ACC 381- Accounting Information Systems Lab Excel Assignment Financial Functions/ Sensitivity Analysis Widget Company is considering upgrading its manufacturing equipment. The Production has identified three possible actions One option would upgrad Vice-President of e their current equipment and the other two options would replace the the Widget could take to accomplish the upgrade. existing equipment with purchases of new equipment. The review committee has asked yo review each of the options to identify relevant cost data and to prepare a schedule com three options. Your analysis schedule is to include comparative relevant costs and a value calculation. paring net present Option One: Using this option Widget would Using this option Widget would upgrade their current equipment to make it more e equipment, which is fully depreciated and has reached the end of its projected would be upgraded at a cost of $125,000. The upgrades would extend the useful life efficient. Th useful life, of the useful life and result is tax savings useful life, you estimate the equipment can be sold for $65,000. equipment by 5 years. The cost of the upgrade would be depreciated over the new 5 year (a cash inflow) of $750 per year. At the end of the 5 year Option Two: This option would require Widget to purchase new up-to-date equipment at a cost of S330,785. This new equipment would have an expected useful life of 7 years and result in an annual tax savings of $2,150 (a cash inflow). At the end of its 7 year useful life, it is estimated the equipment can be sold for $175,000, rl v ,33o,5-175 i er has provided a proposal offering to supply ated Option Three: Another equipment manufacturer has provided a proposal offering to supply a competing Under this proposal, Widget would purchase the equipment for $225,000. This equipment has a 7 year useful life and an estimate $95,000 useful life with an annual tax savings (a cash inflow) of S1,500. Additional Information: formation: Ne matr In order to accommodate any of the equipment options, Widget would need to upgrade the electrical supply capacity and the floor supports in the manufacturing building. The work would be accomplished using Widget's maintenance department at an estimated cost of S328,000 Based on your discussions with the Maintenance Department supervisor, it is estimated that annual maintenance costs would be $25,000, $15,000 and S10,000 for the three options respectively The Production Department supervisor was quite excited about either upgrading their existing equipment or purchasing replacement equipment. The supervisor estimates that . Cest . . the upgrade to the new equipment would reduce labor cost by $1,500 for option 1, $5,000 for option 2 and $7,500 for option 3 The Sales Manager provided estimates of the effect on sales revenue based on the lower relevaxt . ngs. She estimated revenue increases utant prices Widget can charge due to the labor cost savi of $42,500, $50,000, and $32,000 for options 1, 2, and 3 respectively h'my documents 381-415381-excelassignment4 docx