Check my WOT The management of Devine Instrument Company is considering the purchase of a new drilling machine, model RoboDri 1010K. According to the specifications and testing results, RoboDril will substantially increase productivity over AccuDril X10, the machine Devine is currently using The AccuDril was acquired 8 years ago for $100,000 and is being depreciated using the straight-line method over a 10 year expected life and an estimated salvage value of $30,000. The engineering department expects the Accuril to keep going for another 3 years after a major overhaul at the end of its expected useful life. The estimated cost for the overhaul is $100,000. The overhauled machine will be depreciated using straight-line depreciation with no salvage value. The overhaul will improve the machine's operating efficiency approximately 10% for each of years 3, 4 and 5. No other operating conditions will be affected by the overhaul. RoboDrill 1010K is selling for $260.000. Installing, testing, rearranging, and training will cost another $20,000. The manufacturer is willing to take the AccuDril as a trade-in for $30,000. The RoboDrill will be depreciated using the straight- line method with no salvage value. New technology most likely will make RoboDrilobsolete to the firm in 5 years Variable operating cost for either machine is the same: $10 per machine hour (cash-based). Other pertinent data follow Accuori Robobril X10 1010K Units of output (per year) 10,800 10,888 Machine hours 8,000 4.000 Selling price per unit $ 100 $ 100 Variable manufacturing cost-cash-based not including machine hours) 35 35 Other annual expenses (tooling and supervising) $80,000 $50,000 Disposal value-today $35,000 Disposal value-in 5 years $50,000 $ $ $ Devine Instrument Company's weighted-average cost of capital (WACC) is 11%, and it is in the 40% tax bracket. Use the PV factors (Appendix C. Table 1) for calculating the NPV of each decision alternative. Required: 1. Determine for each of years 0 though 5 (inclusive) the after-tax cash flows for items that differ between the two alternatives. 2. Compute the payback period in years) for purchasing RoboDril 1010K rather than having Accueil X10 overhauled in 2 years Assume for this calculation only that all cash flows (other than those related to the net acquisition cost of the replacement asset)- including tax effects-occur evenly throughout the year the main Prev 1 of 2 !!! Next > Reg 1 and 3 Req 2 1. Determine for each of years 0 though 5 (inclusive) the after-tax cash flows for items that differ between the two alternatives. (Express all cash-flow amounts in the individual amounts to 1 decimal place. Negative amounts should be indicated by a minus sign.) 3. Using results generated in requirement 1, what is the present value of each decision alternative, keep vs. replace? (Use the built-in NPV function in Excel to calculate pi all cash flows in thousands (000); round your answers to 1 decimal place. Negative amounts should be indicated by a minus sign.) After-tax Cash Flows py of Net Cash Outlows 0 Overhaul Accu Dril After-tax cash operating cost Overhaul cost (capitalized) Tax Savings on depreciation (straight-line method) Other cash expenses after tak Ahertax cash flows Total Pv Buy Robori 1010 Net equipment purchase After-tax cash operating cost Tux savings on depreciation Other cash expenses, after tax Ahor-tax salvage value After-tax cash flows Total PV PV Difference in cash flows between alternatives Prev 1 of 2 Next > Check my WOT The management of Devine Instrument Company is considering the purchase of a new drilling machine, model RoboDri 1010K. According to the specifications and testing results, RoboDril will substantially increase productivity over AccuDril X10, the machine Devine is currently using The AccuDril was acquired 8 years ago for $100,000 and is being depreciated using the straight-line method over a 10 year expected life and an estimated salvage value of $30,000. The engineering department expects the Accuril to keep going for another 3 years after a major overhaul at the end of its expected useful life. The estimated cost for the overhaul is $100,000. The overhauled machine will be depreciated using straight-line depreciation with no salvage value. The overhaul will improve the machine's operating efficiency approximately 10% for each of years 3, 4 and 5. No other operating conditions will be affected by the overhaul. RoboDrill 1010K is selling for $260.000. Installing, testing, rearranging, and training will cost another $20,000. The manufacturer is willing to take the AccuDril as a trade-in for $30,000. The RoboDrill will be depreciated using the straight- line method with no salvage value. New technology most likely will make RoboDrilobsolete to the firm in 5 years Variable operating cost for either machine is the same: $10 per machine hour (cash-based). Other pertinent data follow Accuori Robobril X10 1010K Units of output (per year) 10,800 10,888 Machine hours 8,000 4.000 Selling price per unit $ 100 $ 100 Variable manufacturing cost-cash-based not including machine hours) 35 35 Other annual expenses (tooling and supervising) $80,000 $50,000 Disposal value-today $35,000 Disposal value-in 5 years $50,000 $ $ $ Devine Instrument Company's weighted-average cost of capital (WACC) is 11%, and it is in the 40% tax bracket. Use the PV factors (Appendix C. Table 1) for calculating the NPV of each decision alternative. Required: 1. Determine for each of years 0 though 5 (inclusive) the after-tax cash flows for items that differ between the two alternatives. 2. Compute the payback period in years) for purchasing RoboDril 1010K rather than having Accueil X10 overhauled in 2 years Assume for this calculation only that all cash flows (other than those related to the net acquisition cost of the replacement asset)- including tax effects-occur evenly throughout the year the main Prev 1 of 2 !!! Next > Reg 1 and 3 Req 2 1. Determine for each of years 0 though 5 (inclusive) the after-tax cash flows for items that differ between the two alternatives. (Express all cash-flow amounts in the individual amounts to 1 decimal place. Negative amounts should be indicated by a minus sign.) 3. Using results generated in requirement 1, what is the present value of each decision alternative, keep vs. replace? (Use the built-in NPV function in Excel to calculate pi all cash flows in thousands (000); round your answers to 1 decimal place. Negative amounts should be indicated by a minus sign.) After-tax Cash Flows py of Net Cash Outlows 0 Overhaul Accu Dril After-tax cash operating cost Overhaul cost (capitalized) Tax Savings on depreciation (straight-line method) Other cash expenses after tak Ahertax cash flows Total Pv Buy Robori 1010 Net equipment purchase After-tax cash operating cost Tux savings on depreciation Other cash expenses, after tax Ahor-tax salvage value After-tax cash flows Total PV PV Difference in cash flows between alternatives Prev 1 of 2 Next >