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 S85.000 and Rocko for trading In the old machine. The old machine has variable manufacturing costs of $24,000 per year. The new machine wil reduce variable manufacturine 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.

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 S85.000 and Rocko for trading In the old machine. The old machine has variable manufacturing costs of $24,000 per year. The new machine wil reduce variable manufacturine 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.

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)

10th Edition

ISBN:9781337902571

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter12: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 10P: Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6...

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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?
Bailey, Inc., is considering buying a new gang punch that would allow it to produce circuit boards more efficiently. The punch has a first cost of $100,000 and a useful life of 15 years. At the end of its useful life, the punch has no salvage value. Labor costs would increase $2,000 per year using the gang punch but raw material costs would decrease $12,000 per year. MARR is 5%/ yr. Solve, a. What is the internal rate of return of this investment? b. What is the decision rule for judging the attractiveness of investments based on internal rate of return? c. Should Bailey buy the gang punch?
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Bailey, Inc., is considering buying a new gang punch that would allow it to produce circuit boards more efficiently. The punch has a first cost of $100,000 and a useful life of 15 years. At the end of its useful life, the punch has no salvage value. Labor costs would increase $2,000 per year using the gang punch, but raw material costs would decrease $12,000 per year. MARR is 5%/ year. a. What is the discounted payback period for this investment? b. If the maximum attractive DPBP is 3 years, what is the decision rule for judging the worth of this investment? c. Should Bailey buy the gang punch based on DPBP?
Bailey, Inc., is considering buying a new gang punch that would allow them to produce circuit boards more efficiently. The punch has a first cost of $105,000 and a useful life of 15 years. At the end of its useful life, the punch has no salvage value. Annual labor costs would increase $3,000 using the gang punch, but annual raw material costs would decrease $16,000. MARR is 4.0 %/year. a)What is the present worth of this investment? b)What is the decision rule for judging the attractiveness of investments based on present worth? c)Should Bailey buy the gang punch?
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