Question
In: Economics
The ABC Corporation is considering the purchase of a new bottling machine for its wine bottling...
The ABC Corporation is considering the purchase of a new bottling machine for its wine bottling line. The bottling machine will cost $30,500. The maintenance and operating costs will amount to $1,300 for the first year. The maintenance and operating costs can be expected to increase $3,000 for each year that the bottling machine is used. The salvage value of the bottling machine, at any time that it is removed from service, will be the bottling machine's scrap value ($1,000). The annual income that will result from the use of the new bottling machine is expected to be $15,000. ABC uses a before-tax MARR of 12%. What is the economic life of the bottling machine?
Solutions
Rahul Sunny answered 1 year agoRelated Solutions
Caine Bottling Corporation is considering the purchase of a new bottling machine. The machine would cost...
Caine Bottling Corporation is considering the purchase of a new
bottling machine. The machine would cost $228,168 and has an
estimated useful life of 8 years with zero salvage value.
Management estimates that the new bottling machine will provide net
annual cash flows of $33,500. Management also believes that the new
bottling machine will save the company money because it is expected
to be more reliable than other machines, and thus will reduce
downtime. Assume a discount rate of 5%....
Michener Bottling Corporation is considering the purchase of a new bottling machine. The machine would cost...
Michener Bottling Corporation is considering the purchase of a
new bottling machine. The machine would cost $170,000 and has an
estimated useful life of eight years with zero salvage value.
Management estimates that the new bottling machine will provide net
annual cash flows of $31,000. Management also believes that the new
machine will save the company money because it is expected to be
more reliable than other machines, and thus will reduce downtime.
Assume a discount rate of 10%. Click...
Fine Corp. is considering the purchase of a new bottling machine for $50,000. The machine is...
Fine Corp. is considering the purchase of a new bottling machine
for $50,000. The machine is expected to increase production,
resulting in $24,500 new sales per year. The cost to operate the
machine is $5,500. The machine will be depreciated on a
straight-line basis to $0 over 10 years. The project will require a
net increase of $15,000 in NWC at the beginning of the project and
will return half that amount at the project’s termination. In
addition, Fine Corp....
The management of ABC Corporation is considering the purchase of a new machine costing $430,000. The...
The management of ABC Corporation is considering the purchase of
a new machine costing $430,000. The company's desired rate of
return is 10%. The present value factors for $1 at compound
interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751,
0.683, and 0.621, respectively. In addition to the foregoing
information, use the following data in determining the
acceptability in this situation by using the NPV methodology
calculations
Year
Income from
Operations
Net Cash
Flow
1
$100,000
$180,000...
The Pan American Bottling Co. is considering the purchase of a new machine that would increase...
The Pan American Bottling Co. is considering the purchase of a
new machine that would increase the speed of bottling and save
money. The net cost of this machine is $57,000. The annual cash
flows have the following projections. Use Appendix B and Appendix D
for an approximate answer but calculate your final answer using the
formula and financial calculator methods.
Year
Cash Flow
1
$
21,000
2
24,000
3
28,000
4
14,000
5
9,000
a. If the cost of...
The ABC company is considering the purchase of a new machine that will last 5 years...
The ABC company is considering the purchase of a new machine
that will last 5 years and cost $100,000; maintenance will cost
$12,000 per year. If the interest rate is 10% per year, compounded
quarterly,
a. how much money should the company set aside for
this machine
b. what is the future value, at the end of year 5, of the given
cash flows
Colby Firestone Corporation is considering the purchase of a new machine to replace an old machine....
Colby Firestone Corporation is considering the purchase of a new
machine to replace an old machine. The new machine will cost
$135,000, has an installation cost of $5000, and will have an
expected life of five years with a salvage value of $5,000. The new
machine will require $2000 additional working capital. The new
machine will result in a cost savings of $20,000 a year. Sales are
expected to increase $9,000 per year. The old machine was purchased
five years...
Colby Firestone Corporation is considering the purchase of a new machine to replace an old machine....
Colby Firestone Corporation is considering the purchase of a new
machine to replace an old machine. The new machine will cost
$135,000, has an installation cost of $5000, and will have an
expected life of five years with a salvage value of $5,000. The new
machine will require $2000 additional working capital. The new
machine will result in a cost savings of $20,000 a year. Sales are
expected to increase $9,000 per year. The old machine was purchased
five years...
Sam’s Shingle Corporation is considering the purchase of a new automated shingle-cutting machine. The new machine...
Sam’s Shingle Corporation is considering the purchase of a new
automated shingle-cutting machine. The new machine will reduce
variable labor costs but will increase depreciation expense.
Contribution margin is expected to increase from $303,660 to
$342,220. Net income is expected to be the same at $48,200.
Compute the degree of operating leverage before and after the
purchase of the new equipment. (Round answers to 1 decimal place,
e.g. 1.5.)
Degree of operating leverage (old) =
Degree of operating leverage (new)=
The management of Ballard MicroBrew is considering the purchase of an automated bottling machine for $71,000....
The management of Ballard MicroBrew is considering the purchase
of an automated bottling machine for $71,000. The machine would
replace an old piece of equipment that costs $18,000 per year to
operate. The new machine would cost $8,000 per year to operate. The
old machine currently in use is fully depreciated and could be sold
now for a salvage value of $26,000. The new machine would have a
useful life of 10 years with no salvage value.
Required:
1. What...
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