Higgins Machine Tools, Inc. is currently manufacturing one of its products on a hydraulic stamping press machine. The unit cost of the product is $16, and in the past year 4,000 units were produced and sold for $24 each. It is expected that the future demand of the product and the unit price will remain steady at 4,000 units per year and $24 per unit, respectively.Defender: The machine has a remaining useful life of three years and could be sold on the open market now for $8,000. Three years from now, thethe machine is expected to have a salvage value of $1,800.Challenger: A new machine would cost $40,000, and the unit manufacturing cost on the new machine is projected to be $14. The new machine has an expected economic life of five years and an expected salvage of $8,000. The appropriate MARR is 10%. The firm does not expect a significant improvement in the machine's technology to occur, and it needs the service of either machine for an indefinite period of time.(a) Compute the cash flows over the remaining useful life if the firm decides to retain the old machine.(b) Compute the cash flows over the useful service life if the firm decides topurchase the machine.(c) Should the new machine be acquired now?
Higgins Machine Tools, Inc. is currently manufacturing one of its products on a hydraulic stamping press machine. The unit cost of the product is $16, and in the past year 4,000 units were produced and sold for $24 each. It is expected that the future demand of the product and the unit price will remain steady at 4,000 units per year and $24 per unit, respectively.
Defender: The machine has a remaining useful life of three years and could be sold on the open market now for $8,000. Three years from now, the
the machine is expected to have a salvage value of $1,800.
Challenger: A new machine would cost $40,000, and the unit
(a) Compute the cash flows over the remaining useful life if the firm decides to retain the old machine.
(b) Compute the cash flows over the useful service life if the firm decides to
purchase the machine.
(c) Should the new machine be acquired now?
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