# Question

Diamond & Turf Inc. is considering an investment in one of two machines. The sewing machine will increase productivity from sewing 150 baseballs per hour to sewing 290 per hour. The contribution margin per unit is $ 0.32 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 $ 21 per hour. The sewing machine will cost $ 260,000, have an eight- year life, and will operate for 1,800 hours per year. The packing machine will cost $ 85,000, have an eight- year life, and will operate for 1,400 hours per year. Diamond & Turf seeks a minimum rate of return of 15% on its investments.

a. Determine the net present value for the two machines. Use the present value of an annuity of $ 1 table in the chapter (Exhibit 2). Round to the nearest dollar.

b. Determine the present value index for the two machines. Round to two decimal places.

c. If Diamond & Turf has sufficient funds for only one of the machines and qualitative factors are equal between the two machines, in which machine should it invest?

a. Determine the net present value for the two machines. Use the present value of an annuity of $ 1 table in the chapter (Exhibit 2). Round to the nearest dollar.

b. Determine the present value index for the two machines. Round to two decimal places.

c. If Diamond & Turf has sufficient funds for only one of the machines and qualitative factors are equal between the two machines, in which machine should it invest?

## Answer to relevant Questions

Great Plains Railroad Inc. is considering acquiring equipment at a cost of $ 450,000. The equipment has an estimated life of 10 years and no residual value. It is expected to provide yearly net cash flows of $ 75,000. The ...Artscape Inc. is considering the purchase of automated machinery that is expected to have a useful life of five years and no residual value. The average rate of return on the average investment has been computed to be 20%, ...The investment committee of Sentry Insurance Co. is evaluating two projects, office expansion and upgrade to computer servers. The projects have different useful lives, but each requires an investment of $ 490,000. The ...Danielle Hastings was recently hired as a cost analyst by CareNet Medical Supplies Inc. One of Danielle’s first assignments was to perform a net present value analysis for a new warehouse. Danielle performed the analysis ...The total factory overhead for Bardot Marine Company is budgeted for the year at $ 600,000, divided into four activities: fabrication, $ 204,000; assembly, $ 105,000; setup, $ 156,000; and inspection, $ 135,000. Bardot ...Post your question

0