Determine net present value of purchasing the new machine

Assignment Help Financial Accounting

Reference no: EM1310933

NPV of purchasing the new machine.

Skates Company is interested in replacing a molding machine with a new improved model. The old machine has a salvage value of $20,000 now and a predicted salvage value of $4,000 in six years, if rebuilt. If the old machine is kept, it must be rebuilt in one year at a predicted cost of $40,000.

The new machine costs $160,000 and has a predicted salvage value of $24,000 at the end of six years. If purchased, the new machine will allow cash savings of $40,000 for each of the first three years, and $20,000 for each year of its remaining six-year life.

What is the net present value of purchasing the new machine if the company has a required rate of return of 14%?

Reference no: EM1310933

Questions Cloud

Evaluate the adjusted budget for appraisal costs : What is the adjusted budget for appraisal costs, assuming the new method is implemented and 800,000 units are tested during the manufacturing process in 20X5?

Determine the average waiting time for cycles : Determine the average waiting time for cycles if they are the only item manufactured? and What are the average waiting times if both cycles and scooters are produced and the assembly line is not enlarged?

Evaluating the effectiveness of psychological treatment : There are much different views of what kinds of evidence are most credible in evaluating the effectiveness of psychological treatment research.

Annual cash outflow for operating costs : Jim Bingham is considering starting a small catering business. He would need to purchase a delivery van and several equipment costing $125,000 to equip the business and another $60,000 for inventories

Determine net present value of purchasing the new machine : Determine the net present value of purchasing the new machine if the company has a required rate of return of 14%?

Evaluate the internal rate of return : Evaluate the net present value at a 14% required rate of return and evaluate the internal rate of return and the payback period of the investment.

What is the over or under absorbed overhead : How much overhead is allocated? What is the over/under absorbed overhead?

Rough-and-tumble activities : Their neighbors Doug and Diane have a daughter who they consider to be a tomboy because she likes to play ball and rough-and-tumble activities in the yard.

Journal entries for warranty repairs : Journal entries for warranty repairs. - 1. Paid $12,350 for warranty repairs originally accrued in 2008.

User Account

All Pages