Calculate the net present value of machine alpha

Assignment Help Accounting Basics
Reference no: EM133184562

Question - The Rosco Company is trying to decide if they should purchase Machine Alpha. The purchase price of Machine Alpha is $345,700 and will require a working capital of $54,500.

Machine Alpha will require a major overhaul in year 3 and year 6 of $37,500.

The increase in revenue will be:

Years 1, Year 2, and Year 3 will have an annual increase in revenue of $98,700 (the same amount for all three years).

Year 4 - $128,400, Year 5 - $135,300, Year 6 - $86,100, Year 7 - $72,300 and Year 8 - 64,900.

At the end of year 8, the company will sell the machine for $18,700.

Calculate the net present value of Machine Alpha using a 16% rate of return.

Show your work and indicate if the Rosco Company should purchase Machine Alpha. Round your net present value answer to the nearest whole dollar.

Reference no: EM133184562

Questions Cloud

Code of conduct have on organization culture : What should be included in the code of conduct? What impact does a code of conduct have on an organization's culture?
Compute the multifactor productivity : Compute the multifactor productivity under each system. Use carts per peso cost (labor plus equipment) as the measure
How much is the foreign exchange loss : On December 31, selling spot rate is 1FC to P64.80. On January 30, selling spot rate is 1FC to P65.45 On settlement date, how much is the foreign exchange loss
Influence the development of relationship : Provide an example of an extrinsic, an instrumental, and an intrinsic reward that may influence the development of a relationship.
Calculate the net present value of machine alpha : At the end of year 8, the company will sell the machine for $18,700. Calculate the net present value of Machine Alpha using a 16% rate of return
Burbage budgetary control system : Identify the problems that appear to exist in Burbage's budgetary control system and how these problems are contributing to the company's poor cash position
Are the cpas being hypocritical : Thus, CPAs advise their clients to use the accrual method of accounting. Are the CPAs being hypocritical
Determine their total cost : The relevant range of operations is between 2,500 units and 10,000 units of Saab per month. Determine their total cost if Adelaide produces 10,000 units
Identify the critical path and the non- critical paths : Determine how long it will take to complete the job by conducting the forward pass and identify the critical path and the non- critical path(s)

Reviews

Write a Review

Accounting Basics Questions & Answers

  How much control does fed have over this longer real rate

Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest.   How much control does the Fed have over this longer real rate?

  Coures:- fundamental accounting principles

Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.

  Accounting problems

Accounting problems,  Draw a detailed timeline incorporating the dividends, calculate    the exact Payback Period  b)   the discounted Payback Period. the IRR,  the NPV, the Profitability Index.

  Write a report on internal controls

Write a report on Internal Controls

  Prepare the bank reconciliation for company

Prepare the bank reconciliation for company.

  Cost-benefit analysis

Create a cost-benefit analysis to evaluate the project

  Theory of interest

Theory of Interest: NPV, IRR, Nominal and Real, Amortization, Sinking Fund, TWRR, DWRR

  Liquidity and profitability

Distinguish between liquidity and profitability.

  What is the expected risk premium on the portfolio

Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.

  Simple interest and compound interest

Simple Interest, Compound interest, discount rate, force of interest, AV, PV

  Capm and venture capital

CAPM and Venture Capital

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd