You are operating an old machine that is expected to produce a cash inflow of $5,000...
You are operating an old machine that is expected to produce a cash inflow of $5,000 in each of the next 3 years before it fails. You can replace it now with a new machine that costs $20,000 but is much more efficient and will provide a cash flow of $10,000 a year for 4 years.
Calculate the equivalent annual cost of the new machine if the discount rate is 15%. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Homework Answers
EAC of New Machine
EAC = Initial cost*(A/P,15%,4) + 10000
= 20000/( (1-1/(1+rate)^number of terms)/rate) + 10000
= 20000/ ((1-1/1.15^4)/0.15) + 10000
= 17005.31
Add Answer to:
You are operating an old machine that is expected to produce a
cash inflow of $5,000...
you are operating an old machine that is expected to produce a cash inflow of $5100...
you are operating an old machine that is expected to produce a cash inflow of $5100 in each of the next 3 years before it fails. You can replace it now with a new machine that costs $20,100 but is more efficient and will provide a cash flow of $10,150 a year for 4 years. Calculate the equivilant annual cost of the new machine if the discount rate is 14%.
11. A potential replacement machine, Machine New, is expected to produce the following real cash flows:...
11. A potential replacement machine, Machine New, is expected to produce the following real cash flows: Machine New Co -120 Cash Flows ($ thousands) C1 +110 C2 +121 C3 +133 The currently used machine, Machine Old, was purchased 5 years ago for $200,000 and produces an annual real cash flow of $80,000. It has no salvage value but is expected to last another 5 years. The company can replace Machine Old with Machine New either now or at the end...
Question 27 Machine B is expected to produce the following real cash flows: Machine B CO...
Question 27 Machine B is expected to produce the following real cash flows: Machine B CO -120 C 1 130 Cash flows C2 141 15.3 Machine C was purchased five years ago and produces an annual real cash flow of $75,000. It has no salvage value but is expected to last another five years. The company can replace machine C with machine B either now or at the end of five years. The real opportunity cost of capital is 10%....
6A. You can continue to use your less efficient machine at a cost of $20,000 annually for the next five years. Alte...
6A. You can continue to use your less efficient machine at a cost of $20,000 annually for the next five years. Alternatively, you can purchase a 5-year more efficient machine for $30,000 plus $10,000 annual maintenance. At a cost of capital of 15%, The EAC of the new machine will be ............... than that of the old machine by $............ greater/lower 6B. You can continue to use your less efficient machine at a cost of $10,000 annually for the next...
9) You are considering to replace an old machine which was purchased 2 years ago at...
9) You are considering to replace an old machine which was purchased 2 years ago at $120,000. The old machine is still working and has four more years of useful life. If you sell the old mahcine today, you can sell at $40,000. The new machine costs you $160,000 and has a life of four years. The new machine is more efficient, therefore the operting expenses (excluding depreciation) will be reduced by S70,000 per year. Replacing old with new one...
Interstate Manufacturing is considering either replacing one of its old machines with a new machine or having the...
Interstate Manufacturing is considering either replacing one of its old machines with a new machine or having the old machine overhauled, Information about the two alternatives follows. Management requires a 8% rate of return on its investments. Use the (PV of $1. FV of $1. PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Alternative 1: Keep the old machine and have it overhauled. If the old machine is overhauled, it will be kept for...
6B. You can continue to use your less efficient machine at a cost of $10,000 annually...
6B. You can continue to use your less efficient machine at a cost of $10,000 annually for the next five years. Alternatively, you can purchase a 5-year more efficient machine for $15,000 plus $5,000 annual maintenance. At a cost of capital of 15%, you should: A) Buy the new machine and save $525 in equivalent annual costs. B) Keep the old machine and save $525 in equivalent annual costs. c) Keep the old machine and save $1933 in equivalent annual...
Interstate Manufacturing is considering either replacing one of its old machines with a new machine or...
Interstate Manufacturing is considering either replacing one of its old machines with a new machine or having the old machine overhauled. Information about the two alternatives follows. Management requires a 10% rate of return on its investments. Use the PV of $1. FV of $1. PVA of $1, and FVA of $1 (Use appropriate factor(s) from the tables provided.) Alternative 1: Keep the old machine and have it overhauled. If the old machine is overhauled, it will be kept for...
A factory costs $840,000. You reckon that it will produce an inflow after operating costs of...
A factory costs $840,000. You reckon that it will produce an inflow after operating costs of $174,000 a year for 14 years. a. If the opportunity cost of capital is 10%, what is the net present value of the factory? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Net present value $ b. What will the factory be worth at the end of seven years? (Do not round intermediate calculations. Round your answer to 2 decimal...
A project requires an initial investment of $100,000 and is expected to produce a cash inflow...
A project requires an initial investment of $100,000 and is expected to produce a cash inflow before tax of $27,500 per year for five years. Company A has substantial accumulated tax losses and is unlikely to pay taxes in the foreseeable future. Company B pays corporate taxes at a rate of 21% and can claim 100% bonus depreciation on the investment. Suppose the opportunity cost of capital is 10%. Ignore inflation. a. Calculate project NPV for each company. (Do not...
11. A potential replacement machine, Machine New, is expected to produce the following real cash flows: Machine New Co -120 Cash Flows ($ thousands) C1 +110 C2 +121 C3 +133 The currently used machine, Machine Old, was purchased 5 years ago for $200,000 and produces an annual real cash flow of $80,000. It has no salvage value but is expected to last another 5 years. The company can replace Machine Old with Machine New either now or at the end...
Question 27 Machine B is expected to produce the following real cash flows: Machine B CO -120 C 1 130 Cash flows C2 141 15.3 Machine C was purchased five years ago and produces an annual real cash flow of $75,000. It has no salvage value but is expected to last another five years. The company can replace machine C with machine B either now or at the end of five years. The real opportunity cost of capital is 10%....
6A. You can continue to use your less efficient machine at a cost of $20,000 annually for the next five years. Alternatively, you can purchase a 5-year more efficient machine for $30,000 plus $10,000 annual maintenance. At a cost of capital of 15%, The EAC of the new machine will be ............... than that of the old machine by $............ greater/lower 6B. You can continue to use your less efficient machine at a cost of $10,000 annually for the next...
9) You are considering to replace an old machine which was purchased 2 years ago at $120,000. The old machine is still working and has four more years of useful life. If you sell the old mahcine today, you can sell at $40,000. The new machine costs you $160,000 and has a life of four years. The new machine is more efficient, therefore the operting expenses (excluding depreciation) will be reduced by S70,000 per year. Replacing old with new one...
Interstate Manufacturing is considering either replacing one of its old machines with a new machine or having the old machine overhauled, Information about the two alternatives follows. Management requires a 8% rate of return on its investments. Use the (PV of $1. FV of $1. PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Alternative 1: Keep the old machine and have it overhauled. If the old machine is overhauled, it will be kept for...
6B. You can continue to use your less efficient machine at a cost of $10,000 annually for the next five years. Alternatively, you can purchase a 5-year more efficient machine for $15,000 plus $5,000 annual maintenance. At a cost of capital of 15%, you should: A) Buy the new machine and save $525 in equivalent annual costs. B) Keep the old machine and save $525 in equivalent annual costs. c) Keep the old machine and save $1933 in equivalent annual...
Interstate Manufacturing is considering either replacing one of its old machines with a new machine or having the old machine overhauled. Information about the two alternatives follows. Management requires a 10% rate of return on its investments. Use the PV of $1. FV of $1. PVA of $1, and FVA of $1 (Use appropriate factor(s) from the tables provided.) Alternative 1: Keep the old machine and have it overhauled. If the old machine is overhauled, it will be kept for...
A project requires an initial investment of $100,000 and is expected to produce a cash inflow before tax of $27,500 per year for five years. Company A has substantial accumulated tax losses and is unlikely to pay taxes in the foreseeable future. Company B pays corporate taxes at a rate of 21% and can claim 100% bonus depreciation on the investment. Suppose the opportunity cost of capital is 10%. Ignore inflation. a. Calculate project NPV for each company. (Do not...
Most questions answered within 3 hours.
-
Why is the standard error of estimate or prediction higher when
the predictive quality of variables...
asked 20 seconds ago -
4. Suppose that a firm has two plants with the following cost
functions:
MC1 = 5+2q1...
asked 2 minutes ago -
I am currently taking a Foundation of Programming course where
we are being taught Java. We...
asked 22 minutes ago -
Suppose a car is traveling at +22.2 m/s, and the driver sees a
traffic light turn...
asked 12 minutes ago -
1) Write a method that will return the length of smallest string
in an array of...
asked 19 minutes ago -
Select one of the following WSJ articles and apply the type
concepts from producers and users...
asked 37 minutes ago -
Make sure you are able to describe the 3 primary goals of
seating interventions.
asked 42 minutes ago -
How does microfiltration work in industrial milk processing? is
it through pump or is it through...
asked 42 minutes ago -
A spy satellite is in circular orbit around Earth. It makes one
revolution in 7.20 h....
asked 42 minutes ago -
When sending an email from one RMU email account to another RMU
email account, the email...
asked 43 minutes ago -
When 10.0 mg of sucrose is dissolved in enough water to make
100.0 mL of solution...
asked 1 hour ago -
I have volunteered at a butterfly garden and I am supposed to
write a journal reflection...
asked 1 hour ago