Coronado Industries is contemplating the replacement of an old machine with a new one.. The following information has been gathered: Old Machine New Machine $260000 $520000 Price 78000 Accumulated Depreciation 0- Remaining useful life 10 years -0- 10 years Useful life -0- Annual operating costs $215000 $156000 If the old machine is replaced, it can be sold for $20800. The company uses straight-line depreciation with a zero salvage value for all of its assets The net advantage (disadvantage) of replacing the old machine is O$(5200) O $(52000) $21500 $90800

Coronado Industries is contemplating the replacement of an old machine with a new one.. The following information has been gathered: Old Machine New Machine $260000 $520000 Price 78000 Accumulated Depreciation 0- Remaining useful life 10 years -0- 10 years Useful life -0- Annual operating costs $215000 $156000 If the old machine is replaced, it can be sold for $20800. The company uses straight-line depreciation with a zero salvage value for all of its assets The net advantage (disadvantage) of replacing the old machine is O$(5200) O $(52000) $21500 $90800

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 18P: Filkins Fabric Company is considering the replacement of its old, fully depreciated knitting...

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Filkins Fabric Company is considering the replacement of its old, fully depreciated knitting machine. Two new models are available: Machine 190-3, which has a cost of $190,000, a 3-year expected life, and after-tax cash flows (labor savings and depreciation) of $87,000 per year; and Machine 360-6, which has a cost of $360,000, a 6-year life, and after-tax cash flows of $98,300 per year. Knitting machine prices are not expected to rise because inflation will be offset by cheaper components (microprocessors) used in the machines. Assume that Filkins’ cost of capital is 14%. Should the firm replace its old knitting machine? If so, which new machine should it use? By how much would the value of the company increase if it accepted the better machine? What is the equivalent annual annuity for each machine?
Marigold Corp. is contemplating the replacement of an old machine with a new one. The following information has been gathered: Old Machine New Machine Price $430000 $630000 Accumulated Depreciation 102000 -0- Remaining useful life 10 years -0- Useful life -0- 10 years Annual operating costs $265000 $186600 If the old machine is replaced, it can be sold for $24000. Which of the following amounts is a sunk cost? $186600 $265000 $328000 $630000
Kingbird is considering the replacement of a piece of equipment with a newer model. The following data has been collected: Old Equipment New Equipment Purchase price $229500 $382500 Accumulated depreciation 91800 - 0 - Annual operating costs 306000 244800 If the old equipment is replaced now, it can be sold for $61200. Both the old equipment’s remaining useful life and the new equipment’s useful life is 5 years.For this question only, assume that six months ago Chung’s equipment manager spent $30600 refurbishing the old equipment. Additionally, the equipment manager has determined that the new equipment can be rented out during idle periods to generate $1836 per year. Using this new information, what is the total cash flow associated with replacing the equipment? ($45900) ($321300) ($342720) ($312120)
Crane Company is contemplating the replacement of an old machine with a new one. The following information has been gathered: Old Machine New Machine Price $360000 $630000 Accumulated Depreciation 90000 -0- Remaining useful life 10 years -0- Useful life -0- 10 years Annual operating costs $280000 $190600 If the old machine is replaced, it can be sold for $24000. Which of the following amounts is a sunk cost? ○ $190600 O $280000 ○ $270000 O $630000
Bonita Industries is contemplating the replacement of an old machine with a new one. The following information has been gathered: Old Machine New Machine Price $250000 $500000 Accumulated Depreciation 75000 -0- Remaining useful life 10 years -0- Useful life -0- 10 years Annual operating costs $205000 $150000 If the old machine is replaced, it can be sold for $20000. The company uses straight-line depreciation with a zero salvage value for all of its assets.The net advantage (disadvantage) of replacing the old machine is $(50000) $(5000) $20500 $70000
Vaughn Manufacturing is considering the replacement of a piece of equipment with a newer model. The following data has been collected: Old Equipment New Equipment Purchase price $220500 $367500 Accumulated depreciation 88200 - 0 - Annual operating costs 294000 235200 If the old equipment is replaced now, it can be sold for $58800. Both the old equipment’s remaining useful life and the new equipment’s useful life is 5 years. The company uses straight-line depreciation with a zero salvage value for all of its assets.For the 5-year period, what is the increase or decrease in net income associated with the new equipment? $88200` $58800 $(14700) $(73500)
Salsa Co. is contemplating the replacement of an old machine with a new one. The following information has been gathered: Old Machine New Machine Price $300,000 $600,000 Accumulated Depreciation 89,300 Remaining useful life 10 years Useful life 10 years Annual operating costs $240,000 $180,600 If the old machine is replaced, it can be sold for $24,000. How much is the sunk cost?
Sala Co. is contemplating the replacement of an old machine with a new one. The following information has been gathered: Old Machine New Machine Purchase Price $300,000 $600,000 Accumulated Depreciation 90,000 -0- Annual operating costs $240,000 $180,600 If the old machine is replaced, it can be sold for $30,000. Both machines have a remaining useful life of 10 years. The net advantage (disadvantage) of replacing the old machine is Group of answer choices $30,000 12,000 $24,000 $120,600
Bradley Industries is considering replacing a machine that is presently used in its production process. Which of the following is irrelevant to the replacement decision? Replacement Machine $46,000 Original cost Remaining useful life in years Current age in years Book value. Old Machine $60,000 5 5 OA. the current disposal value of the old machine OB. the original cost of the old machine OC. the sales price of the new machine OD. the annual cash operating costs for both machines 5 0 $30,000 Current disposal value in cash $9.000 Future disposal value in cash (in 5 years) $0 Annual cash operating costs $7,000 Which of the information provided in the table is irrelevant to the replacement decision? $0 $4,500 GETTI
BAK Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided here Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Machine A $75,500 8 years 0 Net present value Profitability index $20,000 $5,000 Click here to view PV table. Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses es (45). Round answer for present value to 0 decimal places, eg. 125 and profitability index to 2 decimal places, eg. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Machine A Which machine should be purchased? Machine A should be purchased Machine B $180,000 8 years 0 $40,000 $10,000 Machine B…
The great tech company is considering replacing one of its machines with a more efficient one. The old machine has a book value of $60,000 and a remaining useful life of 5 years. It can sell the old machine now for $ 265,000. The old machine is being depreciated by 120,000 per year straight line. The new machine has a purchase price of $ 1,175,000 an estimated useful life and 5 years MACRS class life and salvage value of $145,000. Annual economic savings is $255,000 if new machine is installed. Taxes 35% and WACC is 12. Calculate the NPV and IRR of the project and make a decision on accepting the project and why? If expected life of existing machine decreased what effect does this have on the cash flow, discuss only? No calculations needed, just discuss.
BAK Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided below. Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Net present value Machine A $78,200 8 years Profitability index 0 $19,800 $5,130 Machine A Machine B $182,000 8 years Click here to view the factor table. Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative, use either a negative sign preceding the number eg-45 or parentheses eg (45). Round answer for present value to 0 decimal places, e.g. 125 and profitability index to 2 decimal places, e.g. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) 0 $39,600 $10,180 Machine B