Question

In: Finance

You are considering two different stirring machines for your goat cheese factory. Both meet your performance...

You are considering two different stirring machines for your goat cheese factory. Both meet your performance requirements but differ as tabled below. If you anticipate remaining in business for at least 15 years, and your discount rate is 4%, which machine should you select? Assume no taxes. Machine A Machine B Acquisition cost $40,000 $65,000 Yearly operating cost $10,000 $9,000 Useful Life 3 years 5 years

Solutions

Expert Solution

I HAVE USED HERE "EAC" CONCEPT. WE CAN ALSO USE "REPLACEMENT CHAIN APPROACH", BUT AS IT IS JUST ASKED WHICH MACHINE TO BUY, "EAC" METHOD IS APPROPRIATE

jeff jeffy answered 2 months ago
Next > < Previous

Related Solutions

"Your company needs a machine for the next 20 years. You are considering two different machines....
"Your company needs a machine for the next 20 years. You are considering two different machines. Machine A Installation cost ($): 2,500,000 Annual O&M costs ($): 77,000 Service life (years): 20 Salvage value ($): 79,000 Annual income taxes ($): 65,000 Machine B Installation cost ($): 1,250,000 Annual O&M costs ($): 107,000 Service life (years): 10 Salvage value ($): 46,000 Annual income taxes ($): 45,000 If your company s MARR is 14%, determine which machine you should buy. Assume that machine...
UMB Co. is evaluating two machines. Both machines meet the firm’s quality standard. Machine X costs...
UMB Co. is evaluating two machines. Both machines meet the firm’s quality standard. Machine X costs $40 000 initially and $1000 per year to maintain. Machine Y costs $24 000 initially and $2000 per year to maintain. Machine X has a six-year useful life and Machine Y has a three-year useful life. Both machines have zero salvage value. Assume the firm will continue to replace worn-out machines with similar machines and that the discount rate is 25%. Which machine should...
You are considering the purchase of one of two machines used in your manufacturing plant. Machine...
You are considering the purchase of one of two machines used in your manufacturing plant. Machine A has a life of two years, costs $150 initially, and then $105 per year in maintenance costs. Machine B costs $220 initially, has a life of three years, and requires $170 in annual maintenance costs. Either machine must be replaced at the end of its life with an equivalent machine. The discount rate is 13 percent and the tax rate is zero. Calculate...
You are trying to choose between purchasing one of two machines for a factory. Machine A...
You are trying to choose between purchasing one of two machines for a factory. Machine A costs $15,500 to purchase and has a three-year life. Machine B costs $17,400 to purchase but has a four-year life. Regardless of which machine you purchase, it will have to be replaced at the end of its operating life. Which machine should you choose? Assume a marginal tax rate of 35 percent and a discount rate of 15 percent. (Round answers to 2 decimal...
You are trying to choose between purchasing one of two machines for a factory. Machine A...
You are trying to choose between purchasing one of two machines for a factory. Machine A costs $17,299.00 to purchase and has a 3.00 year life. Machine B costs $18,503.00 to purchase but has a 4.00 year life. Regardless of which machine you purchase, it will have to be replaced at the end of its operating life. Which machine should you choose and what is the cost TODAY of running the machine for the next 27.00 years? Assume a discount...
ABC company is considering two different injection molding machines for the new production line. They have...
ABC company is considering two different injection molding machines for the new production line. They have to choose one of these two models. The cost data for the two alternatives are given in the table below. MARR is 10%. X21-T Model Z24-T Initial cost $440K $580K Annual operating cost 75K 35K Benefits /Year 150K 130K Salvage value 35K 30K Life 12 Years for both a) Calculate the rate of return for each alternative. What is your conclusion for part a?...
A company has to choose between two new machines, the Alpha and the Beta. Both machines...
A company has to choose between two new machines, the Alpha and the Beta. Both machines would cost $30 000 and have an expected lifetime of 4 years. Estimates of the annual cash inflows which each machine would generate are given below Machine Year 0 1 2 3 4 Alpha Cash flow -$30,000 $14,000 $15,000 $15,000 $14,000 Beta Cash flow -$30,000 $8,000 $13,000 $15,000 $21,500 The company staff decides that 12% is an appropriate discount rate. Find the net present...
There are two alternative machines for a manufacturing process. Both machines have the same output rate,...
There are two alternative machines for a manufacturing process. Both machines have the same output rate, but they differ in costs. Machine A costs $20,000 to set up and $8,000 per year to operate. It must be completely replaced every 3 years, and it has no salvage value. Machine B costs $50,000 to set up and $2,160 per year to operate. It should last for 5 years and has no salvage value. The costs of two machines are shown below....
Enter in excel formula You are considering the purchase of one of two machines used in...
Enter in excel formula You are considering the purchase of one of two machines used in your manufacturing plant. Machine A has a life of two years, costs $95 initially, and then $140 per year in maintenance costs. Machine B costs $165 initially, has a life of three years, and requires $115 in annual maintenance costs. Either machine must be replaced at the end of its life with an equivalent machine. The discount rate is 12 percent and the tax...
You have decided to go into the goat feed business. You’ve been mixing it for your...
You have decided to go into the goat feed business. You’ve been mixing it for your own goats and now neighbors and friends want the same mix. So you need to sit down and do a little economics to figure out whether this is a profit opportunity or not. The production function for your special mix of feed is:                                     Y = X11/2 X21/4 Where Y = lbs of feed mix X1 = lbs. of oats X2 = lbs. of...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT