Calculate the equivalent annual cost of each machine

Assignment Help Financial Management

Reference no: EM131308141

Specialty Clothing Corporation is considering the purchase of two machines for their ongoing operations. When a machine is worn out, it will be replaced with another machine, since it is integral to the operations of the business. The discount rate is 9%. The CFO has collected the following information on two possible choices:

Machine A Machine B

Initial cost 220,000 190,000

Useful Life 17 years 20 years

Annual maintenance 1,900 3,000

Calculate the equivalent annual cost of each machine.

EAC A _______________ EAC B _________________

Which machine should Specialty Clothing Corporation choose? ____________

Reference no: EM131308141

Questions Cloud

Calculate the profitability index and the net present value : Calculate the Profitability Index and the Net Present Value of the following project:

Opportunity cost-stock or bond valuation : Example of TVM concept , Describe any event with the concept - be it a loan, opportunity cost, stock or bond valuation, or while subscribing for any new financial plan, or beyond.

Calculate the standard deviation and expected return : Calculate the expected return and standard deviation (square root of the variance) of the following probability distribution of returns 10% probability of 25% return 65% probability of 10% return 20% probability of -5% return 5% probability of -30% r..

Suppose to companies have the exact same balance sheets : Suppose to companies have the exact same balance sheets (i.e. – their book values are the same). Which of the following would not be a reason for one company to have a higher market value than the other?

Calculate the equivalent annual cost of each machine : Specialty Clothing Corporation is considering the purchase of two machines for their ongoing operations. When a machine is worn out, it will be replaced with another machine, since it is integral to the operations of the business. The discount rate i..

What is the after tax salvage value of the old table : Marla’s Massages and More bought a special massage table two years ago for $9,300. At the time, the accountants told Marla to depreciate the table using straight-line depreciation over three years. What is the after tax salvage value of the old table..

Excluding interest earned on the original deposit : Interest-on-Interest Consider a $2,900 deposit earning 11 percent interest per year for 8 years. How much total interest is earned on interest (excluding interest earned on the original deposit)?

Examine the pros and cons of a sinking fund : Examine the pros and cons of a sinking fund from the viewpoint of both a firm and its bondholders. Determine the fundamental manner in which this knowledge could be helpful to a financial manager. Provide a rationale for your response.

Which a company can increase its dividend payments : A firm can only pay out its earnings to investors or reinvest their earnings. Successful young firms often have high initial earnings growth rates. Estimating dividends, especially for the distant future, is difficult. Which of the following is NOT a..

User Account

All Pages