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just need help figuring out the subsequent cash inflow (outflow) velu 11.12 points Interstate Manufacturing is considering either replacing one of its old machines with
just need help figuring out the subsequent cash inflow (outflow)
velu 11.12 points Interstate Manufacturing is considering either replacing one of its old machines with a new machine or having the old machine overhauled. Information about the two alternatives follows. Management requires a 10% rate of return on its investments. Use the PV of S1. FV of S1, PMA of S1, and FMA of S1) Use appropriate factor(s) from the tables provided.) Alternative 1: Keep the old machine and have it overhauled. If the old machine is overhauled, it will be kept for another five years and then sold for its salvage value. $119,000 Cost of old machine 150,000 Cost of overhaul Annual expected revenues generated 117,000 Annual cash operating costs after overhaul 38,000 Salvage value of old machine in 5 years 24,000 Alternative 2: Sell the old machine and buy a new one. The new machine is more efficient and will yield substantial operating cost savings with more product being produced and sold $299.000 Cost of new machine 31,000 Salvage value of old machine now Annual expected revenues generated 91,000 Annual cash operating costs 31,000 Salvage value of new machine in 5 years 12,000Step by Step Solution
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