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In: Finance
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 the EAC
Solutions
jeff jeffy answered 2 years agoRelated Solutions
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...
1. You are evaluating the purchase of either of two machines used in your brewery. Machine...
1. You are evaluating the purchase of either of two machines
used in your brewery. Machine A will last two years, costs $8,000
initially, and then $1,250 per year in maintenance costs. Machine B
costs $9,500 initially, has a life of three years, and requires
$1,000 in annual maintenance costs. Either machine must be replaced
at the end of its life with an equivalent machine. Your interest
rate on current debt and the initial purchases is 9 percent and the...
Capital Budgeting Exercise 1 You are considering the purchase of one of two machines used in...
Capital Budgeting Exercise 1
You are considering the purchase of one of two machines used in
your manufacturing plant. Machine A has a life of two years, costs
$1500 initially, and then $400 per year in maintenance costs.
Machine B costs $2000 initially, has a life of three years, and
requires $300 in annual maintenance costs. Either machine must be
replaced at the end of its life with an equivalent machine. Which
is the better machine for the firm? The...
One year ago your company purchased a machine used in manufacturing for $90000, you can purchase...
One
year ago your company purchased a machine used in manufacturing for
$90000, you can purchase it for $150,000 today. The CCA rate
applicable to both machines is 30% and neither will have a long
term salvage value. New machine will produce earnings before
interest taxes depreciation and amortization of $35000 a year for
the next 10 years. The current machine is expected to produce
EBITDA of $21000 a year. Market value today of the current machine
is 50000. The...
"A company is considering two types of machines for a manufacturing process. Machine A has an...
"A company is considering two types of machines for a
manufacturing process. Machine A has an immediate cost of $75,000,
and its salvage value at the end of 6 years of service life is
$21,000. The operating costs of this machine are estimated to be
$3600 per year. Extra income taxes are estimated at $2300 per
year.
Machine B has an immediate cost of $43,000, and its salvage value
at the end of 6 years' service is negligible. The annual...
A company is considering replacing one of the old machines used in the manufacturing process. The...
A company is considering replacing one of the old machines used
in the manufacturing process. The machine was purchased 2 years ago
for $500,000. This machine is being depreciated on a straight-line
basis, and it has 4 yrs of remaining life. When this machine was
purchased 2 yrs ago, it was to have zero salvage value at the end
of 6 yrs. Currently , this machine has a market value of $250,000.
The company intends to keep this old machine...
A company is considering replacing one of the old machines used in the manufacturing process. The...
A company is considering replacing one of the old machines used
in the manufacturing process. The machine was purchased 2 years ago
for $600,000. This machine is being depreciated on a straight-line
basis, and it has 4 years of remaining life. When this machine was
purchased 2 years ago, it was assumed to have zero salvage value at
the end of its useful life of 6 years. Currently, this machine has
a market value of $250,000. The company intends to...
A firm is considering the purchase of one of two machines to replace an existing one. MachineA...
A firm is considering the purchase of one of two
machines to replace an existing one. MachineA will cost GBP £18,000
and has a four-year life. Annual net cash flows are expected to be
GBP£7,200, beginning one year after the machine is purchased.
Machine B will cost GBP £26,000and has a six-year life. Annual net
cash flows are expected to be GBP £7,500, beginning oneyear after
the machine is purchased. Assume the firm's cost of capital is a
constant 15%forever, and...
A firm is considering the purchase of one of two new machines. The data on each...
A firm is considering the purchase of one of two
new machines. The data on each are given.
Machine A Machine B
Initial cost 3400 6500
Service life 3 years 6 years
Salvage value 100 500
Net operating cost 2000/year 1800/year
If the MARR is 12%, which alternative should be
selected when using the following methods?
a. Annual equivalent cost approach ( method 2)
b. Present Worth comparison (method 2)
c. Incremental IRR comparison ( method 2)
A firm is considering the purchase of one of two new machines. The data on each...
A firm
is considering the purchase of one of two
new
machines. The data on each are given.
Machine A Machine B
Initial cost 3400 6500
Service life 3 years 6 years
Salvage value 100 500
Net
operating cost 2000/year 1800/year
If the
MARR is 12%, which alternative should be
selected when using the following methods?
a.
Annual equivalent cost approach ( method 2)
b.
Present Worth comparison (method 2)
c.
Incremental IRR comparison ( method 2)
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