Question #2 (covered in Chapter 13) A farm owner is considering replacing his obsolete tractor with...
Question #2 (covered in Chapter 13)
A farm owner is considering replacing his obsolete tractor with one of two new state-of-the-tractors. This new machine would cost $125,000 and would have a ten-year useful life. Unfortunately, the new machine would have no salvage value but would result in annual cost savings of $23,000 per year. The current old tractor can be sold now for $10,000. The farm owner’s Cost of Capital is 10%. The farm owner uses the straight line method of depreciation (this depreciation information is needed only for calculating the “Simple Rate of Return” in Question #3).
a.) Calculate the Net Present Value of replacing the tractor .
b.) Based on this method of comparison, would you recommend replacing the tractor? Why?
Question #3 (covered in Chapter 13)
Based on the above information for Question #2 and your solution to that question,
calculate the following associated with replacing the tractor:
c.) The Profitability Index
d.) The Payback Period
e.) Simple Rate of Return
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Question #2 (covered in Chapter 13)
A farm owner is considering replacing his obsolete
tractor with...
A farm owner is considering replacing his obsolete tractor with one of two new state-of-the- tractors
A farm owner is considering replacing his obsolete tractor with one of two new state-of-the- tractors. This new machine would cost $125,000 and would have a ten-year useful life Unfortunately, the new machine would have no salvage value but would result in annual cost savings of $23,000 per year. The current old tractor can be sold now for S10,000. The farm owner's Cost of Capital is 10%. The farm owner uses the straight line method of depreciation (this depreciation information...
Denny Corporation is considering replacing a technologically obsolete machine with a new state-of-the-art numerically controlled machine....
Denny Corporation is considering replacing a technologically obsolete machine with a new state-of-the-art numerically controlled machine. The new machine would cost $110,000 and would have a sixteen-year useful life. Unfortunately, the new machine would have no salvage value. The new machine would cost $12,000 per year to operate and maintain, but would save $42,000 per year in labor and other costs. The old machine can be sold now for scrap for $11,000. The simple rate of return on the new...
Denny Corporation is considering replacing a technologically obsolete machine with a new state-of-the-art numerically controlled machine....
Denny Corporation is considering replacing a technologically obsolete machine with a new state-of-the-art numerically controlled machine. The new machine would cost $200,000 and would have a sixteen-year useful life. Unfortunately, the new machine would have no salvage value. The new machine would cost $30,000 per year to operate and maintain, but would save $62,000 per year in labor and other costs. The old machine can be sold now for scrap for $20,000. The simple rate of return on the new...
2. Denny Corporation is considering replacing a technologically obsolete machine with a new state-of-the-art numerically controlled...
2.
Denny Corporation is considering replacing a technologically obsolete machine with a new state-of-the-art numerically controlled machine. The new machine would cost $310,000 and would have a ten-year useful life. Unfortunately, the new machine would have no salvage value. The new machine would cost $52,000 per year to operate and maintain, but would save $93,000 per year in labor and other costs. The old machine can be sold now for scrap for $31,000. The simple rate of return on the...
Question 2 Little Star Company is considering replacing its ex estar company is considering replacing its...
Question 2 Little Star Company is considering replacing its ex estar company is considering replacing its existing machine with a new one. The machine was or five years of remaining useful life, with zero bought five years ago at a cost of RM700,000. It has another five years of remaining user salvage value. If it is sold now, the company can get RM200,000. The new machine would cost RM1 million and is expected to have a useful lite o value...
The Sumitomo Chemical Corporation is considering replacing a 5-year-old machine that originally cost $50,000 and can...
The Sumitomo Chemical Corporation is considering replacing a 5-year-old machine that originally cost $50,000 and can be sold for $60,000. This machine is totally depreciated. The replacement machine would cost $125,000, and have a 5-year expected life over which it would be depreciated down using the straight-line method and have no salvage value at the end of five years. The new machine would produce savings before depreciation and taxes of $45,000 per year. Assuming a 34 percent marginal tax rate...
Wind Company is considering replacing an old machine with a new one. The new machine has...
Wind Company is considering replacing an old machine with a new one. The new machine has a cost of $320,000, an expected life of five years and zero salvage value. The before-tax cost savings generated by the new machine are shown as below: Year Before-tax cost savings($) 1 120,000 2 120,000 3 95,000 4 95,000 5 70,000 In this replacement exercise, the old machine can be sold for $80,000 today. Assume a 25% tax rate and a required rate of...
The Sumitomo Chemical Corporation is considering replacing a 5-year-old machine that originally cost $50,000 and can...
The Sumitomo Chemical Corporation is considering replacing a 5-year-old machine that originally cost $50,000 and can be sold for $60,000. This machine is totally depreciated. The replacement machine would cost $125,000, and have a 5-year expected life over which it would be depreciated down using the straight-line method and have no salvage value at the end of five years. The new machine would produce savings before depreciation and taxes of $45,000 per year. Assuming a 34 percent marginal tax rate...
The Elberta Fruit Farm of Ontario always has hired transient workers to pick its annual cherry...
The Elberta Fruit Farm of Ontario always has hired transient workers to pick its annual cherry crop. Janessa Wright, the farm manager, just received information on a cherry picking machine that is being purchased by many fruit farms. The machine is a motorized device that shakes the cherry tree, causing the cherries to fall onto plastic tarps that funnel the cherries into bins. Ms. Wright has gathere following information to decide whether a cherry picker would be a profitable investment...
The Elberta Fruit Farm of Ontario always has hired transient workers to pick its annual cherry...
The Elberta Fruit Farm of Ontario always has hired transient workers to pick its annual cherry crop. Janessa Wright, the farm manager, just received information on a cherry picking machine that is being purchased by many fruit farms. The machine is a motorized device that shakes the cherry tree, causing the cherries to fall onto plastic tarps that funnel the cherries into bins. Ms. Wright has gathere following information to decide whether a cherry picker would be a profitable investment...
Denny Corporation is considering replacing a technologically obsolete machine with a new state-of-the-art numerically controlled machine. The new machine would cost $200,000 and would have a sixteen-year useful life. Unfortunately, the new machine would have no salvage value. The new machine would cost $30,000 per year to operate and maintain, but would save $62,000 per year in labor and other costs. The old machine can be sold now for scrap for $20,000. The simple rate of return on the new...
2.
Denny Corporation is considering replacing a technologically obsolete machine with a new state-of-the-art numerically controlled machine. The new machine would cost $310,000 and would have a ten-year useful life. Unfortunately, the new machine would have no salvage value. The new machine would cost $52,000 per year to operate and maintain, but would save $93,000 per year in labor and other costs. The old machine can be sold now for scrap for $31,000. The simple rate of return on the...
Question 2 Little Star Company is considering replacing its ex estar company is considering replacing its existing machine with a new one. The machine was or five years of remaining useful life, with zero bought five years ago at a cost of RM700,000. It has another five years of remaining user salvage value. If it is sold now, the company can get RM200,000. The new machine would cost RM1 million and is expected to have a useful lite o value...
The Elberta Fruit Farm of Ontario always has hired transient workers to pick its annual cherry crop. Janessa Wright, the farm manager, just received information on a cherry picking machine that is being purchased by many fruit farms. The machine is a motorized device that shakes the cherry tree, causing the cherries to fall onto plastic tarps that funnel the cherries into bins. Ms. Wright has gathere following information to decide whether a cherry picker would be a profitable investment...
The Elberta Fruit Farm of Ontario always has hired transient workers to pick its annual cherry crop. Janessa Wright, the farm manager, just received information on a cherry picking machine that is being purchased by many fruit farms. The machine is a motorized device that shakes the cherry tree, causing the cherries to fall onto plastic tarps that funnel the cherries into bins. Ms. Wright has gathere following information to decide whether a cherry picker would be a profitable investment...
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