Question

In: Finance

(EAC) Brandy's Place has decided to purchase a new branding machine. Brandy will buy one of...

(EAC) Brandy's Place has decided to purchase a new branding machine. Brandy will buy one of two machines. Each machine costs $1,500. Machine A has a four-year life, a salvage value of $1,000, and expenses of $475 per year. Machine B has a five-year life, a salvage value of $500, and expenses of $460 per year. Whichever machine is used, revenues for this project are $1,200 per year, and machines will be replaced at the end of their lives. Using straight-line depreciation to the salvage value, a tax rate of 35%, and a cost of capital of 20%, which machine should Brandy buy, and why?

Solutions

Expert Solution

jeff jeffy answered 5 hours ago
Next > < Previous

Related Solutions

(EAC) Brandy's Place has decided to purchase a new branding machine. Brandy will buy one of...
(EAC) Brandy's Place has decided to purchase a new branding machine. Brandy will buy one of two machines. Each machine costs $1,500. Machine A has a four-year life, a salvage value of $1,000, and expenses of $475 per year. Machine B has a five-year life, a salvage value of $500, and expenses of $460 per year. Whichever machine is used, revenues for this project are $1,200 per year, and machines will be replaced at the end of their lives. Using...
21.14 Lease or Buy. Wolfson Corporation has decided to purchase a new machine that costs $2.8...
21.14 Lease or Buy. Wolfson Corporation has decided to purchase a new machine that costs $2.8 million. The machine will be depreciated on a straight-line basis and will be worthless after four years. The corporate tax rate is 35 percent. The Sur Bank has offered Wolfson a four-year loan for $2.8 million. The interest rate per year is 9%. The repayment schedule is four yearly principal repayments of $700,000 and an interest charge of 9 percent on the outstanding balance...
Wolf Corporation has decided to purchase a new machine that costs $4.5 million. The machine will...
Wolf Corporation has decided to purchase a new machine that costs $4.5 million. The machine will be depreciated on a straight-line basis and will be worthless after four years. The corporate tax rate is 30%. The Sur Bank has offered Wolf a four-year loan for $4.5 million. The repayment schedule is four-yearly principal repayments of $1,125,000 and an interest charge of 7% on the outstanding balance of the loan at the beginning of each year. Both principal repayments and interest...
Wolfson Corporation has decided to purchase a new machine that costs $2.6 million. The machine will...
Wolfson Corporation has decided to purchase a new machine that costs $2.6 million. The machine will be depreciated on a straight-line basis and will be worthless after four years. The corporate tax rate is 22 percent. The Sur Bank has offered Wolfson a four-year loan for $2.6 million. The repayment schedule is four yearly principal repayments of $650,000 and an interest charge of 7 percent on the outstanding balance of the loan at the beginning of each year. Both principal...
Wolfson Corporation has decided to purchase a new machine that costs $4.1 million. The machine will...
Wolfson Corporation has decided to purchase a new machine that costs $4.1 million. The machine will be depreciated on a straight-line basis and will be worthless after four years. The corporate tax rate is 40 percent. The Sur Bank has offered Wolfson a four-year loan for $4.1 million. The repayment schedule is four yearly principal repayments of $1,025,000 and an interest charge of 7 percent on the outstanding balance of the loan at the beginning of each year. Both principal...
ABC company has decided to purchase a new printing machine. This Machine has a 9-yer life...
ABC company has decided to purchase a new printing machine. This Machine has a 9-yer life and will cost 750,000 to install the new machine. Total operation costs of the machine per year is 10,000. Calculate the EAC, if the discount rate is 11.25%.
Photo Co. needs to purchase a photocopying machine. It wants to calculate the EAC of the...
Photo Co. needs to purchase a photocopying machine. It wants to calculate the EAC of the following machine. The machine has an initial cost of $18,000 and useful life of three years. Its maintenance cost is $2,000 a year. The expected salvage value is $600. Straight line depreciation method including salvage value for depreciation calculation will be employed. The photocopying machine will be replaced indefinitely and it requires no additional working capital. The appropriate discount rate is 12% and tax...
Programming language is C# A common place to buy candy is from a machine. A new...
Programming language is C# A common place to buy candy is from a machine. A new candy machine has been purchased for the gym , but it is not working properly. The machine sells candies, chips, gum, and cookies. You have been asked to create aprogram for this candy machine so that it can be put into operation. The program should do the following: 1. Show the customer the different products sold by the candy machine. 2. Let the customer...
You must evaluate a proposal to buy a new milling machine. The purchase price of the...
You must evaluate a proposal to buy a new milling machine. The purchase price of the milling machine, including shipping and installation costs, is $132,000, and the equipment will be fully depreciated at the time of purchase. The machine would be sold after 3 years for $78,000. The machine would require an $8,000 increase in net operating working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but pretax labor costs would decline by $35,000...
You must evaluate a proposal to buy a new milling machine. The purchase price of the...
You must evaluate a proposal to buy a new milling machine. The purchase price of the milling machine, including shipping and installation costs, is $134,000, and the equipment will be fully depreciated at the time of purchase. The machine would be sold after 3 years for $73,000. The machine would require a $9,000 increase in net operating working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but pretax labor costs would decline by $40,000...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT