Question

Lakeside Inc. is considering replacing old production equipment with state-of-the-art technology that will allow production cost savings of $10,000 per month. The new equipment will have a five-year life and cost $420,000, with an estimated salvage value of $30,000. Lakeside’s cost of capital is 12%. Table 6-4 and Table 6-5. (Use appropriate factor(s) from the tables provided. Round the PV factors to 4 decimals.)

Required:
Calculate the present value ratio of the new production equipment. (Round your answer to 2 decimal places.)

Lakeside Inc. produces Product A and Product B that require special machining time. Machine time capacity is 17,380 machine hours per month. Lakeside estimates April demand for each product and provides additional information as follows:

	Product A			Product B
April demand		4,800	units		3,800	units
Contribution margin	$	762	per unit	$	680	per unit
Required machine hours		3	per unit		2	per unit

Required:
Determine how many units of each product Lakeside should produce to maximize contribution margin in April.

	Product A Product B    Product mix for April production units units

Lakeside Inc. is considering replacing old production equipment with state-of-the-art technology that will allow production cost savings of $10,000 per month. The new equipment will have a five-year life and cost $390,000, with an estimated salvage value of $30,000. Lakeside’s cost of capital is 10%. Table 6-4 and Table 6-5. (Use appropriate factor(s) from the tables provided. Round the PV factors to 4 decimals.)

Required:
Calculate the net present value of the new production equipment. (Round your final answer to nearest whole dollars.)

Answer 1

for formulas and calculations, refer to the image below -

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