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shusha [124]
4 years ago
10

Although the Chen Company's milling machine is old, it is still in relatively good working order and would last for another 10 y

ears. It is inefficient compared to modern standards, though, and so the company is considering replacing it. The new milling machine, at a cost of $40,000 delivered and installed, would also last for 10 years and would produce after-tax cash flows (labor savings and depreciation tax savings) of $8,000 per year. It would have zero salvage value at the end of its life. The Project cost of capital is 9%, and its marginal tax rate is 35%. Should Chen buy the new machine?
Business
1 answer:
mario62 [17]4 years ago
3 0

Answer:

Chen should buy the machine

Explanation:

Buying of the new milling machine would make a business sense if the net present value of the new machine is positive.

By net present value I mean if the today's worth of the asset considering its initial cash outflow and subsequent cash inflows bring about a positive worth today.

Net present value=initial cost-cash inflows(discounted to today's terms)

Net present value=-$40,000+($8000*6.4177)

                          =-$40,000+51341.6

                          =$11,341.60

The 6.4177 is the annuity factor for 9% cost of capital for 10 years.

Since the project has a positive net present value,Chen should buy the machine

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The compensation companies receive for purchasing capital assets is called the return on?
Mamont248 [21]

<u>Return on Investment</u> is the compensation companies receive for purchasing capital assets.

Capital assets are significant pieces of property like houses, automobiles, rental properties, stocks, bonds, and even antiques or works of art. A capital asset for businesses is an asset with a useful life of more than a year that is not intended for sale during normal company operations.

Your investments in the business are the time and money you devote to strengthening your company. The profit you receive from your investments is the return. The ratio of net profit to the entire cost of the investment is how ROI is often defined.

Find out more about compensation

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3 0
2 years ago
You need $20,000 to purchase a used car. Your wealthy uncle is willing to lend you the money as an amortized loan. He would like
Serga [27]

Answer:

The annualy payment for theamortized loan is $6,802.44

Explanation:

First we will find the total loan payment TP for the $20,000 borrowed over the next four years with a annual return of 8%:

TP = $20,000 *(1+8%)^4

TP = $20,000 *(1.08)^4

TP = $20,000 *1.3605 = $27,209.7

The annual payments AN is obtained by dividing the TP into the 4 years:

AN  = $27,209.7 / 4 = $6,802.44

4 0
4 years ago
For each of the following cash activities, choose the appropriate letter to match the activity with the internal control princip
Helen [10]

Answer:

A. Restrict access

C. Establish responsibility

D. Document procedures

B. Independently verify

Explanation:

A. Restrict access, as the password is set to address the cash register, that is a security is being provided, and this is because, there is a restricted access, for the safety purpose.

C. Establish responsibility - As the treasurer is held liable of making and receiving any checks, and that he is the person who shall monitor such things, related to transactions in checks.

D. Document procedures - since a list is prepared for the checks received in mail, it is mere preparation of records and documentation of what checks are received and what not.

B. Independently verify - Bank Reconciliation Statement is prepared to verify the transactions and match the balance in books with that of the bank pass book.

6 0
3 years ago
Green Vehicle​ Inc., manufactures electric cars and small delivery trucks. It has just opened a new factory where the C1 car and
ioda

Answer and Explanation:

(a)

Variables are given as follows

Total number of cars, C1

Total number of trucks, T1

(b)

Our aim is to maximize the total profit of Green Vehicle Inc.

Max z = 300T1 + 220T1

(c)

In this question, we have limitations, which are

0.025T1 + 0.017C1 ≤ 1

0.020T1 + 0.020C1 ≤ 1

hence attached below are the excel solutions to the problem

3 0
3 years ago
A resource constraint can be exploited using CCPM methodology by: Determining the priority among projects for access to the drum
irina [24]

Answer:

Determining the priority among projects for access to the drum.

Explanation:

An Israeli physicist named, Eliyahu M. Goldratt developed the Critical Chain Project Management (CCPM) and introduced it in his book "Critical Chain" in 1997.

The CCPM is a project management methodology used by managers to better manage a project. The CCPM ensures that the project plan is feasible and immune from any uncertainty or statistical fluctuations.

In the CCPM activity network, there are no milestones and all non-critical activities are performed as late as possible.

A resource constraint can be exploited using Critical Chain Project Management (CCPM) methodology by determining the priority among projects for access to the drum (a system wide constraint).

CCPM adopts the use of drum buffers, so as to ensure extra safety is applied to a project immediately before using constrained resource.

3 0
3 years ago
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