Question: Company X is planning on purchasing a certain machine. The expected cost of this machine is $75,000, and it is expected to have a useful

Company X is planning on purchasing a certain machine. The expected cost of this machine is $75,000, and it is expected to have a useful life of 6 years with an estimated salvage value of $3,000. The machine is expected to produce cash savings of $23,000 per year in reduced labor costs and the cash operating costs to run this machine are estimated to be $5,000 per year. Assuming Company X is in the 34% tax bracket and has a minimum desired rate of return of 12% on this investment, determine the:

(a) Payback period, (b) ARR, and (c) NPV (Ignoring taxes)

(a) Payback period, (b) ARR, and (c) NPV (Assuming taxes).

Step by Step Solution

★★★★★

3.36 Rating (159 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

a Computation of the following Given information Cost of capital 75000 Cash inflows Cash Savings 230... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

68-B-A-T-V-M (950).xlsx

300 KBs Excel File

Students Have Also Explored These Related Accounting Questions!

A machine with a useful life of 6 years and a residual value of $3,000 was purchased at the beginning of year 1 for $30,000. The machine was sold for $15000 on April 1 in year 4. (a). What was the...

Mustafa Corporations desired rate of return is 12 percent. Leeds Division, one of Mustafas five investment centers, earned an operating income of $4,000,000 last year. The division controlled...

Assume that the companys minimum desired rate of return on invested capital is 11 percent. Income ............. $ 4,000,000 Sates revenue ........... 50,000,000 Average invested capital .........

ABC Corporation is planning on purchasing a certain machine. The expected cost of this machine is $75,000, and it is expected to have a useful life of 6 years with an estimated salvage value of...

Maryherry Corp, is planning on purchasing a certain machine. The expected cost of this machine is $ 1 0 0 , 0 0 0 , and it is expected to have a useful life of 8 years winh an estimated salvage value...

Problem 3 Company X is planning on purchasing a 3-D printer. The expected cost of this printer is $75,000, and it is expected to have a useful life of 6 years and an estimated salvage value of...

Company X is planning on purchase a 3-D printer. The expected cost of this printer $75000, and it is expected to have a useful life of 6 year and an estimated salvage value of $3000.00 The printer...

Question 4 ( 2 points ) Norwest is planning on purchasing a welding machine. The expected cost of this machine is $ 6 0 , 0 0 0 , and it is expected to have a useful life of 7 years with an estimated...

4. Norwest is planning on purchasing a welding machine. The expected cost of this machine is $60,000, and it is expected to have a useful life of 7 years with an estimated salvage value of $4,000....

Norwest is planning on purchasing a welding machine. The expected cost of this machine is $60,000, and it is expected to have a useful life of 7 years with an estimated salvage value of $4,000. The...

Suggest an approach that can be used by a regional family restaurant chain to determine the firms strengths over its competitors.

Use the spreadsheet from Lesson 8 - 4 and 8 - 5 to compare the following two situations after a 7 - year period. total amount paid and total amount paid to principal for a $370,000, 20-year mortgage...

Describe two tests of controls that the audit team could perform on each of the key controls identied above.

4 In the situation described in question 3, what would be the effect on the cost of quality to the supplier?

How is GAAP set in the United States? How is it set internationally?

What gives value to an audit?

What is a CPA, and how does someone become one? What is a CA?

QUESTION 4 . 1 POINT Eric wants to estimate the percentage of elementary school children who have a social media account. He surveys 450 elementary school children and finds that 280 have a social...

For Bobby Company, sales is $1,200,000 (6,000 units), fixed expenses are $360,000, and the contribution margin per unit is $80. What is the margin of safety in dollars

A hat company claims that the mean hat size for a male is at least 7.25. A random sample of 12 hat sizes has a mean of 7.15. At=0.01, =0.01,alpha equals , 0.01 , comma can you reject the company's...