Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

These are all part of the same question 5 years ago, a multi-axis NC machine was purchased for the express purpose of machining large, complex

These are all part of the same question image text in transcribed
image text in transcribed
image text in transcribed
5 years ago, a multi-axis NC machine was purchased for the express purpose of machining large, complex parts used in commercial and military aircraft worldwide. It cost $350,000, had an estimated life of 15 years, and O&M costs of $50,000 per year. It was originally thought to have a salvage value of $20,000 at the end of 15 years but is now believed to have a remaining life of 5 years with no salvage value at that time. With business booming the existing machine is no longer sufficient to meet production needs. It can be kept and supplemented by purchasing a new, smaller Machine S for $230,000 that will cost $36,000 per year for O&M have a life of 10 years, and salvage value of $230,000(0.8") after t years. As an alternative, a larger, faster, and more capable Machine L can be used alone to replace the current machine. It has cash price without trade-in of $450,000. O&M costs of $70,000 per year salvage value of $450,000(0.8") after tyears, and a 15 year life. The present machine can be sold on open market for a maximum of $70,000, MARR is 15%, and the planning horizon is 5 years. a. Clearly show the cash flow profile for each alternative using a cash flow approach (insider's viewpoint approach). Provide cash flow for yeart 0,3 and 5. Machine NC &S Machine Cash flow Cash flow t 0 $ 1 $ $ 2 $ $ 3 $ $ 4 $ $ 5 $ $ b. Using an EUAC and a cash flow approach (insider's viewpoint approach), decide which is the more favorable alternative 1. EUAC of the combination of multi-axis NC machine and machines $ 2.EUAC of the machine $ 3.Favorable alternative: c. Clearly show the cash flow profile for each alternative using an opportunity cost approach loutsider's viewpoint approach) Provide cash flow for year t=0,3 and 5. Machine NC&S Machine L Cash flow t Cash flow 0 $ 1 $ $ 2 $ $ 3 $ $ 1 $ $ 2 $ $ 3 $ $ $ 4 $ $ 5 $ d. Using an EUA comparison and an opportunity cost approach (outsider's viewpoint approach), decide which is the more favorable alternative 1. EUAC of the combination of multi-axis NC machine and machines $ 2. EUAC of the machine $ 3. Favorable alternative

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

Finance

Authors: Angelico Groppelli, Ehsan Nikbakht

2nd Edition

0812043731, 978-0812043730

More Books

Students also viewed these Finance questions