Categories

ACCT 386 - Week 7 - Homework - Question 6

ACCT 386 - Week 7 - Homework - Question 6
Price: $4.99
This Tutorial contains following Attachments
  • ACCT 386 - Week 7 - Homework - Question 6.doc
Qty:     - OR -   Add to Wish List

ACCT 386 - Week 7 - Homework - Question 6

There may be chances that the figures given in our question and your question doesn't matches. Don't worry, we are here to help you. Just write to us at studentwhiz@gmail.com and your answer is with you in no time.

 

Question 6

Tiger Computers, Inc., of Singapore is considering the purchase of an automated etching machine for use in the production of its circuit boards. The machine would cost $800,000. (All currency amounts are in Singapore dollars.) An additional $560,000 would be required for installation costs and for software. Management believes that the automated machine would provide substantial annual reductions in costs, as shown below:

 

Annual Reduction
in Costs

  Labor costs

$

150,000       

  Material costs

$

97,000       


The new machine would require considerable maintenance work to keep it properly adjusted. The company’s engineers estimate that maintenance costs would increase by $5,010 per month if the machine were purchased. In addition, the machine would require a $97,000 overhaul at the end of the sixth year.

The new etching machine would be usable for 10 years, after which it would be sold for its scrap value of $404,000. It would replace an old etching machine that can be sold now for its scrap value of $67,000. Tiger Computers, Inc., requires a return of at least 15% on investments of this type. (Ignore income taxes.)

Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables.