Calculate the new machine payback period

Assignment Help Managerial Accounting
Reference no: EM133097109

Question - Flounder Pix currently uses a six-year-old molding machine to manufacture silver picture frames. The company paid $95,000 for the machine, which was state of the art at the time of purchase. Although the machine will likely last another ten years, it will need a $12,000 overhaul in four years. More important, it does not provide enough capacity to meet customer demand. The company currently produces and sells 9,000 frames per year, generating a total contribution margin of $92,500.

Martson Molders currently sells a molding machine that will allow Flounder Pix to increase production and sales to 12,000 frames per year. The machine, which has a ten-year life, sells for $139,000 and would cost $14,000 per year to operate. Flounder Pix's current machine costs only $8,000 per year to operate. If Flounder Pix purchases the new machine, the old machine could be sold at its book value of $5,000. The new machine is expected to have a salvage value of $20,300 at the end of its ten-year life. Flounder Pix uses straight-line depreciation.

Required -

a) Calculate the new machine's net present value assuming a 14% discount rate.

b) Use Excel or a similar spreadsheet application to calculate the new machine's internal rate of return.

c) Calculate the new machine's payback period.

Reference no: EM133097109

Questions Cloud

Calculate the net present value of the two opportunities : Each of the opportunities shown below has a 15-year life. Thomas uses a 12% discount rate. Calculate the net present value of the two opportunities
Discuss any four variables affecting expatriates : Fully discuss any FOUR variables affecting expatriates' performance and how are these variables best managed by host country nationals?
Creation of a comparative art analysis essay : Analyze the formal characteristics and historical context of creative works from the Baroque period and beyond - Analyze creative works from the Baroque period
What is a major pitfall of the nine-box grid system : What is a major pitfall of the nine-box grid system used to identify employees for potential promotion?
Calculate the new machine payback period : The company paid $95,000 for the machine, which was state of the art at the time of purchase. Calculate the new machine's payback period
Design training material for employees for adaptability : Design training material for employees for adaptability (it can include pwrpoint presentations, videos, business games, business competition, pre -test , post-
Company update and maintain job descriptions : How did you decide on what knowledge, skills, and abilities were "essential job functions" for this position? How do you recommend that a company update and mai
Describe the sources of information : Describe the sources of information (apart from the unit of competency) that can be used to determine the LLN skills required by learners
Organizational consulting and training : Think about a client/organization in need of organizational consulting and training. Based on those client/organizational requirements, develop a framework that

Reviews

Write a Review

Managerial Accounting Questions & Answers

  How financial statement analysis used for that organization

How financial statement analysis could be used for that organization. Consider your current company, or a company that you have previously worked for.

  Prepare flexible selling and administrative expenses budget

Prepare a flexible selling and administrative expenses budget for October for sales volumes of $500,000, $750,000, and $1,000,000

  Determine the materials price variance for july

Explain why some companies only require that unfavorable variance be explained while many companies require both favorable and unfavorable variance

  Is an opportunity cost involved for producing and why

The tax rate for the corporation is 40% and the discount rate is 10%. Is there an opportunity cost involved for producing the custom pipe?

  How many check-ins can be forecasted for January

Using a weighted moving average with weights of 0.6, 0.3, and 0.1 (from most recent), how many check-ins can be forecasted for January

  Determine the sales in kilograms

Under the royalty plan determine the sales in kilograms that would be required to produce net operating income of $90,000

  Loreal reports the following for a recent year

LOreal reports the following for a recent year for the major divisions in its Cosmetics branch.

  Prepare a flexible budget performance report showing

Prepare a flexible budget performance report showing AirAssurance Corporation's activity variances and revenue and spending variances for March.

  What are the equivalent units of production

If 2,000 units were started during the period, what are the equivalent units of production for the period according to the weighted average method

  Prepare a budgeted income statement for the year

Income taxes are estimated to be $150,000. Prepare a budgeted income statement for the year ending December 31, 2010

  What would be the amount related to the note

What would be the amount(s) related to the note that Merit would report in its statement of cash flows for the year ended December 31, 2011?

  Determine a transfer price for mmc using the general rule

Determine a transfer price for MMC using the general rule. Transfer price sheet is drawn here References eBook & Resources - Compute the company's sales margin, capital turnover, and ROI. Sales margin % Capital turnover ROI % sheet is drawn here Ref..

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