Required: 1. What is the estimated net present value of purchasing the new machine? (Do not round Intermediate calculation. Round your answers to the nearest whole dollar amount.) 2. How much would Steve Bishop's compensation be increased or decreased by the investment? (Negative amounts should be Indicated by a minus sign.)
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- Required information [The following information applies to the questions displayed below.] Kate's Candy Corporation makes chewy chocolate candies at a plant in Winston-Salem, North Carolina. Steve Bishop, the production manager at this facility, installed a packaging machine last year at a cost of $700,000. This machine is expected to last for 10 more years with no residual value. Operating costs for the projected levels of production, before depreciation, are $140,000 annually. Steve has just learned of a new packaging machine that would work much more efficiently in the production line. This machine would cost $812,000 installed, but the annual operating costs would be only $56,000 before depreciation. This machine would be depreciated over 10 years with no residual value. He could sell the current packaging machine this year for $350,000. Steve has worked for Kate's Candy for 7 years. He plans to remain with the firm for about 2 more years, when he expects to become a vice president…[The following information applies to the questions displayed below.] Kate's Candy Corporation makes chewy chocolate candies at a plant in Winston-Salem, North Carolina. Steve Bishop, the production manager at this facility, Installed a packaging machine last year at a cost of $500,000. This machine is expected to last for 10 more years with no residual value. Operating costs for the projected levels of production, before depreciation, are $100,000 annually. 1. Steve has just learned of a new packaging machine that would work much more efficiently in the production line. This machine would cost $580,000 Installed, but the annual operating costs would be only $40,000 before depreciation. This machine would be depreciated over 10 years with no residual value. He could sell the current packaging machine this year for $250,000. equired: What is the estimated net present value of purchasing the new machine? (Do not round Intermediate calculation. Round your nswers to the nearest whole…Barron Chemical uses a thermoplastic polymer to enhance the appearance of certain RV panels. The initial cost of one process was $122,000 with annual costs of $45,000. Revenues are $79,000 in year 1, increasing by $1000 per year. A salvage value of $21,000 was realized when the process was discontinued after 8 years. What rate of return did the company make on the process? The rate of return made by the company is ____% ?
- 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…The TechHelp Company produces and sells 7,500 modular computer desks per year at a selling price of $ 600 each. Its current production equipment, purchased for$ 1, 500 ,000 and with a 5-year useful life, is only 2 years old. It has a terminal disposal value of $0 and is depreciated on a straight-line basis. The equipment has a current disposal price of$ 550, 000. However, the emergence of a new molding technology has led TechHelp to consider either upgrading or replacing the production equipment. The following table presents data for the two alternatives:Cari Heat (CH) Ltd. is currently faced with a critical decision regarding its productionequipment. Cari Heat (CH) is evaluating two options for its production equipment:upgrading or replacing. The company manufactures and sells 7,500 heaters every year, eachpriced at $920. The current production equipment, which was acquired at a cost of$2,150,000, has been in use for just two years and is subject to straight-line depreciation overa five-year useful life. Furthermore, it possesses no terminal disposal value, but it can becurrently sold for $650,000.The following table presents data for the two alternatives:A B C1 Choice Upgrade Replace2 One-time equipment costs $3,500,000 $5,200,0003 Variable manufacturing cost per Heater $180 $904 Remaining useful life of equipment (years) 3 35 Terminal disposal value of equipmentRequired0 01. Prepare a schedule, for the remaining 3 years, reflecting whether CH should upgrade itsproduction line or replace it? 2. Assuming that all other data are as…
- CariTech (CT) Company produces and sells 7,000 Special purpose chairs per year at a selling price of $850 each. Its current production equipment, purchased for $1,850,000 and with a five-year useful life, is only two years old. It has a terminal disposal value of $0 and is depreciated on a straight-line basis. The equipment has a current disposal price of $500,000.However, the emergence of a new technology has led CT to consider either upgrading or replacing the production equipment. The following table presents data for the two alternatives: A B c 1. Choice Upgrade Replace 2. One-time equipment costs $3,000,000 $4,800,000 3. Variable manufacturing cost per chair $150 $70 4. Remaining useful life of equipment (years) 3 3 5. Terminal disposal value of equipment 0 0 Required1) Should CT upgrade its production line or replace it? Show your calculations. 2) Suppose the one-time equipment cost to replace the…Required information [The following information applies to the questions displayed below.] Wendell's Donut Shoppe is investigating the purchase of a new $18,600 donut-making machine. The new machine would permit the company to reduce the amount of part- time help needed, at a cost savings of $3,800 per year. In addition, the new machine would allow the company to produce one new style of donut, resulting in the sale of 1,000 dozen more donuts each year. The company realizes a contribution margin of $1.20 per dozen donuts sold. The new machine would have a six-year useful life. (Ignore income taxes.) Requirement 2: Using Excel, calculate the internal rate of return promised by the new machine. (Round your answer to two decimal places. Omit the "%" sign in your response.) 16.00 % Internal rate of returnChoco-Lots Candy Co. makes chewy chocolate candies at a plantin Winston-Salem, North Carolina. Brian Main, the production manager at this facility, installed apackaging machine last year at a cost of $400,000. This machine is expected to last for 10 more yearswith no residual value. Operating costs for the projected levels of production are $80,000 annually.Brian has just learned of a new packaging machine that would work much more efficiently inChoco-Lots’ production line. This machine would cost $420,000 installed, but the annual operatingcosts would be only $30,000. This machine would be depreciated over 10 years with no residualvalue. He could sell the current packaging machine this year for $150,000.Brian has worked for Choco-Lots for seven years. He plans to remain with the firm for about twomore years, when he expects to become a vice president of operations at his father-in-law’s company.Choco-Lots pays Brian a fixed salary with an annual bonus of 1 percent of net income for…
- Waterways is considering the replacement of an antiquated machine that has been slowing down production because of breakdowns and added maintenance. The operations manager estimates that this machine still has 2 more years of possible use. The machine produces an average of 50 units per day at a cost of $6.60 per unit, whereas other similar machines are producing twice that much. The units sell for $9.10. Sales are equal to production on these units, and production runs for 260 days each year. The replacement machine would cost $67,900 and have a 2-year life. Given the information above, what are the consequences of Waterways replacing the machine that is slowing down production because of breakdowns? Replacing the machine will result in a of S Waterways keep the old maJonfran Company manufactures three different models of paper shredders including the waste container, which serves as the base. While the shredder heads are different for all three models, the waste container is the same. The number of waste containers that Jonfran will need during the following years is estimated as follows: The equipment used to manufacture the waste container must be replaced because it is broken and cannot be repaired. The new equipment would have a purchase price of 945,000 with terms of 2/10, n/30; the companys policy is to take all purchase discounts. The freight on the equipment would be 11,000, and installation costs would total 22,900. The equipment would be purchased in December 20x4 and placed into service on January 1, 20x5. It would have a five-year economic life and would be treated as three-year property under MACRS. This equipment is expected to have a salvage value of 12,000 at the end of its economic life in 20x9. The new equipment would be more efficient than the old equipment, resulting in a 25 percent reduction in both direct materials and variable overhead. The savings in direct materials would result in an additional one-time decrease in working capital requirements of 2,500, resulting from a reduction in direct material inventories. This working capital reduction would be recognized at the time of equipment acquisition. The old equipment is fully depreciated and is not included in the fixed overhead. The old equipment from the plant can be sold for a salvage amount of 1,500. Rather than replace the equipment, one of Jonfrans production managers has suggested that the waste containers be purchased. One supplier has quoted a price of 27 per container. This price is 8 less than Jonfrans current manufacturing cost, which is as follows: Jonfran uses a plantwide fixed overhead rate in its operations. If the waste containers are purchased outside, the salary and benefits of one supervisor, included in fixed overhead at 45,000, would be eliminated. There would be no other changes in the other cash and noncash items included in fixed overhead except depreciation on the new equipment. Jonfran is subject to a 40 percent tax rate. Management assumes that all cash flows occur at the end of the year and uses a 12 percent after-tax discount rate. Required: 1. Prepare a schedule of cash flows for the make alternative. Calculate the NPV of the make alternative. 2. Prepare a schedule of cash flows for the buy alternative. Calculate the NPV of the buy alternative. 3. Which should Jonfran domake or buy the containers? What qualitative factors should be considered? (CMA adapted)A company is currently producing chemical compounds by a process installed 10 years ago at a cost of $100,000. It was assumed that the process would have a 20-year life with a zero salvage value. The current market value of the equipment, however, is $60,000, and the initial estimate of its economic life is still good. The annual operating costs associated with this process are $18,000. A sales representative from U.S. Instrument Company is trying to sell a new chemicalcompound- making process to the company. This new process will cost $200,000 have a service life of IO years with a salvage value of $20,000, and reduce annual operating costs to $4,000. Assuming the company desires a return of 12% on all investments, should it invest in the new process?