Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Esquire Company needs to acquire a molding machine to be used in its manufacturing process. Two types of machines that would be appropriate are presently

image text in transcribed
Esquire Company needs to acquire a molding machine to be used in its manufacturing process. Two types of machines that would be appropriate are presently on the market. The company has determined the following: (FV of $1. PV of $1. EVA of $1. PVA of $1. FVAD of $1 and PVAD of S1) (Use appropriate factor(s) from the tables provided.) Machine A could be purchased for $48,000. It will tast 10 years with annual maintenance costs of $1,000 per year. After 10 years the machine can be sold for $5,000. Machine B could be purchased for $40,000. It also will last 10 years and will require maintenance costs of $4.000 in year three, $5,000 in year six, and $6,000 in year eight. After 10 years, the machine will have no salvage value, Required: Assume an interest rate of 8% properly reflects the time value of money in this situation and that maintenance costs are paid at the end of each year, Ignore income tax considerations Calculate the present value of Machine A & Machine B. Which machine Esquire should purchase? (Negative amounts should be Indicated by a minus sign. Do not round Intermediate calculations. Round your final answers to the nearest whole dollar amount.) PV $ 49,026 Machine A Machine B Esquire should purchase Machine B

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

Global Financial Accounting And Reporting Principles And Analysis

Authors: Peter Walton, Walter Aerts

1st Edition

1844802655, 9781844802654

More Books

Students also viewed these Accounting questions

Question

Describe the criteria for an effective budget.

Answered: 1 week ago