Question
In: Finance
By installing a new injection molding machine into its assembly line, plastic molding inc can decrease...
By installing a new injection molding machine into its assembly line, plastic molding inc can decrease its production cost by an estimated 35000 the first year of installment, with an additional decrease of 4000 each year throughout the life of the equipment. It is estimated the new equipment will have a 10 years useful life and a salvage equal to 10% of its initial cost. Use a nominal interest rate of 15% to calculate how much plastic molding inc. can afford to pay for the new machine.
Solutions
Expert Solution
Compute the present value (PV) of annual cash flows, using MS-excel as shown below:
The result of the above excel table is as follows:
Hence, the PV of annual cash flows is $107,738.993515.
Let assume the initial value of the new machine be X.
The salvage value of the machine is 0.10X.
Compute the value of the machine, using the equation as shown below:
Machine value = PV of annual cash flows + (Salvage value*PVIF15%, 10 years)
X = $107,738.993515 + (0.10X*0.247184706)
After solving the above-mentioned equation, the initial value of the machine comes out to be $110,469.633913.
jeff jeffy answered 6 months agoRelated Solutions
NOK Plastics is considering the acquisition of a new plastic injection-molding machine to make a line...
NOK Plastics is considering the acquisition of a new plastic
injection-molding machine to make a line of plastic fittings. The
cost of the machine and dies is $125,000. Shipping and installation
is another $8,000. NOK estimates that new project will require
$7,500 in inventory, and result in a $7,500 increase in accounts
receivable and $5,000 increase in accounts payable. The latter
three will be recovered at the end of the life of the
equipment.
Sales of the new plastic fittings...
NOK Plastics is considering the acquisition of a new plastic injection-molding machine to make a line...
NOK Plastics is considering the acquisition of a new plastic
injection-molding machine to make a line of plastic fittings. The
cost of the machine and dies is $125,000. Shipping and installation
is another $8,000. NOK estimates it will need a $10,000 investment
in net working capital initially, which will be recovered at the
end of the life of the equipment. Sales of the new plastic fittings
are expected to be $350,000 annually. Cost of goods sold are
expected to be...
NOK Plastics is considering the acquisition of a new plastic injection-molding machine to make a line...
NOK Plastics is considering the acquisition of a new plastic
injection-molding machine to make a line of plastic fittings. The
cost of the machine and dies is $125,000. Shipping and installation
is another $8,000. NOK estimates it will need a $10,000 investment
in net working capital initially, which will be recovered at the
end of the life of the equipment. Sales of the new plastic fittings
are expected to be $350,000 annually. Cost of goods sold are
expected to be...
NOK Plastics is considering the acquisition of a new plastic injection-molding machine to make a line...
NOK Plastics is considering the acquisition of a new plastic
injection-molding machine to make a line of plastic fittings. The
cost of the machine and dies is $125,000. Shipping and installation
is another $8,000. NOK estimates it will need a $10,000 investment
in net working capital initially, which will be recovered at the
end of the life of the equipment. Sales of the new plastic fittings
are expected to be $350,000 annually. Cost of goods sold are
expected to be...
NOK Plastics is considering the acquisition of a new plastic injection-molding machine to make a line...
NOK Plastics is considering the acquisition of a new plastic
injection-molding machine to make a line of plastic fittings. The
cost of the machine and dies is $125,000. Shipping and installation
is another $8,000. NOK estimates it will need a $10,000 investment
in net working capital initially, which will be recovered at the
end of the life of the equipment. Sales of the new plastic fittings
are expected to be $350,000 annually. Cost of goods sold are
expected to be...
Compare and contrast plastic injection molding and vacuum forming or molding
Compare and contrast plastic injection molding and vacuum forming
or molding
An injection molding machine can be purchased and installed for $90,000. It is in the seven-year...
An injection molding machine can be purchased and installed for
$90,000. It is in the seven-year GDS property class and is expected
to be kept in service for eight years. It is believed that $10,000
can be obtained when the machine is disposed of at the end of year
eight. The net annual value added (i.e., revenues less expenses)
that can be attributed to this machine is constant over eight years
and amounts to $15,000. An effective income tax rate...
The Dauten Toy Corporation uses an injection molding machine that was purchased prior to the new...
The Dauten Toy Corporation uses an injection molding machine
that was purchased prior to the new tax legislation. This machine
is being depreciated on a straight-line basis, and it has 6 years
of remaining life. Its current book value is $2,400, and it can be
sold for $2,600 at this time. Thus, the annual depreciation expense
is $2,400/6 = $400 per year. If the old machine is not replaced, it
can be sold for $500 at the end of its...
The Dauten Toy Corporation uses an injection molding machine that was purchased prior to the new...
The Dauten Toy Corporation uses an injection molding machine
that was purchased prior to the new tax legislation. This machine
is being depreciated on a straight-line basis, and it has 6 years
of remaining life. Its current book value is $2,400, and it can be
sold for $2,500 at this time. Thus, the annual depreciation expense
is $2,400/6 = $400 per year. If the old machine is not replaced, it
can be sold for $500 at the end of its...
The Dauten Toy Corporation uses an injection molding machine that was purchased prior to the new...
The Dauten Toy Corporation uses an injection molding machine
that was purchased prior to the new tax legislation. This machine
is being depreciated on a straight-line basis, and it has 6 years
of remaining life. Its current book value is $2,400, and it can be
sold for $2,500 at this time. Thus, the annual depreciation expense
is $2,400/6 = $400 per year. If the old machine is not replaced, it
can be sold for $500 at the end of its...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Dolomite, [CaMg(CO3)2] is found in a soil sample. A geochemist titrates 24.65 g of soil with...
- 4) Cost per equivalent unit of direct materials and conversion (4 marks) The cost per equivalent...
- We usually write numbers in decimal form (or base 10), meaning numbers are composed using 10...
- Consider a saturated solution of the salt MX3, which M is a metal cation with a...
- Energyshot is a new energy drink that is about to be introduced into the global market....
- Problem 1: During the month, EKM Enterprise purchased $100,000 in raw material on account, used $150,000...
- An electron is accelerated inside a parallel plate capacitor. The electron leaves the negative plate with...
ADVERTISEMENT