Perform break-even analysis on the machine purchase

Assignment Help Accounting Basics
Reference no: EM131752652

Question: Assume a manufacturing operation can increase production of their products by purchasing a new molding machine for $6 Million. The current machine has a salvage value of $200,000. The installation cost of the machine is estimated to be $400,000. Assume that the new machine will have a life of 8 years with no salvage. If the additional production yields an annual increase in before tax cash flow of $1.5 Million and the cost of capital is 10%, what is the present work of the investment? Assume depreciation MACRS - 7 year class life and 30% Tax Rate.

a) Perform break-even analysis on the machine purchase analyzing

1) Cost of capital

2) Tax Rate

3) Life of the machine (in annual steps)

b) How would the analysis change under straight line depreciation? MACRS 3 year class life?

Reference no: EM131752652

Questions Cloud

What is the opportunity cost for this special order : What is the opportunity cost for this special order. Should the order be accepted. Show calculations and explain
What are some possible issues that need to be considered : Assignment: Windows Operating Systems. What are some possible issues that need to be considered when attempting a system recovery? Explain your answer.
What is the effective annual yield of a bond : What is the effective annual yield of a bond that promised an annual yield of 7.5% if this bond pays coupons twice a year?
Kanbans are needed for the app switch assembly process : Moe Electronics produces APP switches for NASA. how many kanbans are needed for the APP switch assembly process?
Perform break-even analysis on the machine purchase : Assume a manufacturing operation can increase production of their products by purchasing a new molding machine for $6 Million.
Discuss measures that may be used to assess : Discuss measures that may be used to assess the quality of a firm's reported earnings
Evaluating the negative impact of a civil fraud penalty : Evaluate any damaging financial and ethical repercussions of failure to include the inventory write-downs in the financial statements.
Compute the book value of vega at january : Following are selected accounts for Green Corporation and Vega Company as of December 31, 2010. Compute the book value of Vega at January
How would you evaluate the crisis : What are the key problems that Gupta should focus on in the short term and in the long term ?How would you evaluate the crisis ?

Reviews

Write a Review

Accounting Basics Questions & Answers

  Difference between fob shipping point and fob destination

What is the difference between FOB shipping point and FOB destination? How do these terms relate to the revenue principle?

  Determine equivalent units in process for direct materials

Determine the equivalent units in process for direct materials and conversion costs, assuming there was no beginning inventory.

  What is the capacity cushion

A standard work year is 2000 hours at the Luther Mill and it takes about an hour and a half to fill a customer order. What is the capacity cushion

  A pants maker is designing a new line of pants called the

a pants maker is designing a new line of pants called the redbird. the pants will sell for 335 per pair and cost 261.30

  Compute the expected cost per hour of the current system

On average, 90 patrons arrive per hour at a hotel lobby (interarrival times are exponential) waiting to check in. At present there are five clerks, and patrons wait in a single line for the first available clerk.

  Determine the cost per equivalent unit of conversion

Alpha Company, on March 1, 2017 has a beginning Work in Process inventory of zero. determine the cost per equivalent unit of conversion

  Discuss the financial statements of arenes corporation

Describe fully how each of the items above should be reported in the financial statements of Arenes Corporation for the year 2017

  Prepare all adjusting entries required on december

Prepare journal entries for each of the transactions through August 31. Prepare all adjusting entries required on December 31. Show how all of the liabilities arising from these items are reported on the balance sheet at December 31. Complete require..

  In 2012 y companys revenue was 205200 its total variable

in 2012 y companys revenue was 205200 its total variable costs were 76950 and its fixed costs were 89400. assume that

  Compute the standard pounds of direct materials allowed for

computation of inputs allowed direct materials and direct laborduring the year minot company produced 120000 drills for

  Merchandise with an invoice price of 2000 was purchased on

merchandise with an invoice price of 2000 was purchased on october 3 terms 115 n60. the company uses the net method to

  Compute the amount of joint cost allocated to each product

zenon chemical inc. processes pine rosin into three products turpentine paint thinner and spot remover.nbsp during may

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd