Business, 16.11.2019 05:31 jaeybird9

Acompany is considering buying a new piece of machinery. a 10% interest rate will be used in the computations. two models of the machine are available.

machine i

initial cost: $80,000

end -of -useful –life salvage value, s: 20,000

annual operating cost 18,000

useful life, in years 20

machine ii

initial cost: $100,000

end -of -useful –life salvage value, s: 25,000

annual operating cost: 15,000 first 10 years, 20,000 thereafter

useful life, in years: 25

(a) determine which machine should be purchased, based on equivalent uniform annual cost.

(b) what is the capitalized cost of machine i?

(c) machine i is purchased and a fund is set up to replace machine i at the end of 20 years. compute the required uniform annual deposit.

(d) machine i will produce an annual saving of material of $28,000. what is the rate of return if machine i is installed?

(e) what will be the book value of machine i after 2 years, based on sum -of -years' -digits depreciation?

(f) what will be the book value of machine ii after 3 years, based on double declining balance depreciation?

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