Determine the net present value for the two machines use

Assignment Help Accounting Basics
Reference no: EM13568084

All-Star, Inc., is considering an investment in one of two machines. The sewing machine will increase productivity from sewing 150 baseballs per hour to sewing 260 per hour. The contribution margin per unit is $0.54 per baseball. Assume that any increased production of baseballs can be sold. The second machine is an automatic packing machine for the golf ball line. The packing machine will reduce packing labor cost. The labor cost saved is equivalent to $25 per hour. The sewing machine will cost $360,000, have an eight-year life, and will operate for 1,700 hours per year. The packing machine will cost $120,000, have an eight-year life, and will operate for 1,600 hours per year. All-Star seeks a minimum rate of return of 15% on its investments.

Present Value of an Annuity of $1 at Compound Interest
Year 6% 10% 12% 15% 20%
1 0.943 0.909 0.893 0.870 0.833
2 1.833 1.736 1.690 1.626 1.528
3 2.673 2.487 2.402 2.283 2.106
4 3.465 3.170 3.037 2.855 2.589
5 4.212 3.791 3.605 3.353 2.991
6 4.917 4.355 4.111 3.785 3.326
7 5.582 4.868 4.564 4.160 3.605
8 6.210 5.335 4.968 4.487 3.837
9 6.802 5.759 5.328 4.772 4.031
10 7.360 6.145 5.650 5.019 4.192

a. Determine the net present value for the two machines. Use the table of present values of an annuity of $1 above. Round to the nearest dollar.


Sewing Machine Packing Machine
Present value of annual net cash flows: $ $
Less amount to be invested: $ $
Net present value: $ $

b. Determine the present value index for the two machines. If required, round your answers to two decimal places.


Sewing Machine Packing Machine
Present value index:

c. If All-Star has sufficient funds for only one of the machines and qualitative factors are equal between the two machines, in which machine should it invest?
SelectPacking MachineSewing MachineItem 9

Reference no: EM13568084

Questions Cloud

What are the critical assumptions in the capital asset : what are the critical assumptions in the capital asset pricing model capm? how do these affect its validity as a way
Calculate golden fleeces company cost of capital ignore : following information for golden fleece financiallong-term debt outstanding500000current yield to maturity rdebt8number
What return on equity do investors seem to expect for a : what return on equity do investors seem to expect for a firm with a 55 share price an expected divident of 5.50 a beta
Here and gone inc has sales of 199 million total assets of : here and gone inc. has sales of 19.9 million total assets of 14.9 million and total debt of 5.7 million. assume the
Determine the net present value for the two machines use : all-star inc. is considering an investment in one of two machines. the sewing machine will increase productivity from
The america-first corporation was one of the innovators of : instructionanswer all eight questions. your response to each question will be judged on completeness correctness
Managers should arbitrate decisions when employees cannot : 1.during the stage of team development team members shift their attention away from task orientation to a relationship
Write a minimum 250 word paper containing your thoughts on : write a minimum 250 word paper containing your thoughts on why or why not business executives are better suited than
What is the difference in basis points between the discount : what is the difference in basis points between the discount rate of return dr and the investment rate of return ir on

Reviews

Write a Review

Accounting Basics Questions & Answers

  On december 31 2012 tran co performed environmental

on december 31 2012 tran co. performed environmental consulting services for hayden co. hayden was short of cash and

  Ruben corporation-breakeven point

Corresponds to CLO 2(c) Ruben Corporation manufactures and sells T-shirts imprinted with college names and slogans. Last year, the shirts sold for $7.50 each, and the variable cost to manufacture them was $2.25 per unit.

  Sapp truckings balance sheet shows a total of noncallable

sapp truckings balance sheet shows a total of noncallable 45 million long-term debt with a coupon rate of 7.00 and a

  Defer intercompany profits on merchandise sales

Defer intercompany profits on merchandise sales when appropriate and eliminate the double counting of sales between affiliates.

  Ending retained earnings balance problem

The following selected amounts are available for Sanders Company. What is its ending retained earnings balance?

  Sale of a depreciable asset require subsequent

Why does an intra-entity sale of a depreciable asset require subsequent adjustments to depreciation expense within the consolidation process?

  Responsibilities for reporting payroll taxes

Describe employer responsibilities for reporting payroll taxes.(To the extent possible reference the form to be filed for each tax.)

  Compute overall contribution margin ratio for the company

Verify the overall break-even point for the company by constructing a contribution format income statement showing the appropriate levels of sales for the two products.

  Price variance and quantity variance

Explain why the quantity purchased is used in computing the direct materials price variance, but the actual quantity consumed is used in computing the direct materials quantity variance.

  Subsidiary gross income

Subsidiary Corporation is insolvent and has no assets to redeem any of the stock that Parent Corporation owns when it liquidates. Nearly all of Subsidiary's gross income during the past five years has come from nonpassive activities. Parent can re..

  Prepare a single-step income statement for 2013 including

exercise 4-2 income statement format single step and multiple step. the following is a partial trial balance for

  Description of bond values

The Heymann company's bonds have 4 years remaining to maturity. Interest is paid annually; the bonds have a $1,000 at maturity. Bond L has a maturity of 15 years, and Bond S a maturity of 1 year.

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