The company makes tasty seafood dumplings and is considering two alternatives to automate its production process....

The company makes tasty seafood dumplings and is considering two alternatives to automate its production process. The data is included below:

	A	B
Initial COst	$42.500	$70,000
Annual costs O&M	$6,000	$4,000
Annual savings	$18,500	$20,000
Residual value	$12,000	$25,000
Useful life	3 year	6 year

Recommend the alternative that you consider the most attractive for this company. Do the analysis using the net present value and annual equivalent value techniques. Show the details of your analysis.

Expert Solution

ekkarill92 answered 2 years ago

Premiere Company is considering the purchase of a machine to further automate its production line. The...

Premiere Company is considering the purchase of a machine to further automate its production line. The machine will cost P600,000 and has a useful life of 5 years. The straight line method of depreciation is used. Premiere expects annual income before depreciation and taxes of P220,000. Premiere’s income tax rate is 25% and its cost of capital is 16%. Required: Determine whether the new machine investment should be accepted using the following: (30 pts) Accounting Rate of Return Payback...

The Company Liv is considering three process alternatives for its new investment in Ottawa. Process A...

The Company Liv is considering three process alternatives for its new investment in Ottawa. Process A has an $80K fixed cost and $4 variable cost for each product (unit) produced. Process B has a $120K fixed cost and $2 variable cost for each product (unit) produced. Process C has a $200K fixed cost and $1 variable cost for each product (unit) produced. 1. Draw the graph of fixed, variable and total costs of all processes in an MS Excel file....

TAD Inc is considering two equipment alternatives to improve the production process and serve more customers....

TAD Inc is considering two equipment alternatives to improve the production process and serve more customers. The financial estimates for each alternative are displayed in the following table: Equipment A Equipment B Initial cost $50k $106.31k Annual benefit/Year $16k $24k Salvage Value $ 9k $0

Broadway Industries is considering whether to automate one phase of its production line. The automation equipment...

Broadway Industries is considering whether to automate one phase of its production line. The automation equipment has a six year life with no residual and will cost $890,000. Projected net cash flows are as follows: Year 1 $ 250,000 Year 2 240,000 Year 3 210,000 Year 4 205,000 Year 5 200,000 Year 6 180,000 Requirement 1 : Compute this project’s Net Present Value (NPV) using Broadway’s 10% hurdle (required) rate. Should Broadway invest in the automation equipment? Year Net Cash...

A manufacturing company is considering two mutually exclusive alternatives. Alternatives &nb

A manufacturing company is considering two mutually exclusive alternatives. Alternatives Alt. A Alt. B Initial cost $ 42,500 $ 70,000 Annual costs O & M $ 6,000 $ 4,000 Annual savings $ 18,500 $ 20,000 Residual value $ 12,000 $ 25,000 Shelf life 3 years 6 years What would be the "advantage" in annual terms of Alternative B versus Alternative A at 15% interest? Select one: a. $ 3020 b. $ 3500 c. $ 7436 d. Alternative B does...

• A MAJOR POTENTIOMETER MANUFACTURER IS CONSIDERING TWO ALTERNATIVES FOR NEW PRODUCTION MACHINES WITH CAPACITY TO...

• A MAJOR POTENTIOMETER MANUFACTURER IS CONSIDERING TWO ALTERNATIVES FOR NEW PRODUCTION MACHINES WITH CAPACITY TO PRODUCE 20 000 UNITS PER DAY. ONE ALTERNATIVE IS FOR A HIGH-CAPACITY AUTOMATED PRODUCTION MACHINE CAPABLE OF PRODUCING 20 000 UNITS PER DAY WHEN OPERATED FOR THREE SHIFTS PER DAY. A QUARTER-TIME EMPLOYEE WOULD BE ASSIGNED TO MONITOR THE MACHINE (EMPLOYEE WOULD MONITOR OTHER MACHINES AT THE SAME TIME). WITH THE THREE-SHIFT SCHEDULE THIS WOULD BE EQUIVALENT TO A THREE-QUARTER-TIME EMPLOYEE. • A SECOND...

Mariposa Inc is considering improving its production process by acquiring a new machine. There are two...

Mariposa Inc is considering improving its production process by acquiring a new machine. There are two machines management is analyzing to determine which one it should purchase. The company requires a 14% rate of return and uses straight-line depreciation to a zero book value. Machine A has a cost of $290,000, annual operating costs of $8,000, and a 3-year life. Machine B costs $180,000, has annual operating costs of $12,000, and has a 2-year life. Whichever machine is purchased will...

Bluebonnet inc is considering the purchase of new equipment that will automate production and thus reduce...

Bluebonnet inc is considering the purchase of new equipment that will automate production and thus reduce labor costs. Bluebonnet made the following estimates related to the new machinery. Bluebonnet Cost of the equipment $ 151 comma 000$151,000 Reduced labor costs $ 45 comma 000$45,000 Estimated life of the equipment 1010 years Terminal disposal value ?$0 ?After-tax cost of capital 88 ?% Tax rate 3535 ?% Assume depreciation is calculated on a? straight-line basis for tax purposes. Assume all cash flows...

Leonard, a company that manufactures explosion-proof motors, is considering two alternatives for expanding its international export...

Leonard, a company that manufactures explosion-proof motors, is considering two alternatives for expanding its international export capacity. Option 1 requires equipment purchases of $600,000 now and $500,000 two years from now, with annual M&O costs of $90,000 in years 1 through 10. Option 2 involves subcontracting some of the production at costs of $240,000 per year beginning now through the end of year 10. Neither option will have a significant salvage value. Use a present worth analysis to determine which...

Bowen Company makes two products from a joint production process. Each product may be sold at...

Bowen Company makes two products from a joint production process. Each product may be sold at the split-off point or processed further. Information concerning these products for last year appears below: Product X Product Y Allocated joint costs .................. $25,000 $17,000 Sales value after further processing ... $41,000 $47,000 Sales value at the split-off point ..... $29,000 $23,000 Additional processing costs ............ $19,000 $15,000 Assume Bowen Company makes all the correct sell or process further decisions. Calculate the net income...

Question