Alton Manufacturing, Inc. has a manufacturing machine that needs attention. (Click the icon to view additional...
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Alton Manufacturing, Inc. has a manufacturing machine that needs attention. (Click the icon to view additional information). Alton expects the following net cash inflows from the two options (Click the icon to view the net cash flows) Alton uses straight-line depreciation and requires an annual return of 10%. Requirement 1. Compute the payback the ARR, the NPV, and the profitability index of these two options. Compute the payback for both options. Begin by completing the payback schedule for Option 1 (refurbish) Net Cash Inflows Year 0 1 2 3 4 5 6 7 8 Net Cash Outflows Amount Invested 900,000 $ Annual Accumulated: (Round your answer to one decimal place) The paybackfor Option 1 (refurbish current machine) is years Data table Year Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Total Refurbish Current $ $ Machine 430,000 $ 320,000 250,000 180,000 110,000 110,000 110,000 110,000 1,620,000 $ Purchase New Machine 1,400,000 430,000 360,000 290,000 220,000 220,000 220,000 220,000 220,000 220,000 3,800,000 - More info - The company is considering two options Option 1 is to refurbish the current machine at a cost of $900,000. If refurbished, Alton expects the machine to last another eight years and then have no residual value. Option 2 isto replace the machine at a cost of $1,900,000. Anew machine would last 10 years and have no residual value. Alton Manufacturing, Inc. has a manufacturing machine that needs attention. (Click the icon to view additional information). Alton expects the following net cash inflows from the two options (Click the icon to view the net cash flows) Alton uses straight-line depreciation and requires an annual return of 10%. Requirement 1. Compute the payback the ARR, the NPV, and the profitability index of these two options. Compute the payback for both options. Begin by completing the payback schedule for Option 1 (refurbish) Net Cash Inflows Year 0 1 2 3 4 5 6 7 8 Net Cash Outflows Amount Invested 900,000 $ Annual Accumulated: (Round your answer to one decimal place) The paybackfor Option 1 (refurbish current machine) is years Data table Year Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Total Refurbish Current $ $ Machine 430,000 $ 320,000 250,000 180,000 110,000 110,000 110,000 110,000 1,620,000 $ Purchase New Machine 1,400,000 430,000 360,000 290,000 220,000 220,000 220,000 220,000 220,000 220,000 3,800,000 - More info - The company is considering two options Option 1 is to refurbish the current machine at a cost of $900,000. If refurbished, Alton expects the machine to last another eight years and then have no residual value. Option 2 isto replace the machine at a cost of $1,900,000. Anew machine would last 10 years and have no residual value.
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Answer rating: 100% (QA)
1 Compute the payback period for both the options as follows Refurbish Current machine Year Net Cash Outflow Net Cash Inflow Amount Invested Annual Ac... View the full answer
Related Book For
Horngrens Financial and Managerial Accounting
ISBN: 978-0133255584
4th Edition
Authors: Tracie L. Nobles, Brenda L. Mattison, Ella Mae Matsumura
Posted Date:
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