An estimated residual value

Assignment Help Humanities

Reference no: EM13320202

Equipment replacement decision Columbia Enterprises is studying the replacement of some equipment that originally cost $74,000. The equipment is expected to provide six more years of service if $8,700 of major repairs are performed in two years. Annual cash operating costs total $27,200. Columbia can sell the equipment now for $36,000; the estimated residual value in six years is $5,000. New equipment is available that will reduce annual cash operating costs to $21,000.

The equipment costs $103,000, has a service life of six years, and has an estimated residual value of $13,000. Company sales will total $430,000 per year with either the existing or the new equipment. Columbia has a minimum desired return of 12% and depreciates all equipment by the straight-line method. Instructions: a. By using the net-present-value method, determine whether Columbia should keep its present equipment or acquire the new equipment. Round all calculations to the nearest dollar, and ignore income taxes. b. Columbia's management feels that the time value of money should be considered in all long-term decisions. Briefly discuss the rationale that underlies management's belief.

Reference no: EM13320202

Questions Cloud

Iterative and incremental developments : Iterative and Incremental developments: focusing on unified Software

Calculate energy loss and approximate dimension of the jump : A wide rectangular channel has a change of slope from 1 in 100 to 1 in 500 and the flow is 4m3/s/m. Manning's n can be taken as 0.015 Determine the normal depth of flow before and after the change in gradient.

Find the total impedance in this circuit : A coil with inductance 370 mH is connected in series with a 220 ohm resistor, a 47.0 microF capacitor and a 25.0 V, 60.0 Hz AC source. Find the total impedance in this circuit

Explain how ductility may be accomplished : A cylindrical rod of 1040 steel originally 15.2 mm (0.60 in.) in diameter is to be cold worked by drawing; the circular cross section will be maintained during deformation.

An estimated residual value : Equipment replacement decision Columbia Enterprises is studying the replacement of some equipment that originally cost $74,000. The equipment is expected to provide six more years of service if $8,700 of major repairs are performed in two years.

What would be melissas after-tax income : What would be Melissa's after-tax income from the part-time job, considering Social Security and Medicare tax (use 7.65%) as well as Federal income tax on the earnings of $5,000? (Round your intermediate computations and final answer to the neares..

What minimum power must be supplied to the coils : A concrete slab is 9.7 cm thick and has an area of 4.6 m^2. What minimum power must be supplied to the coils to maintain a temperature difference of 17.3 Degrees C between the bottom of the slab and its surface

Determine the depth of flow immediately upstream of the hump : A rectangular channel of 2 m depth and 5 m width carries 1 m deep running water. It is laid to a slope of 0.001 with Manning's n = 0.02. Some distance downstream there is a hump of height 0.5 m on the stream bed.

Basic present value calculations : Basic present value calculations Calculate the present value of the following cash flows, rounding to the nearest dollar: a. A single cash inflow of $12,000 in five years, discounted at a 12% rate of return.

User Account

All Pages