Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Clean Duds Laundromat has an industrial water softener that enhances the water quality used in its washing machines. The water softener is approaching the end

image text in transcribedimage text in transcribed
image text in transcribedimage text in transcribed
Clean Duds Laundromat has an industrial water softener that enhances the water quality used in its washing machines. The water softener is approaching the end of its useful life and must be either overhauled or replaced. Details ofthe two alternatives are shown below. lfthe company overhauls its current water softener. then it will be usable for eight more years. If, instead, a new water softener is purchased, it will be used for eight years, after which it will be replaced. The new water softener will be considerably more energy efcient, resulting in a substantial reduction in annual operating costs, as shown below: Current New Water Water Softener Softener Purchase cost new $26,886- 53?,886 Remaining book value 522, 586- Overhaul needed now $13,886- Annual cash operating costs $15,886- 5 9,988 Salvage value now 5 5,686- Salvage value eight years from now 5 2,386- 5 6,688 Clean Duds computes depreciation on a straightline basis. All equipment purchases are evaluated using a 15% discount rate. Required: [Ignore income taxes.) 1-a. Determine the present value of net cash flows using the totalcost approach. [Hint Use Microsoft Excel to calculate the discount factor[s}.) (Enter any cash outows with a minus sign. Do not round intermediate calculations and round nal answers to the nearest dollar amount} Purchase the new softener Upgrade and Keep the old soener on-..\" . \"c...\"- LVIIIHMLLsl we]... emu\"... . u. . u ullult'l n u. .L uuulu. . u. guru]... no... ,4\".-. \"4.1;... u. u -_ \"mun..-\" u...\" .5 u .... \"4 \"When.\" u. . \"LL. Required: [Ignore income taxes} 1-a. Determine the present value of net cash flows using the totalcost approach. (Hint Use Microsoft Excel to calculate the discount factor[s}_) (Enter any}I cash outows with a minus sign. Do not round intermediate calculations and round nal answers to the nearest dollar amount.} Purchase the new soften er Upgrade and Keep the old soener 1-b. Should Clean Duds Laundromat upgrade the old water softener or purchase the new one? (9 Purchase the new softener 0 Upgrade the old softener 7. Using the incrementalcost approach, determine the net present value in favor of [or against} purchasing the newr water softener? [Hint Use Microsoft Excel to calculate the discount factor{s)_) {Do not round intermediate calculations and round final answer to the nearest dollar amount.} $ 5,?27

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Introduction to Managerial Accounting

Authors: Peter C. Brewer, Ray H Garrison, Eric Noreen, Suresh Kalagnanam, Ganesh Vaidyanathan

4th Canadian edition

978-1259103261

More Books

Students also viewed these Accounting questions

Question

1. To generate a discussion on the concept of roles

Answered: 1 week ago