ACC 560 Week 8 Homework Chapter 12 (E12-3, E12-5, E12-8)\t\u00a0Chapter 12: Planning for Capital Investments\tE12-3\t\u00a0Hillsong 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:\tYear 1 \ufffd \ufffd\u00a0 $390,000\t2 \ufffd\u00a0\u00a0\u00a0 400,000\t3 \ufffd\u00a0\u00a0\u00a0 411,000\t4 \ufffd\u00a0\u00a0\u00a0 426,000\t5 \ufffd\u00a0\u00a0\u00a0 434,000\t6 \ufffd\u00a0\u00a0\u00a0 435,000\t7 \ufffd\u00a0\u00a0\u00a0 436,000\tThe 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%.\tInstructions\tUse 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.\t\u00a0\tE12-5\t\u00a0Bruno 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.\t\u00a0\tInstructions\t\u00a0\tCalculate the internal rate of return on this new machine. Should the investment be accepted?\t\u00a0\tE12-8\t\u00a0Pierre’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.\t\u00a0\tInstructions\t\u00a0\tCalculate the annual rate of return on the project.<\/p>\n","protected":false},"excerpt":{"rendered":"
ACC 560 Week 8 Homework Chapter 12 (E12-3, E12-5, E12-8) \u00a0Chapter 12: Planning for Capital Investments E12-3 \u00a0Hillsong Inc. manufactures snowsuits. Hillsong is considering purchasing a new sewing machine at a cost of $2.45 million. Its existing machine was purchased Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-200329","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/200329","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=200329"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/200329\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=200329"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=200329"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=200329"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}