) Should Lopez keep or replace its old machine? (d) If the machine should be replaced, which new machine should Lopez purchase?

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter10: Project Cash Flows And Risk

Section: Chapter Questions

Problem 13PROB

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this is a 2 part question Exercise 23-10 (Algo) Keep or replace LO P5 Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $49,000 and a remaining useful life of five years. It can be sold now for $59,000. Variable manufacturing costs are $49,000 per year for this old machine Information on two alternative replacement machines follows The expected useful life of each replacement machine is five years. Purchase price Variable manufacturing costs per year (a) Compute the income increase or decrease from replacing the old machine with Machine A (b) Compute the income increase or decrease from replacing the old machine with Machine B (c) Should Lopez keep or replace its old machine? (d) If the machine should be replaced, which new machine should Lopez purchase? Req A Complete this question by entering your answers in the tabs below. Revenues Machine A: Keep or Replace Analysis Req B Compute the income increase or decrease from…
Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $49,000 and a remaining useful life of four years. It can be sold now for $59,000. Variable manufacturing costs are $43,000 per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is four years. Purchase price Variable manufacturing costs per year Machine A $ 120,000 20,000 Machine B $ 133,000 13,000 (a) Compute the income increase or decrease from replacing the old machine with Machine A. (b) Compute the income increase or decrease from replacing the old machine with Machine B. (c) Should Lopez keep or replace its old machine? (d) If the machine should be replaced, which new machine should Lopez purchase? Complete this question by entering your answers in the tabs below. Req A Req B Req C and D Compute the income increase or decrease from replacing the old machine with Machine A. Note:…
Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $49,000 and a remaining useful life of five years. It can be sold now for $59,000. Variable manufacturing costs are $47,000 per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is five years. Purchase price Variable manufacturing costs per year Machine A $ 117,000 20,000 Machine B $ 130,000 12,000 (a) Compute the income increase or decrease from replacing the old machine with Machine A. (b) Compute the income increase or decrease from replacing the old machine with Machine B. (c) Should Lopez keep or replace its old machine? (d) If the machine should be replaced, which new machine should Lopez purchase? Complete this question by entering your answers in the tabs below. Req A Req B Req C and D Compute the income increase or decrease from replacing the old machine with Machine A.…
Provide answer in table format Xinhong Company is considering replacing one of its manufacturing machines. The machine has a book value of $43,000 and a remaining useful life of five years, at which time its salvage value will be zero. It has a current market value of $53,000. Variable manufacturing costs are $33,900 per year for this machine. Information on two alternative replacement machines follows. Alternative A Alternative B Cost $ 120,000 $ 119,000 Variable manufacturing costs per year 22,500 10,300 Calculate the total change in net income if Alternative A, B is adopted. Should Xinhong keep or replace its manufacturing machine? If the machine should be replaced, which alternative new machine should Xinhong purchase?
15. You need a metal cutting machine for your operations. Your current machine is worn out so you are trying to decide which one of two machines to buy as a replacement. Whichever machine you purchase will likewise be replaced after its useful life. Machine A costs $221,000 and costs $16,000 a year to operate over a 3-year life. Machine B costs $190,000 and costs $21,000 to operate over a 2-year life. Given this information, which one of the following statements is correct if the applicable discount rate is 9 percent? a. Machine A cuts the annual cost by $25,702 as compared to machine B. b. Machine B cuts the annual cost by $34,559 as compared to machine A. c. The equivalent annual cost of machine A is -$261,501. d. The equivalent annual cost of machine B is -$236,129. e. You are indifferent between using either machine. You need to compute and compare the EACs of the two machines (this is deliberately left for you to solve).
i 4 ances Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $47,000 and a remaining useful life of five years. It can be sold now for $57,000. Variable manufacturing costs are $50,000 per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is five years. Purchase price Variable manufacturing costs per year (a) Compute the income increase or decrease from replacing the old machine with Machine A (b) Compute the income increase or decrease from replacing the old machine with Machine B. (c) Should Lopez keep or replace its old machine? (d) if the machine should be replaced, which new machine should Lopez purchase? Req A Complete this question by entering your answers in the tabs below. Revenues Machine A: Keep or Replace Analysis Req B Compute the income increase or decrease from replacing the old machine with Machine A. (Amounts to be…
Problem:15 Engine valves company is considering building an assembly plant .The decision has been narrowed down to two possibilities. The company desires to choose the best plant at a level of operation of 10,000 gadgets a month. Both plants have an expected life of 10 years and are expected to have any salvage value at the time of their retirements .The cost of capital is 10 percent . Assuming a zero income tax rate , suggest what would be the desirable choice ? Cost of the monthly output of 10,000 valves Large Plant Rs Small plant Rs Initial cost 30,00,000 22,93,500 Direct labour : First shift 15,00,000 per year 7,80,000 per year Second shift 9.00,000 per year Overheads 2,40,000 per year 2,10,000 per year
Brief Exercise 20-7 Your answer is partially correct. Try again. Bryant Company has a factory machine with a book value of $93,500 and a remaining useful life of 6 years. It can be sold for $30,600. A new machine is available at a cost of $534,000. This machine will have a 6-year useful life with no salvage value. The new machine brings annual variable manufacturing costs from $556,800 to $480,200. Prepare an analysis showing whether the old machine should be retained or replaced. (In the first two columns, enter costs and expenses as positive amounts, and any amounts received as negative amounts. In the third column, enter net income increases as positive amounts and decreases as negative amounts. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Variable manufacturing costs New machine cost Sell old machine Total Retain Equipment The old factory machine should be 556800 556800 retained + Replace Equipment 480200 534000 -30600…
16) New-Project Analysis The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $810,000, and it would cost another $19,500 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $471,000. The MACRS rates for the first three years are 0.3333, 0.4445, and 0.1481. The machine would require an increase in net working capital (inventory) of $16,500. The sprayer would not change revenues, but it is expected to save the firm $314,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 25%. (Ignore the half-year convention for the straight-line method.) Cash outflows, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest dollar. What is the Year-0 net cash flow? ________$ What are the net operating cash flows in Years 1, 2, and 3? Year 1: $ Year 2: $ Year 3: $…
Current Attempt in Progress A commercial 3D printer is purchased for $380,000. The salvage value of the printer decreases by 35% each year that it is held. The cost to operate and maintain the machine the first year it is used is $12,500; these costs increase by $4,000 each year. What is the optimal replacement interval and minimum EUAC for the printer, assuming a MARR of 10% is used? Click here to access the TVM Factor Table Calculator. ORI: years EUAC": $ Carry all interim calculations to 5 decimal places and then round your final answers to a whole number. The tolerance is +5 for the EUAC'.
A machine, costing $25000 to buy and $ 3000 per year to operate, will save mainly labor expenses in packaging over 6 years. The anticipated salvage value of the machine at the end of 6 years is $5000. To desire a 10% return on investment (rate of return), what is the minimum required annual savings in labor from this machine? Select one: a. $8092 b. $4050 c. $9010 d. $6092 12
QUESTION ONEETM Co is considering investing in machinery costing K150,000 payable at the start of firstyear. The new machine will have a three-year life with K60,000 salvage value at the end of 3 years. Other details relating to the project are as follows.Year 1 2 3 Demand (units) 25,500 40,500 23,500 Material cost per unit K4.35 K4.35 K4.35 Incremental fixed cost per year K45,000 K50,000 K60,000Shared fixed costs K20,000 K20,000 K20,000The selling price in year 1 is expected to be K12.00 per unit. The selling price is expected to rise by 16% per year for the remaining part of the project’s life.Material cost per unit will be constant at K4.35 due to the contract that ETM has with its suppliers. Labor cost per unit is expected to be K5.00 in year 1 rising by 10% per year beyond the first year. Fixed costs (nominal) are made of the project fixed cost and a share of head office overhead. Working capital will be…