Acc 560 week 8 homework

ACC 560 Week 8 Homework

E12-3 Hillsong Inc. manufactures snowsuits. Hillsong is considering purchasing a new sewing machine at a cost of \$2.45 million. Its existing machine was purchased five years ago at a price of \$1.8 million; six months ago, Hillsong spent \$55,000 to keep it operational. The existing sewing machine can be sold today for \$250,000. The new sewing machine would require a one-time, \$85,000 training cost. Operating costs would decrease by the following amounts for years 1 to 7:

Year 1              \$390,000

2                      400,000

3                      411,000

4                      426,000

5                      434,000

6                      435,000

7                      436,000

The new sewing machine would be depreciated according to the declining-balance method at a rate of 20%. The salvage value is expected to be \$400,000. This new equipment would require maintenance costs of \$100,000 at the end of the fifth year. The cost of capital is 9%.

Instructions

Use the net present value method to determine whether Hillsong should purchase the new machine to replace the existing machine, and state the reason for your conclusion. (CGA adapted)

E12-5 Bruno Corporation is involved in the business of injection molding of plastics. It is considering the purchase of a new computer-aided design and manufacturing machine for \$430,000. The company believes that with this new machine it will improve productivity and increase quality, resulting in an increase in net annual cash flows of \$101,000 for the next 6 years. Management requires a 10% rate of return on all new investments.

Instructions

Calculate the internal rate of return on this new machine. Should the investment be accepted?

E12-8 Pierre’s Hair Salon is considering opening a new location in French Lick, California. The cost of building a new salon is \$300,000. A new salon will normally generate annual revenues of \$70,000, with annual expenses (including depreciation) of \$41,500. At the end of 15 years the salon will have a salvage value of \$80,000.

Instructions

Calculate the annual rate of return on the project.

P12-4A Jane’s Auto Care is considering the purchase of a new tow truck. The garage doesn’t currently have a tow truck, and the \$60,000 price tag for a new truck would represent a major expenditure. Jane Austen, owner of the garage, has compiled the estimates shown below in trying to determine whether the tow truck should be purchased.

Initial cost                                            \$60,000

Estimated useful life                            8 years

Net annual cash flows from towing     \$8,000

Overhaul costs (end of year 4)                        \$6,000

Salvage value                                       \$12,000

Jane’s good friend, Rick Ryan, stopped by. He is trying to convince Jane that the tow truck will have other benefits that Jane hasn’t even considered. First, he says, cars that need towing need to be fixed. Thus, when Jane tows them to her facility, her repair revenues will increase. Second, he notes that the tow truck could have a plow mounted on it, thus saving Jane the cost of plowing her parking lot. (Rick will give her a used plow blade for free if Jane will plow Rick’s driveway.) Third, he notes that the truck will generate goodwill; people who are rescued by Jane’s tow truck will feel grateful and might be more inclined to use her service station in the future or buy gas there. Fourth, the tow truck will have “Jane’s Auto Care” on its doors, hood, and back tailgate—a form of free advertising wherever the tow truck goes. Rick estimates that, at a minimum, these benefits would be worth the following.

Additional annual net cash flows from repair work                             \$3,000

Annual savings from plowing                                                              750

Additional annual net cash flows from customer “goodwill”               1,000

The company’s cost of capital is 9%.

Instructions

1 Calculate the net present value, ignoring the additional benefits described by Rick. Should the tow truck be purchased?

2 Calculate the net present value, incorporating the additional benefits suggested by Rick. Should the tow truck be purchased?

3 Suppose Rick has been overly optimistic in his assessment of the value of the additional benefits. At a minimum, how much would the additional benefits have to be worth in order for the project to be accepted?

Pages (550 words)
Approximate price: -

Why Work with Us

Top Quality and Well-Researched Papers

We always make sure that writers follow all your instructions precisely. You can choose your academic level: high school, college/university or professional, and we will assign a writer who has a respective degree.

We have a team of professional writers with experience in academic and business writing. Many are native speakers and able to perform any task for which you need help.

Free Unlimited Revisions

If you think we missed something, send your order for a free revision. You have 10 days to submit the order for review after you have received the final document. You can do this yourself after logging into your personal account or by contacting our support.

Prompt Delivery and 100% Money-Back-Guarantee

All papers are always delivered on time. In case we need more time to master your paper, we may contact you regarding the deadline extension. In case you cannot provide us with more time, a 100% refund is guaranteed.

Original & Confidential

We use several writing tools checks to ensure that all documents you receive are free from plagiarism. Our editors carefully review all quotations in the text. We also promise maximum confidentiality in all of our services.

Our support agents are available 24 hours a day 7 days a week and committed to providing you with the best customer experience. Get in touch whenever you need any assistance.

Try it now!

Calculate the price of your order

Total price:
\$0.00

How it works?

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Our Services

No need to work on your paper at night. Sleep tight, we will cover your back. We offer all kinds of writing services.

Essay Writing Service

No matter what kind of academic paper you need and how urgent you need it, you are welcome to choose your academic level and the type of your paper at an affordable price. We take care of all your paper needs and give a 24/7 customer care support system.

An admission essay is an essay or other written statement by a candidate, often a potential student enrolling in a college, university, or graduate school. You can be rest assurred that through our service we will write the best admission essay for you.

Editing Support

Our academic writers and editors make the necessary changes to your paper so that it is polished. We also format your document by correctly quoting the sources and creating reference lists in the formats APA, Harvard, MLA, Chicago / Turabian.

Revision Support

If you think your paper could be improved, you can request a review. In this case, your paper will be checked by the writer or assigned to an editor. You can use this option as many times as you see fit. This is free because we want you to be completely satisfied with the service offered.