Sheridan Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the companyto bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided here.Original costEstimated lifeSalvage valueEstimated annual cash inflowsEstimated annual cash outflows.Machine A$78,2008 years0$19,800$5,130Machine B$182,0008 years0$39,600$10,180 Click here to view the factor table,Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative,use either a negative sign preceding the number eg -45 or parentheses eg (45). Round answer for present value to 0 decimal places, e.g. 125 andprofitability index to 2 decimal places, e.g. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)Net present valueProfitability indexMachine AWhich machine should be purchased?should be purchased.Machine B

Sheridan Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided here. Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Machine A $78,200 8 years 0 $19,800 $5,130 Machine B $182,000 8 years 0 $39,600 $10,180

Sheridan Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided here. Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Machine A $78,200 8 years 0 $19,800 $5,130 Machine B $182,000 8 years 0 $39,600 $10,180

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 18EB: Garnette Corp is considering the purchase of a new machine that will cost $342,000 and provide the...

See similar textbooks

Similar questions

Garnette Corp is considering the purchase of a new machine that will cost $342,000 and provide the following cash flows over the next five years: $99,000, $88,000, $92,000. $87,000, and $72,000. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return in Excel. see Appendix C.
The management of Ryland International Is considering Investing in a new facility and the following cash flows are expected to result from the investment: A. What Is the payback period of this uneven cash flow? B. Does your answer change if year 6s cash inflow changes to $920,000?
Bailey Corporation is considering purchasing one of two new processing machines. Either machinewould make it possible for the company to produce its products more efficiently than it is currentlyequipped to do. Estimates regarding each machine are provided below:Machine A Machine BInitial Investment $113,250 $270,000Estimated life 10 years 10 yearsSalvage value -0- -0-Estimated annual cash inflows $30,000 60,000Estimated annual cash outflows $ 7,500 $15,000Instructions1. Calculate the net present value and profitability index of each machine. Assume an 8% discountrate. Which machine should be purchased?Bailey Corporation did some further research and found one other possible machine that would producethe same type of production efficiencies. The information regarding Machine C is below:Machine CInitial Investment $250,000Estimated life 10 yearsSalvage value $ 30,000Estimated annual cash inflows $ 45,000Estimated annual cash outflows $ 10,0002. Calculate the net present value and…
The investment committee of Sentry Insurance Co. is evaluating two projects, office expansion and upgrade to computer servers. The projects have different useful lives, but each requires an investment of $1,104,000. The estimated net cash flows from each project are as follows: Net Cash Flow Year OfficeExpansion Server 1 $308,000 $407,000 2 308,000 407,000 3 308,000 407,000 4 308,000 407,000 5 308,000 6 308,000 The committee has selected a rate of 15% for purposes of net present value analysis. It also estimates that the residual value at the end of each project's useful life is $0, but at the end of the fourth year, the office expansion's residual value would be $385,000. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5…
Door to Door Moving Company is considering purchasing new equipment that costs $734,000. Its management estimates that the equipment will generate cash inflows as follows: Year 1 2 3 4 5 $204,000 204,000 262,000 262,000 158,000 Present value of $1: 6% 1 2 3 4 5 0.943 0.890 0.840 0.792 0.747 7% A. $36,312 B. $886,000 OC. $871,928 OD. $786,000 0.935 0.873 0.816 0.763 0.713 8% 0.926 0.857 0.794 0.735 0.681 9% 0.917 0.842 0.772 0.708 0.650 10% 0.909 0.826 0.751 0.683 0.621 The company's annual required rate of return is 8%. Using the factors in the table, calculate the present value of the cash inflows. (Round all calculations to the nearest whole dollar.)
Current Attempt in Progress Sandhill Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided here. Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Net present value Profitability index Machine A $77,300 8 years 0 Click here to view the factor table. Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round answer for present value to O decimal places, e.g. 125 and profitability index to 2 decimal places, e.g. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Which machine should be purchased? eTextbook and Media Save for Later $20,200 $4,970 Machine A…
The production department is proposing the purchase of an automatic insertion machine. It has identified three machines and has asked the accountant to analyze them to determine which one has the best cash payback. Machine A Machine B Machine C Annual cash flow $40,000 $50,000 $75,000 Average investment 300,000 250,000 500,000 a.Machine A b.Machine C c.Machine B d.Machines B and C have the same preferred payback period.
The investment committee of Sentry Insurance Co. is evaluating two projects, office expansion and upgrade to computer servers. The projects have different useful lives, but each requires an investment of $490,000. The estimated net cash flows from each project are as follows: Net Cash Flows Year Office Expansion Servers 1 $125,000 $165,000 2 125,000 165,000 3 125,000 165,000 4 125,000 165,000 5 125,000 6 125,000 The committee has selected a rate of 12% for purposes of net present value analysis. It also estimates that the residual value at the end of each project's useful life is $0, but at the end of the fourth year, the office expansion's residual value would be $180,000. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432…
The production department is proposing the purchase of an automatic insertion machine. It has asked the accountant to analyze them to determine the best cash payback. Machine A Machine B Machine C Annual cash flow Average investment $40,000 $50,000 $75,000 $300,000 $250,000 $500,000 Oa. Machine B Ob. Machine C Oc. Machine A Od. All of these choices are equal.
Current Attempt in Progress BAK Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do, Estimates regarding each machine are provided below. Original cost Estimated life i Salvage value Estimated annual cash inflows Estimated annual cash outflows Net present value Machine A Profitability index $78,300 Which machine should be purchased? 8 years $19,700 $5,040 Machine A 0 should be purchased Click here to view the factor table Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. Of the net present value is negative, use either a negative sign preceding the number eg-45 or parentheses eg (45). Round answer for present value to O decimal places, s 125 and profitability index to 2 decimal places, eg. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided) Machine B $185,000 8 years 0…
bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided here. Machine A $75,500 8 years Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Click here to view the factor table. Net present value Profitability index 0 $20,000 $5,000 Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round answer for present value to 0 decimal places, e.g. 125 and profitability index to 2 decimal places, e.g. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Machine A 706 Machine B $180,000 8 years 0 89 $40,000 $10,000 Machine B 161642.40 1.04
The investment committee of Sentry Insurance Co. is evaluating two projects, office expansion and upgrade to computer servers. The projects have different useful lives, but each requires an investment of $838,000. The estimated net cash flows from each project are as follows: Net Cash Flow Year Office Expansion Server 1 $234,000 $309,000 2 234,000 309,000 3 234,000 309,000 4 234,000 309,000 5 234,000 6 234,000 The committee has selected a rate of 15% for purposes of net present value analysis. It also estimates that the residual value at the end of each project's useful life is $0, but at the end of the fourth year, the office expansion's residual value would be $293,000. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5…