Answer:
Option (B) $6040 is correct
The amount of repair that company could spend on repair on existing machine is maximum $ 6040 (not more than this amount).
The explanation is as follows:
The present value of cost icnurred on new machine (taken for four years)
Net initial investment in new machine after adjusting trade-in value ($ 43000-$15000) = ($28000)
Present value of savings in expense for four years (i.e. $ 5500* Annutiy factor for 5 years @8% i.e 3.9927)= $21960
Therefore, present value of cash outflow from new machine: ($ 6040)
Therefore, the company can plane to spend maximum of $ 6040 on repairs on existing machine. Otherwise, the best option is to replace it with the new machine.
A company is considering replacing a machine that was bought six years ago for $45,000. The...
12. (5 pts) A company is considering replacing a machine that was bought six years ago for $50,000. The machine, however, can be repaired and its life ext five $44,000 and will reduce the operating expenses by $6,000 per year. The seller of the new machine has offered a trade-in allowance of $15,000 for the old machine. If MARR is 12% per year before taxes, how much can the company spend to repair the existing machine? Choose the closest answer....
12. (5 pts) A company is considering replacing a machine that was bought six years ago for $50,000. The machine, however, can be repaired and its life ext five $44,000 and will reduce the operating expenses by $6,000 per year. The seller of the new machine has offered a trade-in allowance of $15,000 for the old machine. If MARR is 12% per year before taxes, how much can the company spend to repair the existing machine? Choose the closest answer....
A high-speed electronic assembly machine was purchased two years ago for $50,000. At the present time, it can be sold for $26,000 and replaced by a newer model having a purchase price of $42,500; or it can be kept in service for a maximum of one more year. The new assembly machine, if purchased, has a useful life of not more than two years. If the before-tax MARR is 18%, when should the old assembly machine be replaced? Use the...
X Company is unhappy with a machine that they bought just a year ago for $40,000. It is considering replacing it with a new machine that will save significant operating costs. Operating costs with the current machine are $64,000 per year; operating costs with the new machine are expected to be $42,000 per year. Both machines will last for 6 more years.The current machine can be sold immediately for $4,000 but will have no salvage value at the end of...
Over the next 3 years a road paving company is considering replacing their existing grading machine which was purchased 5 years ago for $950,000. Depreciation of the grading machine follows a straight line depreciation model with a predicted salvage value of $150,000 three years from now. The operation and maintenance costs of the grading machine have been increasing and are expected to be $20,000 next year, $30,000 two years from now and $50,000 three years from now. The company uses...
X Company is considering replacing one of its machines in order to save operating costs. Operating costs with the current machine are $61,000 per year; operating costs with the new machine are expected to be $43,000 per year. The new machine will cost $72,000 and will last for six years, at which time it can be sold for $2,500. The current machine will also last for six more years but will not be worth anything at that time. It cost...
Corporation purchased a printing machine three (3) years ago and is considering replacing it with a new one which is faster and easier to operate. The old machine has been depreciated over 3 years using straight-line depreciation. Its original installation cost was $15,000. The old machine has been in use for 2 years, and it can be traded in for $3,500. The new machine will be purchased $24,000 and it will also be depreciated over 3 years using the straight-line...
X Company is considering replacing one of its machines in order to save operating costs. Operating costs with the current machine are $65,000 per year; operating costs with the new machine are expected to be $43,000 per year. The new machine will cost $72,000 and will last for four years, at which time it can be sold for $1,000. The current machine will also last for four more years but will not be worth anything at that time. It cost...
Your company plans to produce a product for two more years and then to shut down production. You are considering replacing an old machine used in production with a new machine. The Old machine originally cost $ 717 and was bought Three (3) years ago (i.e. it has depreciated for three years). It could be sold today for $ 255 or sold in two years for $ 162 . The New machine would cost $ 786 and could be sold...
X Company is considering replacing one of its machines in order to save operating costs. Operating costs with the current machine are $60,000 per year; operating costs with the new machine are expected to be $43,000 per year. The new machine will cost $72,000 and will last for six years, at which time it can be sold for $2,500. The current machine will also last for six more years but will not be worth anything at that time. It cost...