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Problem 11 Exercise 1 The cost of a certain machine is 100,000 QAR. It will have...
Exercise 2 A firm is considering which of two machines to install to reduce costs. Both...
Exercise 2 A firm is considering which of two machines to install to reduce costs. Both machines have useful life of 5 years and no salvage value. Machine A costs 820.5 QAR and can be expected to result in 150 QAR savings first year increasing by 50 annually. Machine B costs 1,389 QAR and will provide savings of 300 QAR the first year increasing 50 QAR annually, making the second-year savings 350 QAR, the third-year savings 400 QAR and so...
The cost of a machine for producing a certain part is $50,000. The machine is expected...
The cost of a machine for producing a certain part is $50,000. The machine is expected to have an annual maintenance cost of $15,000 and an $5,000 salvage value after its 5-year economic life. If the variable cost for producing the part is $2.50 per unit and the part can be sold for $5.00 per unit, how many parts per year must the company sell in order to breakeven at an interest rate of 12% per year?
You purchased a machine five years ago for $100,000. It has a useful life of 10...
You purchased a machine five years ago for $100,000. It has a useful life of 10 years and you depreciate it using straight line depreciation to an expected salvage value at the end of its life of $5,000. It currently has a salvage value of $20,000. You are considering purchasing a new machine for $175,000. The new machine is expected to have a salvage value of $35,000 at the end of its life. It will cost $8,000 to ship the...
Ch. Benefit / Cost Analysis Problem 1: ICON Co. will perform a project that will have...
Ch. Benefit / Cost Analysis Problem 1: ICON Co. will perform a project that will have a first cost of $1 million with an annual maintenance cost of $50,000 and a 10 year life. This project is expected to benefit the company with $250,000 per year. But also the lost income to the company is estimated to be $30,000 per year. At an interest rate of 6% per year, should the project be undertaken? Problem2:ICON Co. is planning to make...
(Straight Line Depreciation) A new machine cost $100,000, and will increase inventory by $10,000, A/R by...
(Straight Line Depreciation) A new machine cost $100,000, and will increase inventory by $10,000, A/R by $15,000, and A/P by $5,000. This machine will reduce our expenses by $18,000 per year. The machine will be depreciated to a zero book value in 10 years, but could be sold for $12,000 at the end of 10 years. The marginal tax rate is 35%, and the cost of capital is 12%. Calculate the payback, NPV, IRR, and PI.
A new machine costs $150,000, lasts 10 years, has an annual O&M cost of $50,000, and...
A new machine costs $150,000, lasts 10 years, has an annual O&M cost of $50,000, and has a salvage value of $15,000. If you want to have a 20% ROR, what should be the annual revenue from this machine?
1.A certain engineer is considering a car that will cost $100,000 to buy. After purchase, it...
1.A certain engineer is considering a car that will cost $100,000 to buy. After purchase, it is estimated that the operations and maintenance costs will be $4,000 per year. Also, there is an overhaul cost expected to occur in year 5 that will cost $5,000. Purchase of this car will result in revenues of $8,000 per year for business. After 8 year, its salvage value will be $25,000. Draw the cash flow diagram. 2. Solve the following cash flows to...
PROBLEM NO. 4 Machine X has an initial cost of $10,000, annual maintenance of $500 per...
PROBLEM NO. 4 Machine X has an initial cost of $10,000, annual maintenance of $500 per year, and no salvage value at the end of its four-year useful life. Machine Y costs $20,000. The first year there is no maintenance cost. The second year, maintenance is $100, and increases $100 per year in subsequent years. The machine has an anticipated $5,000 salvage value at the end of its 12-year useful life. If interest is 8%, which machine should be selected?...
Question #1: Your company is considering the purchase of either machine A or machine B as...
Question #1: Your company is considering the purchase of either machine A or machine B as shown in the following table: Initial cost Estimated life Salvage value Other costs Machine A $80,000 20 years $20,000 $18,000 per year Machine B $100,000 25 years $25,000 $15,000 per year for the first 15 years $20,000 per year for the next 10 years 1. If the interest rate is 10%, and all cash flows may be treated as end-of-year cash flows. Assume that...
2. A project requires an initial investment of $100,000 and installation cost of $20,000. The financial...
2. A project requires an initial investment of $100,000 and installation cost of $20,000. The financial manager of the company expects this project will cut the direct production costs by $30,000 per year. For tax purposes the project can be depreciated straight-line over 5 years.. The company will pay insurance expense of $5,000 per year beginning with the installation of the machine. The salvage value of the machine is expected to be $15,000. If the company pays tax at a...
Exercise 2 A firm is considering which of two machines to install to reduce costs. Both machines have useful life of 5 years and no salvage value. Machine A costs 820.5 QAR and can be expected to result in 150 QAR savings first year increasing by 50 annually. Machine B costs 1,389 QAR and will provide savings of 300 QAR the first year increasing 50 QAR annually, making the second-year savings 350 QAR, the third-year savings 400 QAR and so...
Ch. Benefit / Cost Analysis Problem 1: ICON Co. will perform a project that will have a first cost of $1 million with an annual maintenance cost of $50,000 and a 10 year life. This project is expected to benefit the company with $250,000 per year. But also the lost income to the company is estimated to be $30,000 per year. At an interest rate of 6% per year, should the project be undertaken? Problem2:ICON Co. is planning to make...
1.A certain engineer is considering a car that will cost $100,000 to buy. After purchase, it is estimated that the operations and maintenance costs will be $4,000 per year. Also, there is an overhaul cost expected to occur in year 5 that will cost $5,000. Purchase of this car will result in revenues of $8,000 per year for business. After 8 year, its salvage value will be $25,000. Draw the cash flow diagram. 2. Solve the following cash flows to...
PROBLEM NO. 4 Machine X has an initial cost of $10,000, annual maintenance of $500 per year, and no salvage value at the end of its four-year useful life. Machine Y costs $20,000. The first year there is no maintenance cost. The second year, maintenance is $100, and increases $100 per year in subsequent years. The machine has an anticipated $5,000 salvage value at the end of its 12-year useful life. If interest is 8%, which machine should be selected?...
Question #1: Your company is considering the purchase of either machine A or machine B as shown in the following table: Initial cost Estimated life Salvage value Other costs Machine A $80,000 20 years $20,000 $18,000 per year Machine B $100,000 25 years $25,000 $15,000 per year for the first 15 years $20,000 per year for the next 10 years 1. If the interest rate is 10%, and all cash flows may be treated as end-of-year cash flows. Assume that...
2. A project requires an initial investment of $100,000 and installation cost of $20,000. The financial manager of the company expects this project will cut the direct production costs by $30,000 per year. For tax purposes the project can be depreciated straight-line over 5 years.. The company will pay insurance expense of $5,000 per year beginning with the installation of the machine. The salvage value of the machine is expected to be $15,000. If the company pays tax at a...
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