Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The assignment aims to provide guidance to a company who needs to determine the most suitable plan in terms of the acquisition of a manufacturing

image text in transcribed

The assignment aims to provide guidance to a company who needs to determine the most suitable plan in terms of the acquisition of a manufacturing device. The scenario is the following: A company has purchased a machinery device for $25,000 with an estimated salvvage value of $4.000 at the end of a 6 contract years. The purchase went through a bank loan of $12,000 with an annual interest rate of 15%. The bank is offering 4 payment plans to pay off the loan: Plan 1: Pay through six equal payment series every single year. Plan 2: Pay an equally distributed amount of the principal plus the interest earned at the end of every year. Plan 3: Pay only the interests earned at the end of each year and pay the principal plus the interest earned on year 6. Plan 4: Pay a sum lump that includes the original capital plus the total amount of earned interest of the 6 contract year. If the MARR of the company is 18%, which of the different plans should the company go after to optimize profits if taxes are not paid? Why should the company choose such plan? At the same time, a joint venture of the previous company has been considering the possibility of expanding its current production rate. To do so, an investment of $18,000 will be needed to acquire a sweeping machine. It is expected to last 4 years with the opportunity of a $2,000 salvage value at the end of such period. Profits are expected to be constant and for $5,000. The joint venture's MARR is of 4.4% and will be paying a tax rate of 50%. Determine which depreciation method should work best for the company so investment is profitable. You need to be able to construct an argument for the company's CEO in which you clearly state your proposal regarding both scenarios

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

Advanced Management Accounting

Authors: Maurice L. Hirsch Jnr.

2nd Edition

1861526768, 978-1861526762

More Books

Students also viewed these Accounting questions

Question

What is the mode? a. 71 b. 75 c. 9 d. 700

Answered: 1 week ago

Question

Does mind reading help or hinder communication?

Answered: 1 week ago