Determine the cash flows associated with this replacement

Assignment Help Finance Basics

Reference no: EM13945953

The Norman Corporation of Cerritos, CA, maker of a famous electronic component, is considering replacing one of its current hand-operated assembly machines with a new fully automated machine. This replacement would mean the elimination of one employee, generating salary and benefit savings.

Keep: One full-time machine operator -salary and benefits, $25,000 per yearCost of maintenance -$2000 per yearCost of defects -$6000Original depreciable value of old Machine -$50,000Annual depreciation -$5000 per yearExpected life -10yearsAge -5 years oldNo expected salvage value in 5 yearsCurrent salvage value -$5000Tax rate -34 percent.

Replace: Cost of new machine -$60,000Installation fee -$3000Transportation charge -$3000Cost of maintenance -$3000 per yearCost of defects -$3000 per yearExpected life -5 yearsSalvage value -$20,000Depreciation method by straight-line.

1. Given the following information, determine the cash flows associated with this replacement.

2. Assume an after-tax cost of capital of 14 percent, compute:(a) Payback period(b) Internal rate of return(c) Net present value Should the new machine be bought?

Reference no: EM13945953

Questions Cloud

Did you observe any shortcomings with these bi systems : Have you had any experience of such systems, and if so, was their use of significant benefit to the company

Used to determine various properties in physics : The wave function is used to determine various properties in physics. One of them is the probability of where a particle (usually an electron) is at one point in time. So let's look at the wave function for the infinite square well. This is given ..

How does moses come to be in the house of pharaoh : Read the Bible verses to answer the following questions: How does Moses come to be in the house of Pharaoh? Why does Moses leave Egypt? Describe the circumstances that lead to Moses meeting with God

Prepare a constitution : Register a Proprietary Limited Company. You should refer to Section 117 of the Corporations Act, complete an application form ,Form 201, and prepare all relevant consents.

Determine the cash flows associated with this replacement : Assume an after-tax cost of capital of 14 percent, compute:(a) Payback period(b) Internal rate of return(c) Net present value Should the new machine be bought?

Two processes that should used to manage system requirements : Give the advantages and disadvantages of using multiple models to describe a system requirement.

How would you define physical activity : How would you define physical activity and What do you consider the most important characteristics of physical activity

Angle of refraction versus incident angle : The Critical Angle Due at the end of Week 5 This week's lab is based on our knowledge of Snell's Law: n1 sin θ1 = n2 sin θ2 and subsequently the critical angle: sin θc = nr/ni Imagine light traveling in these three situations: Water to Air (nwater..

What are major differences between wi-fi, wireless and 3g : What are their advantages and disadvantages?

User Account

All Pages