Machine A was purchased last year for P500,000 and had an estimated salvage value of P75,000...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Machine A was purchased last year for P500,000 and had an estimated salvage value of P75,000 at the end of its five-year life. Annual operating costs are P20,000. The machine will perform satisfactorily over the next thirteen years. A salesperson for another company is offering a replacement, Machine B, for P380,000, with a salvage value of P80,000 after thirteen years. Annual operating costs for Machine B will only be P14,000. Using the following methods for replacement analysis, which would be better, to replace Machine A or not. a. ROR on Additional Investment b. Annual Cost Method c. Equivalent Uniform Annual Cost Method d. Capitalized Cost Method Machine A was purchased last year for P500,000 and had an estimated salvage value of P75,000 at the end of its five-year life. Annual operating costs are P20,000. The machine will perform satisfactorily over the next thirteen years. A salesperson for another company is offering a replacement, Machine B, for P380,000, with a salvage value of P80,000 after thirteen years. Annual operating costs for Machine B will only be P14,000. Using the following methods for replacement analysis, which would be better, to replace Machine A or not. a. ROR on Additional Investment b. Annual Cost Method c. Equivalent Uniform Annual Cost Method d. Capitalized Cost Method
Expert Answer:
Answer rating: 100% (QA)
Annual Cost Method The annual cost method would be better for replacement analysis because it ... View the full answer
Related Book For
Engineering Economy
ISBN: 978-0132554909
15th edition
Authors: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Posted Date:
Students also viewed these finance questions
-
Machine A was purchased last year for $18,000 and had an estimated MV of $2,000 at the end of its six-year life. Annual operating costs are $1,600. The machine will perform satisfactorily over the...
-
Machine A was purchased three years ago for $10,000 and had an estimated market value of $1,000 at the end of its 10-year life. Annual operating costs are $1,000. The machine will perform...
-
Determine the tax basis of the business asset acquired in each of the following cases: a. Firm L paid $5,950 cash plus $416 sales tax plus a $500 installation charge for a satellite dish. b. TTP Inc....
-
Explain how a firm can reduce costs while improving the performance of its supply chain.
-
Assume that g: V W is linear. One of these is true, the other is false. Which is which? (a) If f: W V is a left inverse of g then f must be linear. (b) If f: W V is a right inverse of g then f...
-
The trial balance for Silver Shovels Exploration Company does not balance. The following errors were detected: a. The cash balance is overstated by $3,000. b. Rent expense of \($390\) was erroneously...
-
(a) Blank Company sells three different categories of tools (small, medium and large).The cost and market value of its inventory of tools are as follows. Determine the value of the companys inventory...
-
Describe approach to assessing the competitive market for craft breweries in Canada: Describe the number of competitors and relative size of the industry. NOTE: use proxy data - demonstrate to...
-
For the combined translational and rotational system shown in Figure P2.28, find the transfer function, G(s) = X(s)/T(s). J= 3 kg-m? B Radius = 2 m 1 N-m-s/rad TO) N = 10 A 3 kg-m2 N2 = 20 N4 = 60...
-
Explain the purpose of preparing financial statements for non-reporting entities in Australia. You must address: Financial transparency Stakeholder communication Compliance with regulatory...
-
Identify and briefly explain the primary purpose of the audit objectives that are applicable to tests of balances.
-
Explain the importance of internal control within organizations. What are the main elements and what is the auditors interest in them?
-
What specific assistance can a computer provide in verifying accounts receivable balances?
-
Audit evidence is required to be both sufficient and appropriate. Explain what is meant by this statement giving appropriate examples.
-
Explain why a good system of corporate governance is essential if the business risk approach is to be adopted.
-
Which one of the following statements about the Global Tailings Standard is correct? which one of the following statements about the global tailings standard is correct? The Standard is intended to...
-
1. What are some current issues facing Saudi Arabia? What is the climate for doing business in Saudi Arabia today? 2. Is it legal for Auger's firm to make a payment of $100,000 to help ensure this...
-
Suppose that the industrial engineers are able to increase the average utilization rate of the CVD tool from 80% to 90%. What is the projected impact of this 10% increase on the PW of the project?
-
In a chlorine-fluxing installation in a large aluminum company, engineers are considering the replacement of existing plastic pipe fittings with more expensive, but longer lived, copper fittings. The...
-
A supply chain manager has to select a supplier to purchase some materials from. Supplier selection is a multiattribute decision-making problem. Table P14-10 matches a set of desired attributes with...
-
The joint density function of two random variables \(X\) and \(Y\) is given by \[p_{X, Y}(x, y)= \begin{cases}\frac{x y}{9}, & 0 \leq x \leq 2,0 \leq y \leq 3 \\ 0, & \text { elsewhere }\end{cases}\]...
-
Define the correlation coefficient, \(ho_{X Y}\).
-
True or False. The autocorrelation function \(R\left(t_{1}, t_{2} ight)\) is the same as \(E\left[x\left(t_{1} ight) x\left(t_{2} ight) ight]\).
Study smarter with the SolutionInn App