Value of machine investment

High School ・Accounting ・MLA

Period of 6 years
Savings = 125,000
New machine cost + the old machine salvage value = cash inflows present value which is at a certain return rate which is r.
The present value of inflows = income received per year.
*[ (1-(1+r)^-n]/r
r represents return rate
n represents period of the investment.
For instance, 372,000 = 125,000 * [ (1-(1+r)^-6]/r
R is given to be 34.7%.
Therefore, the index price = present cash inflows value/ initial investment.
= 63,830/46,000= 1.39.

initial investment
year opening balance cash flow balance
1 510,000 90,000 420,000
2 420,000 90,000 330,000
3 330,000 90,000 240,000
4 240,000 90,000 150,000
5 150,000 90,000 60,000
Year 6 =60,000/90,000=0.7 years
Payback period =5.7 years.

5. Profitability index=95,140/71,000=1.34

6. N.P.V of the project = net present value of labor saving costs – initial investment.
. 296,868-330,000= -33,131
Answers = -33,144.

7. N.P.V= present value of cash flows – initial investment
Present value. Of cash flows =16,000*[1-1.13^-5)/0.13 + 8000*1.13^-5
Present value of cash flows =56,275.700+4342.079 =60,617.779
N.p.v =60,617.779-52,000

8. N.p.v =128,000[1-1.09^-4]/0.09 – 280,000
N.p.v =414,684.14 -280,000=134,684.14
Answer = 134,592

initial investment
year opening balance cash flow balance
1 369,000 80,000 289,000
2 289,000 80,000 209,000
3 209,000 80,000 129,000
4 129,000 80,000 49,000
Payback period =4.6 years.

10. Year 1 =213,000-105,000=111,000
Year 2 =111,000-105,000 =6,000
=6000/105,000=0.057 years
Pay back= 2.057 = 2 years.

11. Payback period;
initial investment
Year opening balance cash flow balance
1 77,000 23,000 54,000
2 54,000 23,000 31,000
3 31,000 23,000 8,000
=8000/23000= 0.3 years
payback period =3.3 years

total costs of y =220,500
total costs of x =176,000
differential 44,500
asnwers =45,000

13.income when you upgrade =180,000 -120,000 =60,000
When sold not upgraded =50,000
Advantage =60,000-50,000 =10,0000 advantage.

A total cost =125,700
B total cost = 168,700
Differential cost =168,700 – 125,700 =43,000
15. income =sales – expenses
Income =960,000-400,000-382,000-262,000= -84,000 (loss)
By eliminating the production of the production its income will increase by 84,000.

beets cost=51
crush cost=13
total cost=(51+13) =64
beet fibre price =27
further processed for $ 19 the price =39 income =(30-19)=20
beet juice price =47
further processing of the juice for $31 cost to sell at $73 income =(73-31)=42.
If not processed could sell at 47
After further processing price =42
It leads to a loss of (42-47) = $ 5 loss

17. answers =QR, BJ ,XS
18.SALES =13900*21 =291,900
Variable costs =13900*15 =(208,000)
Income =219,900-208,000 =83,400 per month
If x is discontinued =decrease in fixed expense on x =10,4000-74,000 =30,000
Income =83,400 – 30,000 = 53,400 decrease.
19.contribution margin =35,000 = income
Fixed cost =70,000
Eliminating non eliminating F.cost=70,000-17,500 =52,500
Impact on income =35,000-52,500 = -17,500
Decrease by 17,500.
20. profits after split over;
X =18-17-3 =3 yes
Y=18-17-5=-4 no
Z=23-14-5 =4 yes
x z
yes no yes

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