User Account

All Pages

Should the company purchase the new machine

Assignment Help Finance Basics
Reference no: EM133001465

The Triple-A Manufacturing Co. is considering the purchase of a machine. The machine will cost a total of $50,000 and has an expected useful life of 6 years. The company's cost of capital is 12% and the inflation rate in Canada is expected to be 6% annually for the foreseeable future. The following projections are made:

  • The machine will produce 8,000 units annually.
  • In the first year, each unit will sell for $5.00.
  • Subsequent increases in the selling price are expected to be 5 percent per year.
  • Labour costs will be $10,000 in the first year of operations are expected to rise by 10 percent each year.
  • Materials will cost $12,000 in the first year and will rise by 6 percent annually.
  • Other expenses total $1,500 in the first year and will rise by 2 percent a year.
  • Corporate taxes are 40 percent.
  • The CCA rate is 30 percent.

Should the company purchase the new machine?

Reference no: EM133001465

Questions Cloud

What is the yield to maturity : The face value is $1,000 and the current market price is $1,034.50. The bond matures in 20 years. What is the yield to maturity
Calculate the material price variance : Calculate the material price variance and the material quantity variance related to the M640 electrical relay
Dividend discount model : A stock's current annual dividend is $1 per share and its current expected return is 10%. It is currently traded at $40 per share. Assume future expected return
Discuss the benefits of investment in properties : Discuss the benefits of investment in properties. Discuss the differences between investment in equity and investment in debt securities
Should the company purchase the new machine : The Triple-A Manufacturing Co. is considering the purchase of a machine. The machine will cost a total of $50,000 and has an expected useful life of 6 years. Th
How much is the realized gain : If the GOT7 bonds were sold at 100 on January 2, 2022, how much is the realized gain (loss)? All of the bonds were acquired on January 2, 2020.
What is the purpose of this step : Explain what happens when an accountant does the third step in the closing process. What is the purpose of this step? What information is needed
What is the balance of direct origination cost on december : On January 1, 2020, Lunox Bank granted a 12%, P5,000,000 loan to Nana Company. What is the balance of direct origination cost on December
Undertake an investment project : A Namibia firm ABC Holdings has a subsidiary company ABC Corporation, which is located in France. ABC Holdings trades with a British company TN Holdings and an

Reviews

Write a Review

Finance Basics Questions & Answers

  What do you think drives the increasing cost of healthcare

What do you think drives the increasing cost of healthcare? What part of the healthcare ecosystem do you think is most inefficient or efficient?

  Discuss a current global risk management issue which can be

discuss a current global risk management issue which can be a financial or non-financial realted issue. the suggested

  What is the rate of return on an investment

What is the rate of return on an investment of $10,606 if the company will receive $2,000 each year for the next 10 years?

  Calculate the effect on profits of processing product

What should Elm do if it wants to maximize its profit for the period and calculate the effect on profits of processing Product A further beyond the split-off point - Calculate the effect on profits of processing Product D further beyond the split-off..

  Which is the best measure for an asset held

Which is the best measure of risk for a single asset held in isolation, and which is the best measure for an asset held in a diversified portfolio?

  Present value of the funds be enough

What is the present value of $140,000 to be received after 30 years with a 14 percent discount rate? Would the present value of the funds be enough to buy a $ 2,900 concert ticket?

  Evaluate soundness of strategic shift away from production

Do American companies like LS&C that transfer production to lower-wage countries hurt or help the economy of the United States?

  Fundamental attribution error

With respect to the fundamental attribution error, it turns out that in other cultures, like those of Asia, there's a/an _______ orientation to others that emphasizes interdependence.

  Calculate reorder level minimum stock level maximum stock

calculate reorder level minimum stock level maximum stock level and average stock level from the following

  What is the total amount withdrawn

If this plan is followed for 10 years, how much should the monthly contributions be for the next 28 years in order to be able to withdraw, 10,000 at the end of each month from the account for the next 25 years. what is the total amount contributed..

  Discuss the market interest rate on the issue date

On January 1, 2012, White Water issues $500,000 of 6% bonds, due in 20 years, with interest payable annually on December 31 each year.

  Compute the payback period for a project with the following

compute the payback period for a project with the following cash flows if the companys discount rate is 12.initial

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd