Investment Required at time 0, I = $300,000
Salvage Value after 8 years, S = $50,000
Time , n = 8 years
Minimum Acceptable Rate of Return, MARR = 18%
Inflation, f = 2%
Inflation adjusted MARR, i = MARR + f + (MARR)*(f) = 20.36%
Annual Capital Recovery Cost, ACRC = I(A/P, i, n) - S(A/F, i, n)
Discounting Factors:
ACRC = $300,000 * (0.2634) - $50,000*(0.0598)
ACRC = $79,023.05 - $2990.509
ACRC = $76,032.55
1. [7pts] A machine is to be purchased for $300,000, used for 8 years, and then...
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4. (20 points) A machine purchased 3 years ago for $140,000 is now too slow to satisfy demand. The machine can be upgraded now for $70,000 (and thus be able to satisfy demand) or be sold to a smaller company for $40,000. After upgrading, the existing machine will have an annual operating cost of $85,000 per year, and an estimated life of 3 years (after upgrading you will keep the machine for...
2. [7pts) A $80,000 piece of equipment will be purchased to produce a product. Production will continue for 5 years and the equipment will then be salvaged (estimated at $20,000). The equipment will used 8 hours a day, 270 days a year, and produces 200 units of product per hour. What is the unit cost of this equipment? MARR=20%.
On January 1, 2013, Marlon Humphrey Industries purchased a machine at a cost of $300,000. The machine had a useful life of 10-years, estimated salvage value of $20,000, and was depreciated using the straight-line method. On January 1, 2018, Humphrey sold the machine for $140,000 cash. The journal entry to record the sale of the machine would include
12.22 Four years ago, a firm purchased an industrial batch oven for $23,000. The oven had an estimated life of 10 years with $1,000 salvage value. These original esti- mates are still good. If sold now, the machine will bring in $2,000. If sold at the end of the year, it will bring in $1,500. The market value after the first year has decreased at annual rate of 25%. Annual operating costs for subsequent years are $3,800. A new machine...
A machine can be purchased for $300,000 and used for five years, yielding the following net incomes. In projecting net incomes, double-declining depreciation is applied, using a five-year life and a zero salvage value. Year 1 Year 2 Year 3 Year 4 Year 5 Net income $ 21,500 $ 29,000 $ 60,000 $ 39,500 $ 132,000 Compute the machine’s payback period (ignore taxes). (Round payback period answer to 3 decimal places.) Computation of Annual Depreciation Expense Year Beginning Book Value...
Assume Corbins ,Inc purchased an automated machine 5 years ago that had an estimated economic life of 10 years. The Automated Machines originally cost $300,000 and has been fully depreciated, leaving a current book value of $0. The actual market value of this drill press is $80,000. The company is considering replacing the automated machine with a new one costing $380,000. Shipping and installation charges will add an additional $10,000 to the cost. Corbins., Inc also has paid a sunk...
ECON
You have purchased a machine costing $26,000. The machine will be used for two years, and at the end of this time, its salvage value is expected to be $18,000. The machine will be used 7,000 hours during the first year and 9,000 hours during the second year. The expected annual net savings will be $36,000 during the first year and $49,000 during the second year. If your interest rate is 14%, what would be the equivalent net savings...
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4. (20 points) A machine purchased 3 years ago for $140,000 is now too slow to satisfy demand. The machine can be upgraded now for $70,000 (and thus be able to satisfy demand) or be sold to a smaller company for $40,000. After upgrading, the existing machine will have an annual operating cost of $85,000 per year, and an estimated life of 3 years after upgrading you will keep the...
A machine purchased three years ago for $300,000 has a current book value using straight-line depreciation of $177,000; its operating expenses are $31,000 per year. A replacement machine would cost $238,000, have a useful life of eleven years, and would require $13,000 per year in operating expenses. It has an expected salvage value of $67,000 after eleven years. The current disposal value of the old machine is $80,000; if it is kept 11 more years, its residual value would be...
Robinson Corporation currently processes seafood with a machine it purchased several years ago. The machine, which originally cost $1,000,000, currently has a book value of $400,000. Robinson is considering replacing the machine with a newer, more efficient one. The new machine will cost $1,400,000 and will require an additional $100,000 for delivery and installation. The new machine will also require Robinson to increase its investment in receivables and inventory by $400,000. The new machine will be depreciated on a straight-line...