A local manufacturing company is evaluating the purchase of a vertical panel saw new from $5,499.99. The
Question:
A local manufacturing company is evaluating the purchase of a vertical panel saw new from $5,499.99. The new saw is expected to operate for 7 years, with maintenance costs averaging $25/month, and it is expected to show a positive return on investment by improving manufacturing productivity, thereby saving the company labor expenses. Draw a cash flow diagram that represents the expected expenses and savings related to the saw. Represent unknowns as variables. Do not include sales taxes on the saw purchase. Calculate the book value and depreciation in each year, over the expected life of the saw, using MACRS. Upload the results of your calculations as a table. Compute the monthly labor cost savings (in $/mo) required to achieve a 33% internal rate of return on the saw purchase. Upload your calculations in a digital file. Create a model to perform a 1×1 sensitivity analysis in which labors savings are the independent variable and internal rate of return is the dependent variable. Upload your response in the form of a graph. Make an actionable recommendation regarding purchase of the saw.
Accounting Principles
ISBN: 978-0470533475
9th Edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso