Compute if precision mechanical should purchase equipment

Assignment Help Accounting Basics
Reference no: EM132702288

Precision Mechanical is considering purchasing a robotic system at a cost of $250,000. There will be additional costs for installation and modification totalling $14,000. Use of the system will reduce annual labour costs of $200,000 by 25%. Product defects will also be reduced, saving the company $18,000 per year. Precision will need to increase net operating working capital by $5,000. The company has decided that the robot can be located in a part of the factory that is currently underutilized and is undergoing a $20,000 upgrade for a separate project. The robotic system has an expected life of 6 years, at which time it will have a salvage value of $40,000. Precision Mechanical has a weighted average cost of capital of 13%. The applicable corporate tax rate is 35% and the CCA rate is 20%. The company will be financing the system with a 6-year bank loan with annual year-end payments of $57,000, (consisting of both interest and principal).

Required:

Problem 1: Determine if Precision Mechanical should purchase this equipment.

Reference no: EM132702288

Questions Cloud

Find the type of audit report the auditor would issue is : Find the type of audit report the auditor would issue in this circumstance is? In an audit of internal control, the auditor discovered one control deficiency
Find evidence-based interventions : Find evidence-based interventions for dealing with a crisis in the Campbell family's town as the result of a tornado - describe how to apply the recommended
Are satisfied employees productive employees : Are satisfied employees productive employees?
Difference between chronic stress and acute stress : Q 1. What is the difference between chronic stress and acute stress? List one (1) possible impact of each.?
Compute if precision mechanical should purchase equipment : The company will be financing the system with a 6-year bank loan with annual year-end payments.Determine if Precision Mechanical should purchase this equipment.
Why is compliance important in the health care field : Why is compliance important in the health care field?
Discuss and examine best practices : Discuss and examine best practices as they apply to the Campbell family members as individuals and as a group. You can review details about the Campbell family
Find what sequence do normally appear on income statement : Find, In what sequence (order) do they normally appear on the income statement? 1- Revenues, 2- operating income, 3- Earnings per share, 4- Results
What changes can you envisage in economic order quantity : What changes can you envisage in economic order quantity based planning when the demand for item increases by 5%? The carrying cost will increase by 1/ v(5%)

Reviews

Write a Review

Accounting Basics Questions & Answers

  What degree do the US government and private banks

To what degree do the U.S. government and private banks have a material interest in providing mortgages as a means of encouraging home ownership?

  Define the four principal functions of a manager

List and define the four principal functions of a manager (Hint: POLC). How are these functions applied at your organization (or an organization with which you)

  What is the total interest income that will be reported

What is the total Interest Income that will be reported over the life of the bond investment if the bonds were purchased at 103

  Constanza company had a beginning and ending allowance for

constanza company had a beginning and ending allowance for doubtful accounts balance of 23000 and 27000 respectively.

  Journalize the month end adjusting entries

Journalize the month end adjusting entries in the general journal. Post them to the general ledger

  Helena furnishings wants to sharply reduce its cash

helena furnishings wants to sharply reduce its cash conversion cyle. which of the following steps would reduce its cash

  Sofa company manufactures two models of its couch the mini

sofa company manufactures two models of its couch the mini and the maxi. the mini model requires 10000 direct labor

  What types of situations result in troubled debt what are

what types of situations result in troubled debt? what are some of the general rules for recognizing gain or loss by

  Original data assume that feather friends inc distributes a

original data assume that feather friends inc. distributes a high-quality wooden birdhouse that sells for 20 per unit.

  Gain on the sale of its current plant

Dean uses GAAP On its December 31, year 10 financial statements Dean will defer Gain on the sale of its current plant in the amount of?

  Compute present value of the bonds and amortization table

ABC Corp. issued $6,000,000 of 8% debentures on January 1, 2016. Compute present value of the bonds and the amortization table

  How department can help in assisting the external auditor

Discuss how the department can help in assisting the external auditors to attest the true and fair view of the financial statements reported.

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