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 $9,000 Useful Life 3 years 5 years
Solutions
Expert Solution
I HAVE USED HERE "EAC" CONCEPT. WE CAN ALSO USE
"REPLACEMENT CHAIN APPROACH", BUT AS IT IS JUST ASKED WHICH MACHINE
TO BUY, "EAC" METHOD IS APPROPRIATE
jeff jeffy answered 4 months agoRelated Solutions
"Your company needs a machine for the next 20 years. You are considering two different machines....
"Your company needs a machine for the next 20 years. You are
considering two different machines.
Machine A
Installation cost ($): 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
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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
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$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
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Machine B costs $220 initially, has a life of three years, and
requires $170 in annual maintenance costs. Either machine must be
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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
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four-year life. Regardless of which machine you purchase, it will
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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
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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
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ABC company is considering two different injection molding machines for the new production line. They have...
ABC company is considering two different injection molding
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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
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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...
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