Homework Answers
Answer-
Given
Discount rate = 15 %
Machine A
NPV = $ 20000
Estimated life = 4 years
Machine B
NPV = $ 25000
Estimated life = 5 years
The firm should buy machine B as it has higher NPV of $ 25000 than the machine A with NPV of $ 20000 and the estimated life is also higher for machine B.
The correct option is c . The firm should buy mavchine B.
Note - The discount rate is not applied here as the Net Present Value (NPV) is directly given which is obtained after discounting the original amount by applying the discount rate.
Add Answer to:
Practice Question 14 A firm can either purchase machine A or B for its project. Machine...
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...
You are considering the purchase of one of two machines used in your manufacturing plant. Machine...
You are considering the purchase of one of two machines used in your manufacturing plant. Machine A has a life of two years, costs $20,000 initially, and then $4,000 per year in maintenance costs. Machine B costs $25,000 initially, has a life of three years, and requires $3,500 in annual maintenance costs. Either machine must be replaced at the end of its life with an equivalent machine. Which is the better machine for the firm? The discount rate is 14...
Spike Inc is considering the purchase of a new machine for the production of computers. Machine A...
Spike Inc is considering the purchase of a new machine for the production of computers. Machine A costs $3,400,000 and will last for 6 years. Variable costs are 20% of sales and fixed costs are $850,000 per year. Machine B costs $5,600,000 and will last for 10 years. Variable costs for the machine are 15% of sales and fixed costs are $1,000,000 per year. The sales for each machine will be $5,000,000 per year. The required rate of return is 8%,...
(New project analysis) Garcia's Truckin' Inc. is considering the purchase of a new production machine for...
(New project analysis) Garcia's Truckin' Inc. is considering the purchase of a new production machine for $150,000. The purchase of this machine will result in an increase in earnings before interest and taxes of $40,000 per year. To operate the machine properly, workers would have to go through a brief training session that would cost $5,000 after taxes. It would cost$6,000 to install the machine properly. Also, because this machine is extremely efficient, its purchase would necessitate an increase in...
Suppose that your firm is trying to decide between two machines that will do the same...
Suppose that your firm is trying to decide between two machines that will do the same job. Machine A costs $50,000, will last for ten years and will require operating costs of $5,000 per year. At the end of ten years it will be scrapped for $10,000. Machine B costs $60,000, will last for seven years and will require operating costs of $6,000 per year. At the end of seven years it will be scrapped for $5,000. Which of the...
X Company must replace one of its current machines with either Machine A or Machine B....
X Company must replace one of its current machines with either Machine A or Machine B. The useful life of both machines is seven years. Machine A costs $52,000, and Machine B costs $60,000. Estimated annual cash flows with the two machines are as follows: Year NM Machine A $ 6,000 8,000 8,000 8,000 6,000 5,000 4,000 Machine B $ 7,000 4,000 3,000 3,000 3,000 2,000 2,000 N If X Company buys Machine B instead of Machine A, what is...
X Company must replace one of its current machines with either Machine A or Machine B....
X Company must replace one of its current machines with either
Machine A or Machine B. The useful life of both machines is seven
years. Machine A costs $51,000, and Machine B costs $70,000.
Estimated annual cash flows with the two machines are as
follows:
Year
Machine A
Machine B
1
$-6,000
$-7,000
2
-8,000
-4,000
3
-8,000
-3,000
4
-8,000
-3,000
5
-6,000
-3,000
6
-5,000
-2,000
7
-4,000
-2,000
If X Company buys Machine B instead of Machine...
Managers at Acme Doohickey Co. are considering two projects. Project A: purchase and operation of a...
Managers at Acme Doohickey Co. are considering two projects. Project A: purchase and operation of a new machine, called the Starpunch, for manufacturing Acme doohickeys. The life of this project is three years. Project B: purchase and operation of a new machine, called the Sunspot, for manufacturing Acme doohickeys. The life of this project is two years. The machines have identical capacity and produce the same doohickey. The company only has floor space in its machinists’ shop for one machine....
X Company must replace one of its current machines with either Machine A or Machine B....
X Company must replace one of its current machines with either Machine A or Machine B. The useful life of both machines is seven years. Machine A costs $51,000, and Machine B costs $67,000. Estimated annual cash flows with the two machines are as follows: Year Machine A $-6,000 -8,000 -8,000 -8,000 -6,000 -5,000 -4,000 Machine B $-7,000 -4,000 -3,000 -3,000 -3,000 -2,000 -2,000 If X Company buys Machine B instead of Machine A, what is the payback period (in...
X Company must replace one of its current machines with either Machine A or Machine B....
X Company must replace one of its current machines with either Machine A or Machine B. The useful life of both machines is seven years. Machine A costs $49,000, and Machine B costs $68,000. Estimated annual cash flows with the two machines are as follows: Year Machine A $-6,000 -8,000 -8,000 -8,000 -6,000 -5,000 -4,000 Machine B $-7,000 -4,000 -3,000 -3,000 -3,000 -2,000 -2,000 If X Company buys Machine B instead of Machine A, what is the payback period (in...
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...
X Company must replace one of its current machines with either Machine A or Machine B. The useful life of both machines is seven years. Machine A costs $52,000, and Machine B costs $60,000. Estimated annual cash flows with the two machines are as follows: Year NM Machine A $ 6,000 8,000 8,000 8,000 6,000 5,000 4,000 Machine B $ 7,000 4,000 3,000 3,000 3,000 2,000 2,000 N If X Company buys Machine B instead of Machine A, what is...
X Company must replace one of its current machines with either
Machine A or Machine B. The useful life of both machines is seven
years. Machine A costs $51,000, and Machine B costs $70,000.
Estimated annual cash flows with the two machines are as
follows:
Year
Machine A
Machine B
1
$-6,000
$-7,000
2
-8,000
-4,000
3
-8,000
-3,000
4
-8,000
-3,000
5
-6,000
-3,000
6
-5,000
-2,000
7
-4,000
-2,000
If X Company buys Machine B instead of Machine...
X Company must replace one of its current machines with either Machine A or Machine B. The useful life of both machines is seven years. Machine A costs $51,000, and Machine B costs $67,000. Estimated annual cash flows with the two machines are as follows: Year Machine A $-6,000 -8,000 -8,000 -8,000 -6,000 -5,000 -4,000 Machine B $-7,000 -4,000 -3,000 -3,000 -3,000 -2,000 -2,000 If X Company buys Machine B instead of Machine A, what is the payback period (in...
X Company must replace one of its current machines with either Machine A or Machine B. The useful life of both machines is seven years. Machine A costs $49,000, and Machine B costs $68,000. Estimated annual cash flows with the two machines are as follows: Year Machine A $-6,000 -8,000 -8,000 -8,000 -6,000 -5,000 -4,000 Machine B $-7,000 -4,000 -3,000 -3,000 -3,000 -2,000 -2,000 If X Company buys Machine B instead of Machine A, what is the payback period (in...
Most questions answered within 3 hours.
-
A mixture contains 5.432 g of
sand and 2.521 g of salt. What is the percentage...
asked 3 minutes ago -
A 8.62 -m ladder with a mass of 21.1 kg lies flat on the ground.
A...
asked 2 minutes ago -
What problem would arise from this vanadium-based treatment over
the course of a lifetime in diabetes
asked 1 minute ago -
Homework: Create a Class.... from scratch
Design , implement and test a class that can be...
asked 17 minutes ago -
A project has a service life of five years with the initial
investment outlay of $200,000....
asked 13 minutes ago -
Employee develop involves longer term training and opportunities
that while not immediately needed on a current...
asked 13 minutes ago -
Why is the reticulum the affected compartment of the
stomach?
Group of answer choices
It has...
asked 15 minutes ago -
(Print distinct numbers) C++
Write a program that reads in 10 numbers and displays distinct
numbers...
asked 15 minutes ago -
A 3.0275 g sample of KHP (a primary standard, 1:1 acid:base,
FM=204.23 g/mol) is titrated with...
asked 21 minutes ago -
1. You need to make an aqueous solution of
0.165 M barium acetate for an
experiment...
asked 21 minutes ago -
Let X be a discrete random variable with the following PMF.
Px(k) =
1/4 for k...
asked 25 minutes ago -
ONLY use the information provided here on the
firm's Mission Statement. Written assessment must include
(1)...
asked 34 minutes ago