ZuoTi.Pro
Question

Geneseo Coffee Company is consider buying a new machine. They are considering two machines. Machine A...

Geneseo Coffee Company is consider buying a new machine. They are considering two machines. Machine A costs $450,000 and Machine B $650,000. They will both last 7 years. Machine A will produce $171,924 per year for 7 years and Machine B will produce $276,352 per year. The companies cost of capital is 10%. Compute the simple payback, net present value and internal rate of return for each machine and then make a recomendation as to what machine is best. Assume no tax impact. SHOW ALL YOUR WORK

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE1 e 0828 9 v a x 3 ENG 19 01 2000 MH/66 fx * - MA MB MC MD ME MF MG MH YEAR 766 767 768 769 MACHINE B -650000 770 771 MACHINE

0 0
Add a comment
Know the answer?
Add Answer to:
Geneseo Coffee Company is consider buying a new machine. They are considering two machines. Machine A...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • A coffee company is considering buying a new machine. They are considering two machines. Machine A...

    A coffee company is considering buying a new machine. They are considering two machines. Machine A costs $450,000 and Machine B $650,000. They will both last 7 years. Machine A will produce $171,924 per year for 7 years and Machine B will produce $276,352 per year. The companies cost of capital is 10%. Compute the simple payback, net present value and internal rate of return for each machine and then make a recomendation as to what machine is best. Assume...

  • [20 Marks) Batho & Mondo Enterprises intends buying a new machine and has the option of...

    [20 Marks) Batho & Mondo Enterprises intends buying a new machine and has the option of buying one of the following two machines. Machine A Machine B Purchase price P220,000 250,000 Expected economic life 4 years 5 years Scrap vale P20,000 Expected net cash inflow P50,000 P90,000 End of year 1 P90,000 P90,000 P150,000 P90,000 P110,000 P90,000 P90.000 Minimum required rate of return is 14%. Depreciation is on fixed installment method. (a) (b) (c) (d) Calculate payback period for both...

  • 1A. Define capital budgeting and explain its significance B. Zelnic Corporation needs a food processing machine. It is considering two machines - Machine A and Machine B. Machine A costs $20,000 and...

    1A. Define capital budgeting and explain its significance B. Zelnic Corporation needs a food processing machine. It is considering two machines - Machine A and Machine B. Machine A costs $20,000 and will reduce operating cost by $5,000 per year. Machire B costs only $10,000 but will also reduce costs by $5.000 per year. Calculate the payback period and derr.or strate which machire should be purchased according to the payback method. Formula: Investnent required/Net annual cash inflow C.Explain the present...

  • Co X is considering replacing one of its weaving machines with a new, more efficient machine. The old machine is being d...

    Co X is considering replacing one of its weaving machines with a new, more efficient machine. The old machine is being depreciated on a straight-line basis down to a salvage value of zero over the next 5 years. It has a book value of $200,000 and could be sold for $120,000. The replacement machine would cost $600,000 and have an expected life of 5 years, after which it could be sold for $100,000. Because of reductions in defects and material...

  • A company is considering investing in a new machine to replace an old machine. The estimated...

    A company is considering investing in a new machine to replace an old machine. The estimated operating costs of the two machines per year are: OLD MACHINE    NEW MACHINE DEPRECIATION $64,000 $96,000 LABOR $230,400 $173,600 REPAIRS $62,400 $13,600 OTHER COST $38,400 $9,600 The cost of the new machine is $480,000, and it has no salvage value at the end of its useful life. a. What is the estimated life of the new machine? b. Compute the payback period for...

  • Renegade Industries is considering the purchase of a new machine for the production of latex. Machine...

    Renegade Industries is considering the purchase of a new machine for the production of latex. Machine A costs $3.08 million and will last for six years. Variable costs are 32% of sales, and fixed costs are $1,940,832 per year. Machine B costs $5.09 million and will last for nine years. Variable costs for this machine are 22% of sales and fixed costs are $1,393,004 per year. The sales for each machine will be $9.7 million per year. The required return...

  • The Chang Company is considering the purchase of a new machine to replace an obsolete one....

    The Chang Company is considering the purchase of a new machine to replace an obsolete one. The current machine has a useful life of 8 years and a depreciation of $3000 per year. The proposed machine costs $40000 and will last for 8 years. The $40000 will be 100% depreciated over a straight line basis for 8 years. The new machine is expected to perform more efficiently and will produce a before tax cost savings of 9000 a year. The...

  • Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine...

    Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $2,150,000 and will last for 4 years. Variable costs are 36 percent of sales, and fixed costs are $169,000 per year. Machine B costs $4,530,000 and will last for 7 years. Variable costs for this machine are 27 percent of sales and fixed costs are $110,000 per year. The sales for each machine will be $9.06 million per year. The required return...

  • Johnson Company is considering purchasing one of two new machines. The following estimates are available for...

    Johnson Company is considering purchasing one of two new machines. The following estimates are available for each machine: Machine 1 Machine 2 Initial cost $152,000 $169,000 Annual cash inflows 50,000 60,000 Annual cash outflows 15,000 20,000 Estimated useful life 6 years 6 years The company's minimum required rate of return is 9%. Present Value of an Annuity of 1 Period 8% 9% 10% 11% 12% 15% 6 4.623 4.486 4.355 4.231 4.111 3.784 Requirement: Compute Payback, NPV, PI, and IRR...

  • Franco is considering replacing one of its machines. The old machine is being depreciated on a...

    Franco is considering replacing one of its machines. The old machine is being depreciated on a straight-line basis down to a salvage value of zero over the next 5 years. It has a book value of $200,000 and could be sold for $120,000. The replacement machine would cost $600,000 and have an expected life of 5 years, after which it could be sold for $100,000. Because of reductions in defects and material savings, the new machine would produce cash benefits...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT