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69. Tool Makers, Inc. uses tool and die machines to produce equipment for other firms. The initial cost of one customized tool and die machine is $850,000. This machine costs $10,000 a year to operate. Each machine has a life of 3 years before it is replaced. What is the equivalent annual cost of this machine if the required return is 9%? (Round your answer to the nearest whole dollar.) = -$875,312.95; EAC = $345,796.55 = $345,797 (rounded)Difficulty level: ChallengeTopic: Equivalent Annual Cost70. Jackson & Sons uses packing machines to prepare its product for shipping. One machine costs $136,000 and lasts about 4 years before it needs replaced. The operating cost per machine is $6,000 a year. What is the equivalent annual cost of one packing machine if the required rate of return is 12%? (Round your answer to the nearest whole dollar.) = -$154,224.10; EAC = $50,775.88 = $50,776 (rounded)Difficulty level: ChallengeTopic: Equivalent Annual Cost
Chapter 08 - Making Capital Investment Decisions71. Sanjay's Incorporated is analyzing two machines to determine which one it should purchase. The company requires a 14% rate of return and uses straight-line depreciation to a zero book value. Machine A has a cost of $290,000, annual operating costs of $8,000, and a 3-year life. Machine B costs $180,000, has annual operating costs of $12,000, and has a 2-year life. Whichever machine is purchased will be replaced at the end of its useful life. Which machine should Sanjay's purchase and why? (Round your answer to the nearest whole dollar.) = -$308,573.06; EAC = $132,912.13 = $132,912 (rounded)= -$199,759.93; EAC = $121,312.15 = $121,312 (rounded)Machine B lowers the annual cost of the equipment by about $11,600, which is $132,912 less $121,312.Difficulty level: ChallengeTopic: Equivalent Annual Cost8-65
Chapter 08 - Making Capital Investment Decisions72. Kay's Nautique is considering a project which will require additional inventory of $128,000 and will also increase accounts payable by $45,000 as suppliers are willing to finance part of these purchases. Accounts receivable are currently $80,000 and are expected to increase by 10% if this project is accepted. What is the initial project cash flow needed for net working capital? NWC requirement = $128,000 - $45,000 + ($80,000 ×.10) = $91,000Difficulty level: MediumTopic: Net Working Capital