Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Interstate Manufacturling is considering elther overhauling an old machine or replacing it with a new machine. Information about the two alternatlves follows. Management requlres a

image text in transcribedimage text in transcribedimage text in transcribed

Interstate Manufacturling is considering elther overhauling an old machine or replacing it with a new machine. Information about the two alternatlves follows. Management requlres a 10% rate of retum on its investments. (PV of $1, PV of $1. PVA of $1, and FVA of $1 ) (Use approprlate factor(s) from the tables provided.) Alternatlve 1: Keep the old machine and have it overhauled. This requires an Initlal investment of $149,000 and results in $43,000 of net cash flows in each of the next five years. After five years, It can be sold for a $18,000 salvage value. Alternative 2: Sell the old machine for $41,000 and buy a new one. The new machine requlres an Initial Investment of $299,000 and can be sold for a $11,000 salvage value in five years. It would yleld cost savings and higher sales, resulting in net cash flows of $58,000 in each of the next five years. Requlred: 1. Determine the net present value of alternatlive 1. 2 Determine the net present value of alternative 2 . 3. Which alternative should management select based on net present value? Complete this question by entering your answers in the tabs below. Determine the net present value of alternative 1. (Do not round intermediate calculations. Round your present value factor to 4 decimals and final answers to the nearest whole dollar.) Determine the net present value of alternative 2 . (Negative net present values should be indicated with a minus sign. Do not round intermediate calculations. Round your present value factor to 4 decimals and final answers to the nearest whole dollar.) Which alternative should management select based on net present value

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

Step: 3

blur-text-image

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

Computer Auditing Security And Internal Control Manual

Authors: Javier F. Kuong

1st Edition

0131629670, 978-0131629677

More Books

Students also viewed these Accounting questions

Question

The amount of work I am asked to do is reasonable.

Answered: 1 week ago

Question

The company encourages a balance between work and personal life.

Answered: 1 week ago