A company is considering investing in a new machine to replace an old machine. The estimated operating
Question:
A company is considering investing in a new machine to replace an old machine. The estimated operating costs of the two machines per year are:
Old Machine | New Machine | |
Depreciation | $64,000 | $96,000 |
Labor | $230,400 | $173,600 |
Repairs | $62,400 | $13,600 |
Other costs | $38,400 | $9,600 |
The cost of the new machine is $480,000, and it has no salvage value at the end of its useful life.
a. What is the estimated life of the new machine?
b. Compute the payback period for the new machine; ignore income taxes.
c. Assume the same data as given above except that the repair costs on the new machine are expected to increase by $9,600 per year. Compute the payback period for the new machine.
Please show excel screenshots with formulas
Accounting
ISBN: 978-0324662962
23rd Edition
Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren