Should the company replace the old machine now

Assignment Help Financial Accounting
Reference no: EM132741314

Aussie Boilers Pty Ltd is a major supplier of boilers for mining companies in the north of Western Australia. It is considering to replace an old welding machine with a state-of-the-art welding machine that would increase the sale revenues from $ 35,000 to $100,000. The new machine would cost the company $500,000 to purchase and has a life of 10 years. It also has an estimated salvage value of $50,000 at the end of its life.

  • The old machine was purchased 5 years ago at a cost of $300,000 and the accumulated depreciation shown in accounting records is $150,000. It has a remaining life of 5 years and as that time it will be worthless. However, the company can sell the old machine to other companies in the industry now for $180,000. Both the old machine and the new machine are depreciated using the straight-line method. The company has a tax rate of 30 percent and its required rate of return is 10 percent per annum.

Problem 1: Should the company replace the old machine now or later in five years time? (Show all workings and state any assumptions that may be necessary).

Reference no: EM132741314

Questions Cloud

Create business plan for this organization : Create a business plan for this organization (AT&T) to enter a global market in which they are not already doing business .
Ethical and social interpretation of primary research : Critically evaluate and select appropriate big data analytic algorithms to solve a given problem, considering the processing time available and other aspects
Determine the optimal purchase quantity : This requirement is assumed to be fixed and known. The manufacturer is given a lower price for quantity purchased within certain ranges.
Capital budgeting process : What is opportunity cost and why is it an important concept in the capital budgeting process?
Should the company replace the old machine now : Should the company replace the old machine now or later in five years time? (Show all workings and state any assumptions that may be necessary).
President obama signed affordable care act : President Obama signed Affordable Care Act. The law enacted comprehensive health insurance reforms. What is your analysis and opinion of Affordable Care Act?
Tell us about three considerations a specific b2b company : Tell us about three considerations a specific B2B company should take into account before deciding on entering into a new specific marketing channel.
Describe the internal conflicts of the inventory management : Describe the internal conflicts of the inventory management System and its collision with the firms profitability
What is the approximate after-tax cost of debt for packman : If the bonds have a coupon rate of 7.25%, then what is the approximate after-tax cost of debt for PackMan if its company tax rate is 30%?

Reviews

Write a Review

Financial Accounting Questions & Answers

  Financial statement analysis and preparation

Financial Statement Analysis and Preparation

  Shareholder of a company

Describe the ways that a person can become a shareholder of a company. Why Wal-Mart would split its stock?

  Financial and accounting principles

An understanding of financial and accounting principles can be a valuable tool for managers. While not all managers will find themselves calculating financial ratios or preparing annual financial data.

  Prepare a statement of cash flow using the direct method

Prepare a Statement of Cash Flow using the Direct Method and Prepare the Operations section of the Statement of Cash Flow using the Indirect Method.

  Financial accounting assignment

This assignment has one case study and two question apart from case study. Questions related to document Liquidation question and Company financial statements question - Torquay Limited

  Prepare general journal entries for goela

Prepare general journal entries for Goela Ltd

  Principles of financial accounting

Prepare the journal entry to record the acquisition of the assets.

  Prepare general journal entries to record the transactions

Prepare general journal entries to record the transactions, assuming use of the periodic inventory system

  Global reporting initiative

Compare the view espoused by the economist Milton Friedman about the social responsibilities of business with the views express by Stigler.

  Explain the iasb conceptual frameworks

Explain the IASB Conceptual Framework's perspective of users and their decisions.

  Determine the company''s financial statements

T he focus of the report is to determine the extent to which you are comfortable relying on the financial statements as presented by management .

  Computation of free cash flow

Computation of Free Cash Flow

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