Question

VYS Inc will purchase a new machine that costs $30,000 and is expected to last 12...

VYS Inc will purchase a new machine that costs $30,000 and is expected to last 12 years with a salvage value of $3,000. Annual operating expenses for first year is $9,000 and increase by $200 each year thereafter. Annual income is expected to be $12,000 per year. If VYS’s MARR is 10%, determine the NFW of the machine purchase.

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Ans. The new present worth of the cashflows at 10% interest rate is,

NPW = -30000 + (12000 -9000)/(1+0.10) + (12000-9200)*(1+0.10)^2 + (12000-9400)*(1+0.10)^3 + (12000-9600)*(1+0.10)^4 + (12000-9800)*(1+0.10)^5 + (12000-10000)*(1+0.10)^6 + (12000-10200)*(1+0.10)^7  + (12000-10400)*(1+0.10)^8 + (12000-10600)*(1+0.10)^9  + (12000-10800)*(1+0.10)^10 + (12000-11000)*(1+0.10)^11 + (12000-11200 + 3000)*(1+0.10)^2

=> NPW = -$13833.02

Thus, net future worth at 9% interest rate,

NFW = NPW*(P/F, 9%, 12) = -$39048.2814

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Yupi Inc. is considering replacing a machine. These are the data for both the used and...
Yupi Inc. is considering replacing a machine. These are the data for both the used and new machine. Used machine: the machine was purchased for $17,130 one year ago, the current salvage value is $10073 and is expected to have a scrap value of $6734 whenever it is retired. This used machine still has 3 years left of service. From now on, the operating and Maintenance costs are $2383 for the first year and expected to increase by $1967 thereafter....
5.30 A company needs to purchase a new machine to maintain its level of production. The...
5.30 A company needs to purchase a new machine to maintain its level of production. The company is considering three different machines. The costs, savings and service life related to each machine are listed in the table below. Machine A Machine B Machine C First Cost $37,500 $31,000 $35,000 Annual Savings $13,500 $12,000 $12,750 Annual Maintenance $3,000 the first year and increasing by $600 every year thereafter $2,500 $2,000 Salvage Value $5,000 $11,000 $13,000 Service Life 6 years 3 years...
An industrial sewing machine costs $6760 and is expected to have a scrap value of $3732...
An industrial sewing machine costs $6760 and is expected to have a scrap value of $3732 whenever it is retired. Operating and Maintenance costs are $1852 for the first year and expected to increase by $1923 thereafter. If the MARR is 9%, determine the minimum equivalent uniform annual cost associated with the optimal economic life of the machine. The service life of this machine is 5 years
alpha Company is planning to purchase a new machine for $30,000. The payback period is expected...
alpha Company is planning to purchase a new machine for $30,000. The payback period is expected to be five years. The new machine is expected to produce cash flow from operations, net of income taxes, of $7,000 a year in each or the next three years, and $5,500 in the fourth year. What is the amount of cash flow from operations, net of taxes, that the new machine is expected to produce in the last (fifth) year of the payback...
Weir Inc. is considering to purchase of new production machine for $100,000. although the purchase of...
Weir Inc. is considering to purchase of new production machine for $100,000. although the purchase of this machine will not produce ny increase in sales revenues , it will result in a reduction of labor costs by $31,000 per year. the shipping cost is is $7,000. in addition it would cost $3,000 to install this machine properly. also because this machine is extremely efficient its purchase would necessitate an increase in inventory of $25,000. this machine has an expected life...
Delta Inc. is considering the purchase of a new machine which is expected to increase sales...
Delta Inc. is considering the purchase of a new machine which is expected to increase sales by $10,000 in addition to increasing cash expenses by $3,000 annually. Due to the sales increase, Delta will need to increase working capital by $2,000 at the beginning of the project. This working capital investment will not be recouped in the final year of the project. Delta will depreciate the machine using the straight-line method over the project's five-year life to a salvage value...
Kemp Copy Co. is considering to purchase a new high speed copy machine. The machine costs...
Kemp Copy Co. is considering to purchase a new high speed copy machine. The machine costs $500,000 and can be depreciated to zero on a straight-line basis over its life of 5 years. Thus, annual depreciation will be $100,000. The machine is expected to have salvage value of $10,000. Revenues are expected to be $450,000 per year (in real terms), and operating expenses are estimated 60 percent of revenues. Operating cash flows are expected to rise with inflation, forecasted at...
The Springdale Corporation plans to purchase a demolition and wrecking machine to save labor costs. The...
The Springdale Corporation plans to purchase a demolition and wrecking machine to save labor costs. The machine costs $60,000 and has a salvage value of $10,000 at the end of 5 years. The machine is expected to be in operation for 5 years, and it will be depreciated by the straight line method up to the salvage value. The corporation specifies an after-tax MARR including inflation of 10% and has an income tax rate of 34%. The annual inflation rate...
A company is purchasing a new equipment in Class 8 (20% CCA rate -- declining balance...
A company is purchasing a new equipment in Class 8 (20% CCA rate -- declining balance class, half year rule applicable) in 2019 for $30,000. The machine is expected to result in annual revenue of $14,000 for each of the next five years and will be sold at the end of that time for an expected salvage value of $12,000. Maintenance expenses are expected to be $1,400 for the first year and to increase by $200 per year for each...
Expand Your Critical Thinking 7-1 Aurora Company is considering the purchase of a new machine. The...
Expand Your Critical Thinking 7-1 Aurora Company is considering the purchase of a new machine. The invoice price of the machine is $109,000, freight charges are estimated to be $3,000, and installation costs are expected to be $5,000. Salvage value of the new equipment is expected to be zero after a useful life of 5 years. Existing equipment could be retained and used for an additional 5 years if the new machine is not purchased. At that time, the salvage...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT