Question

A company is thinking in replacing an existing machine. The old machine it is expected to...

A company is thinking in replacing an existing machine. The old machine it is expected to last for another four (4) years and has a market value of $3,000. Operating estimated costs are $2,000 each year. The new machine or challenger has a cost of $15,000, operating cost of $1,000 and an expected life of 10 years. The salvage value of the new machine is $5,000. Should be replaced, with an interest rate of 10%?

a. Replace, the defender is -$2,946.41

b. Do not replace, the defender is -$3,127.50

c. Do not replace, the defender is -$2,946.41

d. Replace, the challenger is -$2,946.41

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

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
Delafono is evaluating the option of replacing an old pasta-making machine that is expected not to...
Delafono is evaluating the option of replacing an old pasta-making machine that is expected not to last more than two years. During that time, the machine is expected to generate a cash inflow of 20,000 per year. It could be replaced by a new machine at a cost of 150,000. The new machine is more efficient than the current one, and as a result, it is expected to generate a net cash flow of 75,000 per year for three years....
Advanced Electrical Insulator Company is considering replacing a broken inspection machine, which has been used to...
Advanced Electrical Insulator Company is considering replacing a broken inspection machine, which has been used to test the mechanical strength of electrical insulators, with a newer and more efficient one. If repaired, the old machine can be used for another five years, although the firm does not expect to realize any salvage value from scrapping it in five years. Alternatively, the firm can sell the machine to another firm in the industry now for $7,500. If the machine is kept,...
a Canton Movie Theatre is considering selling its old popcorn machine and replacing it with a...
a Canton Movie Theatre is considering selling its old popcorn machine and replacing it with a newer one. The old machine originally cost $5,000 and has been fully depreciated. Annual costs are $3,500. Canton high school is willing to buy it for $1,000. New equipment would cost $18,000 and annual operating costs would be $1,500. The new machine has an estimated useful life of 5 years, and the old machine will last another 5 years. Please Prepare a proposal and...
a Canton Movie Theatre is considering selling its old popcorn machine and replacing it with a...
a Canton Movie Theatre is considering selling its old popcorn machine and replacing it with a newer one. The old machine originally cost $5,000 and has been fully depreciated. Annual costs are $3,500. Canton high school is willing to buy it for $1,000. New equipment would cost $18,000 and annual operating costs would be $1,500. The new machine has an estimated useful life of 5 years, and the old machine will last another 5 years. Please Prepare a proposal and...
A company is considering replacing an old equipment with a new, more advanced machine. The new...
A company is considering replacing an old equipment with a new, more advanced machine. The new machine costs $100,000, will be used for 5 years, and with a salvage value of $10,000. The old machine has a current book value of $55,000, has 5 years of life remaining, an after-tax salvage value of $55,000 today and $5,000 (after-tax) after 5 years, and an annual depreciation of $10,000. The new machine is expected to increase annual sales by $30,000, and an...
A company is considering buying a new machine and replacing the old one. The managers have...
A company is considering buying a new machine and replacing the old one. The managers have collected the following information: Current machine (old machine): ISK ISK The purchase price 50,000 Accumulated depreciation 40,000 Annual operating expenses 5,000 market 1,500 Impact value after 5 years 0 Repair of current machine (old machine): Repair costs, improvements 12,000 Annual operating expenses after improvements 2,000 New engine: The purchase price 56,000 Annual operating expenses 1,000 Impact value after 5 years 0 1. What is...
ABC Co. is considering replacing a machine. The original cost of the old machine currently in...
ABC Co. is considering replacing a machine. The original cost of the old machine currently in use is $10,000 (with accumulated depreciation of $8,000) while the purchase price of the contemplated new machine is $20,000. Annual operating costs for the current machine is $7,000/ year and estimated to be $2,600/ year for the new machine. Both machines will have an estimated remaining useful of 5 years. If sold now, the current machine would have a salvage value of $1,000 while...
Gull Corp. is considering selling its old popcorn machine and replacing it with a newer one....
Gull Corp. is considering selling its old popcorn machine and replacing it with a newer one. The old machine has a book value of $5,000, and its remaining useful life is five years. Annual costs are $4,000. A high school is willing to buy it for $2,000. New equipment would cost $18,000 with annual operating costs of $1,500. The new machine has an estimated useful life of five years. Should the machine be replaced? No Support your answer with calculations....
A 2-year old injection molding machine was expected to serve out its projected life of 5...
A 2-year old injection molding machine was expected to serve out its projected life of 5 years, but a challenger promises to be more efficient and have lower operating costs. We want to perform an AW evaluation to determine if it is economically attractive to replace the defender now or keep it for 3 more years as originally planned.             The defender had a first cost of $300,000, but its market value now is only $100,000. It has chargeable expenses...
(Apply Least Cost Approach) Val-Tek Company is considering replacing an old threading machine with a new...
(Apply Least Cost Approach) Val-Tek Company is considering replacing an old threading machine with a new threading machine that would substantially reduce annual operating costs. Selected data relating to the old and new machines are presented below: Old Machine New Machine Overhauling/Purchase Cost $40,000 $250,000 Salvage Value Now $30,000 - Annual Cash Operating Cost $150,000 $90,000 Salvage Value in Six Years $0 $50,000 Remaining Life 6 Years 6 Years Val-Tek Company uses a 10% discount rate. Should the company replace...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT