Question
In: Mechanical Engineering
A new semi-automatic machine costs $ 80,000 and is expected to generate revenues of $ 40,000...
A new semi-automatic machine costs $ 80,000 and is expected to generate revenues of $ 40,000 per year for 6 years. It will cost $ 25,000 per year to operate the machine. At the end of 6 years, the machine will have a salvage value of $ 10,000. Evaluate the investment in this machine using all four methods (payback period, present worth, uniform annual cost (UAC), and rate of return). Neglect the salvage value for the payback period method and the rate of return methods.
Suppose, a completely automated machine is available for $ 140,000. The annual operating cost is $ 10,000 and the service life is expected to be 7 years. The salvage value of this equipment at the end of this period is $ 25,000. Revenues from this alternative too are $ 50,000 per year. Use the UAC method to compare this investment alternative with the semi-automatic machine investment.
Use a rate of return of 15 % where necessary.
Solutions
samet mamat answered 1 year agoRelated Solutions
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Evaluating a capital budgeting project that costs $40,000 that is expected to generate after-tax cash flows...
Evaluating a capital budgeting project that costs $40,000 that
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Part A Bennett Co. has a potential new project that is expected to generate annual revenues...
Part A
Bennett Co. has a potential new project that is expected to
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Part B
Bruno's Lunch Counter is expanding and expects operating cash...
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Revenues generated by a new fad product are forecast as follows:
Year Revenues 1 $40,000 2 30,000 3 20,000 4 5,000 Thereafter 0
Expenses are expected to be 40% of revenues, and working capital
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following year. The product requires an immediate investment of
$49,000 in plant and equipment. Required: a. What is the initial
investment in the product? Remember working capital. b. If the
plant and equipment...
Revenues generated by a new fad product are forecast as follows: Year Revenues 1 $40,000 2...
Revenues generated by a new fad product are forecast as
follows:
Year
Revenues
1
$40,000
2
30,000
3
20,000
4
5,000
Thereafter
0
Expenses are expected to be 40% of revenues, and working capital
required in each year is expected to be 20% of revenues in the
following year. The product requires an immediate investment of
$49,000 in plant and equipment.
Required:
a. What is the initial investment in the
product? Remember working capital.
b. If the plant and equipment...
Revenues generated by a new fad product are forecast as follows: Year Revenues 1 $40,000 2...
Revenues generated by a new fad product are forecast as
follows:
Year
Revenues
1
$40,000
2
20,000
3
15,000
4
10,000
Thereafter
0
Expenses are expected to be 40% of revenues, and working capital
required in each year is expected to be 20% of revenues in the
following year. The product requires an immediate investment of
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a. What is the initial investment in the
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A new machine that costs $80,800 is expected to save annual cash operating costs of $20,000...
A new machine that costs $80,800 is expected to save annual cash
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machine's internal rate of return is (see choices below the present
value tables):
Present Value of $1
Periods
4%
6%
8%
10%
12%
14%
16%
1
.962
.943
.926
.909
.893
.877
.862
2
.925
.890
.857
.826
.797
.769
.743
3
.889
.840
.794
.751
.712
.675
.641
4
.855
.792
.735
.683
.636
.592...
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