I am not sure which costs are associated with the corresponding excel cells or the NPV and Profitable Index.
Meadville Widgets is considering the purchase of a fully automated widget finishing machine to replace an older but still functioning but more labor intensive model. The machine being replaced was purchased 5 years ago for a price of $45,000.00 at which time it had an expected life of 10 years. This machine is being depreciated by the straight line method with an anticiapated salvage value of $0.00 The current market value of this machine is estimated to be $27,000.00. The current machine requires one operator with an annual cost of $37,500.00 in salary and benifits. The replacement machine has a purchase price of $79,500, a 5 year life, and an expected salvage value of $17,000. The new machine will require a 440 volt three phase electric service and a new concrete pad these installation expenses are $7,500. Meadville Widgets expect the maintence costs to be $5,000 as compared to the current costs of $6,000 and the defects to be $2,000 compared to current defect costs of $4,000 Before considering the purchase of the new machine Meadville Widgets conducted and engineering study to determine if the installation costs would be prohibitive The Supreme Shoe Company Replacement Analysis LTNawr AA 27,000 arva Price Shipping and Install Original Life Current Life Original Salvage Value Current Salvage Value Book Value Increase in Raw Materials Depreciation Salaries Maintenance Defects Marginal Tax Rate Required Return 79,500 7,500 10 17,000 79,500 45,000 37,500 6,000 4,000 34.00% 15.00% 5,000 2,000 Cash Floys Period Cash Flos Initial Outlay 24,500 old machine price+ new machine? Annual AftrTax Savings Depreciation Tax Benefit TotalATCF Terminal Cash Flow Payback Perioc Net Present Value (NPV) Profitability Index (P) Internal Rate of Return (IRR) MIRR Meadville Widgets is considering the purchase of a fully automated widget finishing machine to replace an older but still functioning but more labor intensive model. The machine being replaced was purchased 5 years ago for a price of $45,000.00 at which time it had an expected life of 10 years. This machine is being depreciated by the straight line method with an anticiapated salvage value of $0.00 The current market value of this machine is estimated to be $27,000.00. The current machine requires one operator with an annual cost of $37,500.00 in salary and benifits. The replacement machine has a purchase price of $79,500, a 5 year life, and an expected salvage value of $17,000. The new machine will require a 440 volt three phase electric service and a new concrete pad these installation expenses are $7,500. Meadville Widgets expect the maintence costs to be $5,000 as compared to the current costs of $6,000 and the defects to be $2,000 compared to current defect costs of $4,000 Before considering the purchase of the new machine Meadville Widgets conducted and engineering study to determine if the installation costs would be prohibitive The Supreme Shoe Company Replacement Analysis LTNawr AA 27,000 arva Price Shipping and Install Original Life Current Life Original Salvage Value Current Salvage Value Book Value Increase in Raw Materials Depreciation Salaries Maintenance Defects Marginal Tax Rate Required Return 79,500 7,500 10 17,000 79,500 45,000 37,500 6,000 4,000 34.00% 15.00% 5,000 2,000 Cash Floys Period Cash Flos Initial Outlay 24,500 old machine price+ new machine? Annual AftrTax Savings Depreciation Tax Benefit TotalATCF Terminal Cash Flow Payback Perioc Net Present Value (NPV) Profitability Index (P) Internal Rate of Return (IRR) MIRR
