Precision Tool is analyzing two machines to determine which one it should purchase

Champion Bakers uses specialized ovens to bake its bread. One oven costs $689,000 and lasts about 4 years before it needs to be replaced. The annual operating cost per oven is $41,000. What is the equivalent annual cost of an oven if the required rate of return is 13 percent?    A.  -$272,638 B.  -$248,313 C.  -$232,407 D.  -$200,561 E.  $196,210

79.

Precision Tool is analyzing two machines to determine which one it should purchase. The company requires a 15 percent rate of return and uses straight-line depreciation to a zero book value over the life of its equipment. Machine A has a cost of $892,000, annual operating costs of $28,200, and a 4-year life. Machine B costs $1,118,000, has annual operating costs of $19,500, and has a 5-year life. Whichever machine is purchased will be replaced at the end of its useful life. Precision Tool should purchase Machine _____ because it lowers the firm's annual cost by approximately _______ as compared to the other machine.    A.  A; $12,380 B.  A; $17,404 C.  B; $16,965 D.  B; $17,404 E.  B; $17,521   Difference in costs = -$340,636.69 - (-$353,016.79) = $12,380.09 Machine A lowers the firm's annual costs by about $12,380.

80.

The Buck Store is considering a project that will require additional inventory of $216,000 and will increase accounts payable by $181,000. Accounts receivable are currently $525,000 and are expected to increase by 9 percent if this project is accepted. What is the project's initial cash flow for net working capital?    A.  -$82,250 B.  -$12,250 C.  $12,250 D.  $36,250 E.  $44,250 NWC requirement = -$216,000 + $181,000 - ($525,000 × 0.09) = - $82,250