Question

rating costs. Operating costs with the 8pt X Company is considering replace S considering replacing one of its machin e to save operating costs. Operating current machine are $64.000 per year operating costs with the new machine are e machine will cost $65.000 and will last for Her year; operating costs with the new machine are expected to be $13,000 per year. The new at which time it can be sold to last for four more years but will not be worth anything at that which time it can be sold for $2,500. "The current machine will also 31.000 three years ago but is currently wort will not be worth anything at that time it only $5,000. Assuming a discount rate of 5%, what is the increm discount rate of 5% what is the incremental net present value of replacing the current mich with the new machine? 9. AO $3,738 BO 55.620 COST 59 DO SI56 EO $16.524FO 52 8 pt X Company is planning to launch a new product. A mark year, indicating that the product will be successful for the next fo witing to launch a new product. A market research study, costing $130,000, was conducted last the product will be successful for the next four years. Profits from sales of the product are expected De S i cach of the first two years in each of the last two years. The company plans to undertak rtising campaign that will cost $82,000. New manufacturing equipment will have to be purchased for ve zero disposal value at the end of the four years. Assuming a discount rate of 7%, what is the net present value of launching the new product? 10. AO $12,391 BO $17.968 CO 526,053 DO $37,777 EO $54,776FO $79,126 PE Company must replace one of its current machines with either Machine A or Machine B. The useful life of both is seven years. Machine A costs $18,000, and Machine B costs $51.000. Estimated annual cash flows with the two machines are as follows: Year Machine A Machine B S-6,000 $-7,000 -8.000 -4,000 -8.000 -3,000 -8,000 -3,000 -6,000 -3,000 -5,000 -2,000 -4,000 -2,000 IF X Company buys Machine B instead of Machine A, what is the payback period in years)? 11. AO 2 BO 3 CO 4 DO 5 EO 6 FO7

Answer 1

			Amount	Period	PVF	PV
Cost of New Machine			$ (65,000)	0	1.000	$ (65,000)
salvage value of old machine			$       5,000	0	1.000	$       5,000
Saving in Operating Cost	$64,000-$43,000		$     21,000	1-4 Years	3.546	$     74,466
Salvage value of new machine			$       2,500	4	0.823	$       2,058
Incremental Benefit/(loss) of new machine						$     16,524