Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Skysong Inc, plans to purchase a new metal stamping machine for use in its manufacturing process. After contacting the appropriate vendors, the purchasing department received

image text in transcribed
image text in transcribed
Skysong Inc, plans to purchase a new metal stamping machine for use in its manufacturing process. After contacting the appropriate vendors, the purchasing department received differing terms and options from each vendor. The engineering department has determined that each vendor's stamping machine is substantially identical and each has a useful life of 30 years. In addition, engineering has estimated that required year-end maintenance costs will be $2,820 per year for the first 10 years, $4,820 per year for the next 10 years, and $11,820 per year for the last 10 years. Following is each vendor's sale package: Vendor A:$40,500 cash at time of delivery and 5 year-end payments of $48,700 each. Vendor A offers all its customers the right to purchase at the time of sale a separate 30-year maintenance service contract, under which Vendor A will perform all year-end maintenance at a one-time initial cost of $46,600. Vendor B: Forty semiannual payments of $13,400 each, with the first instailment due upon delivery. Vendor B will perform all year-end maintenance for the next 30 years at no extracharge. Vendor C: Full cash price of $215,000 will be due upon delivery. Assuming that both Vendors A and B will be able to perform the required year-end maintenance, that Skysong's cost of funds is 8%. and the machine will be purchased on January 1, compute the following: Click here to view factor tables The present value of the cash flows for vendor A. (Round factor values to 5 decimal places, e.s. 1.25124 and final answer to O decimal places, e.s. 458,581.) The present value of the cash outflows for this option is $ The present value of the cash flows for vendor B. (Round factor values to 5 decimal places, e.3. 1.25124 and final answer to 0 decimol places, e.s. 458,581.) The present value of the cash outflows for this option is $ The present value of the cash flows for vendor B. (Round foctor values to 5 decimal places, es. 1.25124 and final answer to 0 decimal places, e.g. 458,581.) The present value of the cash outflows for this option is $ The present value of the cash fiows for vendor C. (Round factor values to 5 decimal places, e.s. 1.25124 and final answer to 0 decimal places, es. 458,581.) The present value of the cash outflows for this option is \$ From which vendor should the stamping machine be purchased? The press should be purchased from

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

Financial Accounting

Authors: Jr. Belverd E. Needles, Marian Powers

9th Edition

0547070020, 978-0547070025

More Books

Students also viewed these Accounting questions

Question

8. Explain how to price managerial and professional jobs.pg 87

Answered: 1 week ago