Question
In: Economics
A tool and die company is considering the purchase of a drill press with fuzzy-logic software...
A tool and die company is considering the purchase of a drill press with fuzzy-logic software to improve accuracy and reduce tool wear. The company has the opportunity to buy a slightly used machine for $15,000 or new one for $21,000. Because the new machine is a more sophisticated model, its operating cost is expected to be $7000 per year, while the used machine is expected to require $8200 per year. Each machine is expected to have 25 years life with 5% salvage value. Tabulate the incremental cash flow
I've already looked at https://www.chegg.com/homework-help/questions-and-answers/tool-die-company-considering-purchase-drill-press-fuzzy-logic-software-improve-accuracy-re-q28194174 and https://www.chegg.com/homework-help/questions-and-answers/tool-die-company-considering-purchase-drill-press-fuzzy-logic-software-improve-accuracy-re-q28235286 answers just need additional help
Solutions
Expert Solution
Salvage value of used machine = 5% * 15000 = 750
Salvage value of new machine = 5% * 21000 = 1050
Basically, we need to find Net cash flow each year for both machines and then subtract the value of used machine from the new machine
incremental cash flow = Net cash flow of New machine - Net cash flow of old machine
| Used machine (U) | New Machine (N) | N-U | |||||||
| Year | Initial Cost | O&M Cost | Salvage value | Net cash Flow | Initial Cost | O&M Cost | Salvage value | Net cash Flow | Incremental cash Flow |
| 0 | -15000 | -15000 | -21000 | -21000 | -6000 | ||||
| 1 | -8200 | -8200 | -7000 | -7000 | 1200 | ||||
| 2 | -8200 | -8200 | -7000 | -7000 | 1200 | ||||
| 3 | -8200 | -8200 | -7000 | -7000 | 1200 | ||||
| 4 | -8200 | -8200 | -7000 | -7000 | 1200 | ||||
| 5 | -8200 | -8200 | -7000 | -7000 | 1200 | ||||
| 6 | -8200 | -8200 | -7000 | -7000 | 1200 | ||||
| 7 | -8200 | -8200 | -7000 | -7000 | 1200 | ||||
| 8 | -8200 | -8200 | -7000 | -7000 | 1200 | ||||
| 9 | -8200 | -8200 | -7000 | -7000 | 1200 | ||||
| 10 | -8200 | -8200 | -7000 | -7000 | 1200 | ||||
| 11 | -8200 | -8200 | -7000 | -7000 | 1200 | ||||
| 12 | -8200 | -8200 | -7000 | -7000 | 1200 | ||||
| 13 | -8200 | -8200 | -7000 | -7000 | 1200 | ||||
| 14 | -8200 | -8200 | -7000 | -7000 | 1200 | ||||
| 15 | -8200 | -8200 | -7000 | -7000 | 1200 | ||||
| 16 | -8200 | -8200 | -7000 | -7000 | 1200 | ||||
| 17 | -8200 | -8200 | -7000 | -7000 | 1200 | ||||
| 18 | -8200 | -8200 | -7000 | -7000 | 1200 | ||||
| 19 | -8200 | -8200 | -7000 | -7000 | 1200 | ||||
| 20 | -8200 | -8200 | -7000 | -7000 | 1200 | ||||
| 21 | -8200 | -8200 | -7000 | -7000 | 1200 | ||||
| 22 | -8200 | -8200 | -7000 | -7000 | 1200 | ||||
| 23 | -8200 | -8200 | -7000 | -7000 | 1200 | ||||
| 24 | -8200 | -8200 | -7000 | -7000 | 1200 | ||||
| 25 | -8200 | 750 | -7450 | -7000 | 1050 | -5950 | 1500 | ||
Rahul Sunny answered 2 years agoRelated Solutions
Exercise 17.4 Alliance Manufacturing Company is considering the purchase of a new automated drill press to...
Exercise 17.4
Alliance Manufacturing Company is considering the purchase of a
new automated drill press to replace an older one. The machine now
in operation has a book value of zero and a salvage value of zero.
However, it is in good working condition with an expected life of
10 additional years. The new drill press is more efficient than the
existing one and, if installed, will provide an estimated cost
savings (in labor, materials, and maintenance) of $6,000 per...
A machine tool company is considering a new investment in a punch press machine that will...
A machine tool company is considering a new investment in a
punch press machine that will cost $100,000 and has an annual
maintenance cost of $10,000. There is also an additional
overhauling cost of $20,000 for the equipment once every four
years. Assuming that this equipment will last 12 years under these
conditions, what is the cost of owning and maintaining the punch
press at an interest rate of 10%?
A machine shop owner is attempting to decide whether to purchase a new drill press, a...
A machine shop owner is attempting to decide whether
to purchase a new drill press, a lathe, or a grinder. The
profit or loss from each purchase are shown in the following table
where one of two states of nature could occur (the company succeeds
in getting a military contract, or it does not get a
contract).
Contract status
Purchase
Get Contract
No contract
Drill press
40000
-8000
Lathe
25000
4000
Grinder
12000
10,000
a-for each purchase...
Dungan Corporation is evaluating a proposal to purchase a new drill press to replace a less...
Dungan Corporation is
evaluating a proposal to purchase a new drill press to replace a
less efficient machine presently in use. The cost of the new
equipment at time 0, including delivery and installation, is
$250,000. If it is purchased, Dungan will incur costs of $7,000 to
remove the present equipment and revamp its facilities. This $7,000
is tax deductible at time 0.
Depreciation for tax
purposes will be allowed as follows: year 1, $60,000; year 2,
$90,000; and in...
A machine shop owner is attempting to decide whether to purchase a new drill press, a...
A machine shop owner is attempting to decide whether to purchase
a new drill press, a lathe, or a grinder. The profit or loss from
each purchase are shown in the following table where one of two
states of nature could occur (the company succeeds in getting a
military contract, or it does not get a contract).
Contract status
Purchase
Get Contract No contract
Drill press
30,000
-10,000
Lathe
25,000
4,000
Grinder
12,000
...
A machine shop owner wants to decide whether to purchase a new drill press, new lathe,...
A machine shop owner wants to decide
whether to purchase a new drill press, new lathe, or new grinder.
As shown in the following table, the profit from each purchase will
vary depending on whether or not the owner wins a government
contract, with the owner estimating a probability of .60 of winning
the contract:
Profit if win contract
Profit if lose contract
drill press
$40,000
$-8,000
lathe
$20,000
$ 4,000
grinder
$12,000
$10,000
Before deciding which...
Fuzzy Restaurant is considering the purchase of a $1,500,000 flat top grill. The grill has an...
Fuzzy Restaurant is considering the purchase of a $1,500,000
flat top grill. The grill has an economic life of 8 years and will
be fully depreciated using straight line method. The grill is
expected to produce 59,000 tacos per year for the next 8 years,
with each costing $1.50 to make and priced at $5. Assume the
discount rate is 8% and the tax rate is 21%. The restaurant expects
the market value of the grill to be $200,000, 8...
Design the logic in pseudocode for Bugz App software company that sells a software package as...
Design the logic in pseudocode for Bugz App software company
that sells a software package
as follows.
1. The retail price of the package is $99
2. Quantity discounts are given on purchases of 10 or more units as
follows The program
must allow the user to enter the customer’s name and number of
units purchased, and
output the original cost of the units purchased, the percentage
discount given, the dollar
amount of the discount given, and the final cost...
Wells Printing is considering the purchase of a new printing press. The total installed cost of...
Wells Printing is considering the purchase of a new printing
press. The total installed cost of the press is $ 2.15 million.
This outlay would be partially offset by the sale of an existing
press. The old press has zero book value, cost $ 1.01 million 10
years ago, and can be sold currently for $ 1.29 million before
taxes. As a result of acquisition of the new press, sales in each
of the next 5 years are expected to...
Wells Printing is considering the purchase of a new printing press. The total installed cost of...
Wells Printing is considering the purchase of a new printing
press. The total installed cost of the press is $2.2 million. This
outlay would be partially offset by the sale of an existing press.
The old press has zero book value, cost $1 million 10 years ago,
and can be sold currently for $1.2 million before taxes. As a
result of acquisition of the new press, sales in each of the next 5
years are expected to be $1.6 million...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Samsung Industry that requires you to act as a change agent to form an organizational change...
- Use fork() Create a program that reads characters from an input file. Use fork to create...
- A pension fund manager is considering three mutual funds. The first is a stock fund, the...
- Compute the cost of not taking the following cash discounts. (Use a 360-day year. Do not...
- During his project presentation, Bob falls sick and performs poorly. However, his colleague, Dan, concludes that...
- A sample human input file that contains test values that a human would enter on the...
- A solution is prepared by dissolving 15 ml of methanol in 150.0 ml water at 25...
ADVERTISEMENT