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QUESTION 8 Concord Corporation is analyzing two machines to determine which one it should purchase. Whichever...


QUESTION 8 Concord Corporation is analyzing two machines to determine which one it should purchase. Whichever machine is purc
QUESTION 8 Concord Corporation is analyzing two machines to determine which one it should purchase. Whichever machine is purchased will be replaced at the end of its useful life. The company requires a 10 percent rate of return and uses straight-line depreciation to a zero book value over the life of the machine. Machine A has a cost of $272,000, annual operating costs of $14,000, and a 3-year life. Machine B costs $194,000, has annual operating costs of $19,000, and a 2-year life. The firm currently pays no taxes. Which machine should be purchased and why?) Machine A; because it will save the company about $5,392 a year Machine A; because it will save the company about $7,406 a year Machine B; because it will save the company about $4,173 a year C Machine B; because it will save the company about $5,037 a year Machine A; because it will save the company about $6,268 a year QUESTION 9 Suncas is analyzing a proposed 3-year project using standard sensitivity analysis. The company expects to sell 20,000 units, A24 percent. The expected variable cost per unit is $12 and the expected fixed costs are $70,000. The fixed and variable cost estimates are considered accurate within a At5 percent range. The sales price is estimated at $18 a unit, At5 percent. The project requires an initial investment of $192,000 for equipment that will be depreciated using the straight-line method to zero over the project's life. The equipment can be sold for $45,000 at the end of the project. The project requires $20,000 in net working capital for the three years. The discount rate is 10% percent and tax rate is 25 percent. What is the operating cash flow under the optimistic case scenario? $73,250 $96,128 $79,101 $89,247 $83,125 QUESTION 10 Abbey Company has compiled this information related to a new project: Initial investment: $460,000; Fixed costs: $256,000; Variable costs: $16 per unit; Selling price: $40 per unit: Discount rate: 13 percent; Project life: 5 years; Tax rate: 25 percent. Fixed assets are depreciated using straight-line depreciation over the project's life. What is the financial break-even point? 18,547 18,018 17,520 17,008 16,655
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Answer #1

Ans 8

Ans is option 2 Machine A ,7406 saving per year.Since cost of Machine B by Equivalent annual annuity method is coming more than Machine A.

My ans is coming to 7382.43 bec of rounding off difference . If we take pvaf in two digits ans will be 7406.Machine NPV = 14000 XPVAF (10) 349] + 272000 luorox 2.487 +27200 = - 34818 + 272av = 306818 Machine B NPU 1 good x PUAF [10),Since life span equivalent Annuel Innuity is different, we will calculating Method NPU Pvarli,n Machine EAAM 306818 2.487 = 1

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