Janko Wellspring Incorporated has a pump with a book value of $26,000 and a four-year remaining life. A new, more efficient pump is available at a costof $47,000. Janko can receive $8,200 for trading in the old pump. The old machine has variable manufacturing costs of $27,000 per year. The new pumpwill reduce variable costs by $11,100 per year over its four-year life. Should the pump be replaced?Multiple ChoiceNo, because the company will be $5,600 worse off in total.Yes, because income will increase by $5.500 per yearNo, because income wit decrease by $100 per year.Yes, because income will increase by $5.600 in totalNo, Janko will record a loss of $16,400 r they replace the pump< Prev5 of 24Next >

The objective of the question is to determine whether Janko Wellspring Incorporated should replace…

Answered: Janko Wellspring Incorporated has a…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 14P

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Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6 years, and an estimated salvage value of 800. The replacement machine is eligible for 100% bonus depreciation at the time of purchase- The replacement machine would permit an output expansion, so sales would rise by 1,000 per year; even so, the new machines much greater efficiency would cause operating expenses to decline by 1,500 per year The new machine would require that inventories be increased by 2,000, but accounts payable would simultaneously increase by 500. Dautens marginal federal-plus-state tax rate is 25%, and its WACC is 11%. Should it replace the old machine?
Caduceus Company is considering the purchase of a new piece of factory equipment that will cost $565,000 and will generate $135,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return In Excel, see Appendix C.
Although the Chen Company’s milling machine is old, it is still in relatively good working order and would last for another 10 years. It is inefficient compared to modern standards, though, and so the company is considering replacing it. The new milling machine, at a cost of $110,000 delivered and installed, would also last for 10 years and would produce after-tax cash flows (labor savings and depreciation tax savings) of $19,000 per year. It would have zero salvage value at the end of its life. The project cost of capital is 10%, and its marginal tax rate is 25%. Should Chen buy the new machine?
Janko Wellspring Inc. has a pump with a book value of $24,000 and a four-year remaining life. A new, more efficient pump, is available at a cost of $45,000. Janko can also receive $8,000 for trading in the old pump. The new pump will reduce variable costs by $10,000 per year over its four-year life. The costs not relevant to the decision of whether or not to replace the pump are: Select one: O a. $40,000. O b. $8,000. O c. $10,000. O d. $24,000. O e. $16,000.
Janko Wellspring Incorporated has a pump with a book value of $28,000 and a four-year remaining life. A new, more efficient pump is available at a cost of $49,000. Janko can receive $8,400 for trading in the old pump. The old machine has variable manufacturing costs of $29,000 per year. The new pump will reduce variable costs by $11,300 per year over its four-year life. Should the pump be replaced? Multiple Choice No, because the company will be $4,600 worse off in total. Yes, because income will increase by $4,600 per year. No lankn will record a loss of $16,800 if they replace the pump.
Rocko Incorporated has a machine with a book value of $50,000 and a five-year remaining life. A new machine Is available at a cost of 585.000 and Rocko ca for trading in the old machine. The old machine has varlable manufacturing costs of $24,0o00 per year. The new machine will reduce variable manutacturing over its five-year life. Should the machine be replaced? Multiple Choice Rocko will be not be better or worse off by replacing the machine. Yes, because income will increase by $14,000 per year. Yes, because income will increase by $23,000 in total. No, because the income will decrease by $14,000 per year. No, because the company will be $23,000 worse off in total.
Janko Wellspring Inc. has a pump with a book value of $35,000 and a 4-year remaining life. A new, more efficient pump, is available at a cost of $56,000. Janko can also receive $9100 for trading in the old pump. The new pump will reduce variable costs by $13,100 per year over its four-year life. Should the pump be replaced? Yes, because income will increase by $5500 in total. No, because income will decrease by $13,100 per year. No, because the company will be $5500 worse off in total. No, Janko will record a loss of $18,200 if they replace the pump. Yes, because income will increase by $5500 per year.
Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $48,000 and a remaining useful life of four years. It can be sold now for $58,000. Variable manufacturing costs are $46,000 per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is four years. Machine A Machine B Purchase price $ 116,000 $ 128,000 Variable manufacturing costs per year 21,000 13,000 (a) Compute the income increase or decrease from replacing the old machine with Machine A.(b) Compute the income increase or decrease from replacing the old machine with Machine B.(c) Should Lopez keep or replace its old machine?(d) If the machine should be replaced, which new machine should Lopez purchase? (c) Should Lopez keep or replace its old machine?(d) If the machine should be replaced, which new machine should Lopez purchase? Compute the income increase or…
Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $46,000 and a remaining useful life of five years. It can be sold now for $56,000. Variable manufacturing costs are $44,000 per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is five years. Machine A Machine B Purchase price $ 116,000 $ 129,000 Variable manufacturing costs per year 21,000 13,000 (a) Compute the income increase or decrease from replacing the old machine with Machine A. (b) Compute the income increase or decrease from replacing the old machine with Machine B. (c) Should Lopez keep or replace its old machine? (d) If the machine should be replaced, which new machine should Lopez purchase?
Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $50,000 and a remaining useful life of four years. It can be sold now for $60,000. Variable manufacturing costs are $44,000 per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is four years. Machine A Machine B Purchase Price $116,000 $130,000 Variable manufacturing costs per year 20,000 14,000 (a) Compute the income increase or decrease from replacing the old machine with Machine A.(b) Compute the income increase or decrease from replacing the old machine with Machine B.(c) Should Lopez keep or replace its old machine?(d) If the machine should be replaced, which new machine should Lopez purchase? *please correct my answers
Janko Wellspring Inc. has a pump with a book value of $35,000 and a 4-year remaining life. A new, more efficient pump, is available at a cost of $56,000. Janko can also receive $9,100 for trading in the old pump. The new pump will reduce variable costs by $13,100 per year over its four-year life. Should the pump be replaced? Multiple Choice No, because income will decrease by $13,100 per year. Yes, because income will increase by $5,500 in total. No, Janko will record a loss of $18,200 if they replace the pump. No, because the company will be $5,500 worse off in total. Yes, because income will increase by $5,500 per year.
Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $49,000 and a remaining useful life of four years. It can be sold now for $59,000. Variable manufacturing costs are $43,000 per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is four years. Purchase price Variable manufacturing costs per year Machine A $ 120,000 20,000 Machine B $ 133,000 13,000 (a) Compute the income increase or decrease from replacing the old machine with Machine A. (b) Compute the income increase or decrease from replacing the old machine with Machine B. (c) Should Lopez keep or replace its old machine? (d) If the machine should be replaced, which new machine should Lopez purchase? Complete this question by entering your answers in the tabs below. Req A Req B Req C and D Compute the income increase or decrease from replacing the old machine with Machine A. Note:…

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