Jump to content

looking for accounting help


Steve Butters

Recommended Posts

final two weeks of assignments and im not doing very well in this class....accounting is definitely a weak point for me....my grade could be teetering on this assignment lol....anyone able to help? you can PM me or something....maybe explain how this works?

my accounting teacher from my first class is on here - but i dont know his s/n....maybe he will see this lol

The Sweetwater Candy Company would like to buy a new machine that would automatically "dip" chocolates. The dipping operation is currently done largely by hand. The machine the company is considering costs $92,000. The manufacturer estimates that the machine would be usable for nine years but would require the replacement of several key parts at the end of the fifth year. These parts would cost $8,400, including installation. After nine years, the machine could be sold for $5,900.

The company estimates that the cost to operate the machine will be $12,500 per year. The present method of dipping chocolates costs $43,000 per year. In addition to reducing costs, the new machine will increase production by 5,300 boxes of chocolates per year. The company realizes a contribution margin of $0.6 per box. A 16% rate of return is required on all investments. (Ignore income taxes.)

To determine the appropriate discount factor(s) using tables, click here to view Exhibit 12B-1 and Exhibit 12B-2. Alternatively, if you calculate the discount factor(s) using a formula, round to three (3) decimal places before using the factor in the problem.

1. What are the annual net cash inflows that will be provided by the new dipping machine?

2. Compute the new machine's net present value. Use the incremental cost approach.

12b-1

http://ezto.mhhmdemo.mcgraw-hill.com/servlet/TestPilot4/lazerwords/12532669500493800.tp4/exhibit12b-1.jpg

12b-2

http://ezto.mhhmdemo.mcgraw-hill.com/servlet/TestPilot4/lazerwords/12532669500493800.tp4/exhibit12b-2.jpg

all i could figure out is that the machine costs 23k per year (initial cost + repairs + cost to operate - salvage value / 9 years).....previous costs were 43k per year

so 20k saved per year...then i did 5300 (new boxes) * .6 (cm) and got 3180

so 23180 saved * 16% over 9 years which is 0.263 on the chart = 6096.34 for the annual cash inflow....but it says that answer isnt right...not sure what im doing wrong

Edited by Steve Butters
Link to comment
Share on other sites

Lurker comments:

Excel is the way to go. Here's how I would tackle it.

Q1. Make the columns years and the rows for line items. Line items will be costs and revenues (include cost savings as revenue). Then just fill it out and add it up for each year's cash flow.

Q2. Think about the ROI and how you could use it as the discount factor. Follow the NPV calculation for each year's discounted cash flow.

FYI:

I'm not a Finance professor, but I did stay in a Holiday Inn Express last night. :)

Link to comment
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

×
×
  • Create New...