Question

spt X Company is considering replacing one of current machine are $60.000 rating costs with the new machine will cost $65.000 and will last for six yea last for six more years but will not be worth only $6,000. Assuming a discount rate of W with the new machine? 9. AO S-779 B O S-1.130 CO S-1,638 dermg replacing one of its machines in order to save operating costs. Operating costs with the car; operating costs with the new machine are expected to be $48.000 per year. The new and will last for six years, at which time it can be sold for $1,000. The current machine will also out will not be worth anything at that time. It cost $32,000 three years ago but is currently worth & discount rate of 79. what is the incremental net present value of replacing the current machine 5-1,130 CO S-1,638 DO S-2,376 EO S-3.445 FO S-4.996 8 pt X Company any is planning to launch a new product. A market research study, costing $170,000, was conducted last dicating that the product will be successful for the next four years. Profits from sales of the product are expected 9,000 in each of the first two years and $112.000 in each of the last two years. The company plans to undertake ate advertising campaign that will cost $89,000. New manufacturing equipment will have to be purchased for $370,000; it will have mer 4.000; it will have zero disposal value at the end of the four years. Assuming a discount rate of 6%, what is the net present value of launching the new product? 10. AO $15,231 BO $20.257 CO $26,912 DO $35,833 EO $47,658 FO $63,385 pt 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 $50,000, and Machine B costs $58,000. Estimated annual cash flows with the two machines are as follows: Year Machine A Machine B S-6,000 S-7,000 -8,000 -4,000 -8,000 -3,000 -8,000 -3,000 -6,000 -3,000 -5,000 -2,000 -4,000 -2,000 If X Company buys Machine B instead of Machine A, what is the payback period (in years)? 11. AO 2 BO 3 CO 4 DO 5 EO 6 FO7

I just realized how to do 11, but still stucked on 9 and 10. please help

Answer 1

Solution 9:

Computation of NPV - Replacement proposal of Equipment - X Company
Particulars	Period	Amount	PV Factor	Present Value
Cash Outflows:
Cost of new Equipment	0	$65,000	1	$65,000
Sale value of old equipment	0	-$6,000	1	-$6,000
Present value of cash outflows (A)				$59,000
Cash Inflows:
Annual cost savings	1-6	$12,000	4.767	$57,204
Difference in Salvage value of old and new machine	6	$1,000	0.666	$666
Present value of cash Inflows (B)				$57,870
NPV (B-A)				-$1,130

Hence option B is correct.

Solution 10:

Computation of NPV - X Company
Particulars	Period	Amount	PV factor at 5%	Present Value
Cash outflows:
Initial investment (Equipment + Advertising)	0	$459,000.00	1	$459,000
Present Value of Cash outflows (A)				$459,000
Cash Inflows
Year 1	1	$159,000.00	0.943	$149,937
Year 2	2	$159,000.00	0.890	$141,510
Year 3	3	$112,000.00	0.840	$94,080
Year 4	4	$112,000.00	0.792	$88,704
Present Value of Cash Inflows (B)				$474,231
Net Present Value (NPV) (B-A)				$15,231

Hence option A is correct.