Question Alternative A: To buy Machine Audi which is similar to the existing machine Alternative B: Go in for Machine Benz which is more expensive and has much greater capacity The cash flows at the present level of operations under the two alternatives are as follows: Year Machine Audi Machine Benz 0 (30500) (32000) 1 - 14500 2 9000 14500 3 19000. 14500 4 16000 14500 5 14000 14500

Question Alternative A: To buy Machine Audi which is similar to the existing machine Alternative B: Go in for Machine Benz which is more expensive and has much greater capacity The cash flows at the present level of operations under the two alternatives are as follows: Year Machine Audi Machine Benz 0 (30500) (32000) 1 - 14500 2 9000 14500 3 19000. 14500 4 16000 14500 5 14000 14500

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 2PB

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Alternative A: To buy Machine Audi which is similar to the existing machineAlternative B: Go in for Machine Benz which is more expensive and has much greater capacityThe cash flows at the present level of operations under the two alternatives are as follows:Year Machine Audi Machine Benz0 (30500) (32000)1 - 145002 9000 145003 19000 145004 16000 145005 14000 14500The company estimates that its cost of capital is 11%. At the end of year 5, Machine Audi will have a scrap value of $2500 which is not included in the table above. Machine Benz will not have any residual value. Calculate the payback period for both machines. (answers must be expressed in years, months and days) (b) Calculate the discounted payback period for both machines (answers in years, months and days) (c) Calculate the net present value for both machines. (to the nearest dollar) (d) Calculate the Profitability Index for Machine Audi. (e) Calculate the Internal Rate of Return for both…
Blanda Incorporated management is considering investing in two alternative production systems. The systems are mutually exclusive, and the cost of the new equipment and the resulting cash flows are shown in the accompanying table. If the firm uses a 7 percent discount rate for their production systems. Year System 1 System 2 0 -$12,800 -$42,700 1 12,800 32,300 2 12,800 32,300 3 12,800 32,300 What are the payback periods for production systems 1 and 2? (Round answers to 2 decimal places, e.g. 15.25.) Payback period of System 1 is years and Payback period of System 2 is years If the systems are mutually exclusive and the firm always chooses projects with the lowest payback period, in which system should the firm invest? The firm should invest in .system 1 system 2
6The Arrow Company is considering the purchase of equipment that will return cash flows as follows: End of period Cash flows 1 $5,000 2 3,000 3 2,000 4 1,000 5 500 Assume a cost of money of 10 percent. What is the maximum amount the company could pay for the machine and still be financially no worse off than if it did not buy the machine?
Alternative A: To buy Machine Audi which is similar to the existing machineAlternative B: Go in for Machine Benz which is more expensive and has much greater capacityThe cash flows at the present level of operations under the two alternatives are as follows:Year Machine Audi Machine Benz0 (30500) (32000)1 - 145002 9000 145003 19000. 145004 16000 145005 14000 14500The company estimates that its cost of capital is 11%. At the end of year 5, Machine Audi will have a scrap value of $2500 which is not included in the table above. Machine Benz will not have any residual value. Calculate the payback period for both machines. (answers must be expressed in years, months and days) (b) Calculate the discounted payback period for both machines (answers in years, months and days) (c) Calculate the net present value for both machines. (to the nearest dollar) (d) Calculate the Profitability Index for Machine Audi. (e) Calculate the Internal Rate of Return for…
An car company has presented an investment opportunity as follows: Year Cash Flow Year 0 -440,000 Year 1 20,000 Year 2 40,000 Year 3 60,000 Year 4 80,000 Year 5 100,000 Year 6 120,000 Year 7 140,000 Year 8 160,000 Determine the IRR for the investment proposal. Show complete solution pls. No excel computation
The cash flow after taxes for two machineries A and B are given in the table below.Year wise Cash flow A B1 22000 70002 25000 50003 28000 45004 5000 280005 4500 250006 7000 22000The estimated useful life of the machines is 6 years and the discount rate is 11%. The cost of each machine is Rs60000 1. Discuss the steps of application of the concept of NPV to the given situation. Determine the NPV of Machine A . 2. Determine the NPV of the Machine B. Discuss, which machinery should be acquired and why?
A company is planning to expand its business is costing OMR 21601. The following cash inflows are expected. Calculate Profitability index given the rate of discounting to be 3.008% Years Machine A 1 14564 2 13300 3 12500 4 14500 Select one: a. none of the options b. 0.424 c. 2.380 d. 29387.948 e. 2.360 Clear my choice
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Office Automation Inc. must choose between two copiers, XX40 and RH45. XX40 costs less than RH45, but its economic life is shorter. The costs and maintenance expenses of these two copiers are given as follows. These cash flows are expressed in real terms: Copier XX40 RH45 Year 0 $ 900 1,400 Year 1 $ 120 95 Year 2 $ 120 95 Year 3 Year 4 Year 5 $ 120 95 $ 95 $ 95 The inflation rate is 5 percent and the nominal discount rate is 14 percent. Assume that revenues are the same regardless of the copier, and that whichever copier the company chooses, it will buy the model forever. a. Calculate the value of EAC for XX40 and RH45 copier? (Input all amounts as positive values. Do not round intermediate calculations. Round the final answers to 2 decimal places. Omit $ sign in your response.) Copier XX40 EAC $ -955.08 ⭑ RH45 $ -338.82 b. Which copier should the company choose? Ignore taxes and depreciation. XX40 RH45
A company is planning to expand its business is costing OMR 18656. The following cash inflows are expected. Calculate Profitability index given the rate of discounting to be 3.008% Years Machine A 1 11766 13300 3 12500 4 14500 Select one: O a. 2.588 O b. 29616.654 O c. 0.386 O d. 2.606 O e. none of the options
QUESTION 1 a) A project requires the purchase of a new piece of machinery. choose between three potential machines (Machine A, Machine B and Machine C), either of which would be You are the project manager and must suitable. The cost of each machine is identical at £1,634,500. However, they differ in performance such that the projected future cash flows are different for each machine. Projected cash flows over a 5 year period are shown in Table Qla:. Year Cash Flow: Cash Flow: Cash Flow: Machine A Machine B Machine C -£1,634,500 -£1,634,500 -£1,634,500 950,000 950,000 200,000 2 700,500 684,500 280,000 3 560,500 600,000 440,000 4 240,000 575,000 600,000 800,000 5 130,000 550,000 Table Qla. Show the Payback Period and Total Income for each machine (Machine A, Machine B and Machine C). NOTE: ALL calculations must be shown. (i) (ii) For each machine (Machine A, Machine B and Machine C) calculate Return on Investment (ROI). NOTE: ALL calculations must be shown. (iii) For each machine…
Using the provided information calculate the NPV Mkhize Ltd is considering buying a machine and has presented the following information; Purchase price Expected economic life Minimum required rate of return Net cash inflows Rate of taxation Depreciation is calculated using the straight-line method A. Positive R12,883 B. Negative R9,086 OC. Positive R10,089 OD. Negative R988 R130 000 10 years 12% R25000 30%