Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

plz I hope to solve the questions in clear steps!? 1. Bidba. Co plans to replace an existing machine and must choose between two machines.

plz I hope to solve the questions in clear steps!?
image text in transcribed
1. Bidba. Co plans to replace an existing machine and must choose between two machines. Machine 1 has an initial cost of OMR 200,000 and will have a scrap value of OMR 25,000 after four years. Additional maintenance cost of machine 1 is OMR 20,0000 Machine 2 has an initial cost of OMR 225,000 and will have a scrap value of OMR 50,000 after three years. Additional maintenance cost of machine 1 is OMR 25,0000. Bidha Co. can sell the existing machine for OMR 45,000 Annual earnings of the two machines are as follows: Year 1 2 Machine 1 (OMR 75,000 65,000 50,000 45,000 per year) Machine 2 (OMR 85,000 70,000 55,000 per year) 3 4 Bidba, Co has a cost of capital of 12%. Which machine you suggest Bidha Co. to buy? 2. Mazoon LLC is planning to purchase a machinery for OMR75,000. The useful life of the machinery is 5 years. The machinery will be sold after 5 years for OMR 5,000. The annual cost of maintenance and repairs is expected to be OMR 5,000. The company wants to insure the machinery with an annual premium of OMR 2,000. The cost of capital for the company is 15% Alternatively, company has an option to lease the same machinery with a lease rental of OMR 15,000 per year. If company acquires the machinery on lease, the maintenance cost should be incurred by the company and insurance will be borne by the lessor. You are required to suggest the best option for Mazoon LLC

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

Ethical Obligations And Decision Making In Accounting Text And Cases

Authors: Steven Mintz, Roselyn Morris

2nd Edition

0078025281, 9780078025280

More Books

Students also viewed these Accounting questions