Company is considering buying new piece of machinery

Assignment Help Business Economics

Reference no: EM131195425

A company is considering buying a new piece of machinery. A 10% interest rate will be used in the computations. Two models of the machine are available.

Machine I

Initial cost:$80,000

End -of -useful –life Salvage value, S: 20,000

Annual operating cost 18,000

Useful life, in years 20

Machine II

Initial cost: $100,000

End -of -useful –life Salvage value, S: 25,000

Annual operating cost: 15,000 first 10 years, 20,000 thereafter

Useful life, in years: 25

(a) Determine which machine should be purchased, based on equivalent uniform annual cost.

(b) What is the capitalized cost of Machine I?

(c) Machine I is purchased and a fund is set up to replace Machine i at the end of 20 years. Compute the required uniform annual deposit.

(d) Machine I will produce an annual saving of material of $28,000. What is the rate of return if Machine I is installed?

(e) What will be the book value of Machine I after 2 years, based on sum -of -years' -digits depreciation?

(f) What will be the book value of Machine II after 3 years, based on double declining balance depreciation?

Reference no: EM131195425

Questions Cloud

Ethical controversies around carbon trading mechanisms : 1. What is corporate citizenship and how does it compare to corporate social responsibility? 2. What are the ethical controversies around carbon trading mechanisms?

Calculate the radius of influence : A well of 0.1 m radius is part of a well point network to keep an excavation dry (Figure P6.13). The groundwater at the far edge of the excavation must be 0.5 m below the base.

Securities and exchange commission web site : Search the Internet (for example, a company's Web site or the Securities and Exchange Commission Web site) to find an audit report for a company's audit of internal control over financial reporting, in particular one that expresses an adverse opin..

How is currently being applied by law enforcement agencies : Using your own words and in APA formatting, write a 2-3 page paper on telematics technology, explaining how it works and providing examples of how it is currently being applied by law enforcement agencies around the U.S.

Company is considering buying new piece of machinery : A company is considering buying a new piece of machinery. A 10% interest rate will be used in the computations. Two models of the machine are available. What will be the book value of Machine II after 3 years, based on double declining balance deprec..

Changing business environment impact businesses : How does the changing business environment impact businesses, and what do businesses need to do in order to stay competitive in a changing, diverse business environment?

Why any other action are not considered business transaction : Which of Austin's actions described below are business transactions? Explain why any other actions are not considered business transactions.

Challenges of implementing strategic planning : Evaluation of the benefits and challenges of implementing strategic planning within an organization. Your evaluation should include the following:

Compute the mean change in cholesterol : Comment on the symmetry of the distribution of change scores based on your answers to Problems 2.12 through 2.16.

User Account

All Pages