Question
1) The Rosco company is purchasing a new machine that will increase revenue for 8 years. The purchase price of the machine is $245,900 and
1) The Rosco company is purchasing a new machine that will increase revenue for 8 years. The purchase price of the machine is $245,900 and will require a working capital of $55,000.
This new machine will require a major service in year 3 and year 6 of $37,500.
The increase in revenue will be:
Years 1, Year 2, and Year 3 will have an annual increase in revenue of $98,700.
Year 4 - $118,400, Year 5 - $125,300, Year 6 - $96,100, Year 7 - $82,300 and Year 8 - 74,900.
At the end of year 8, the company will sell the machine for scrap for $25,000.
Calculate the net present value of the new machine using a 15% rate of return.
2) Cash Collections for Belcher Motors found that35% of its sales were cash and the remaining 65% are credit sales.
Of the credit sales,the company collected 55% in the month of sale,
40% collected the month after the sale, and
5% collected the second month after the sale.
May Sales were $100 000, April Sales were $115,000, and June Sales were 136,000.
How much will be collected in the 3rd quarter if July sales are $180,000, August sales are 167,000, and September sales are $152,000, and
include a total column for the 3rd quarter total.
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