Waterways (Chapter 27)

For this assignment, you will apply what you have learned from the unit lesson and required unit resources. 

Waterways puts much emphasis on cash flow when it plans for capital investments. The company chose its discount rate of 8% based on the rate of return that it must pay its owners and creditors. Using that rate, Waterways then uses different methods to determine the best decisions for making capital outlays.

Don't use plagiarized sources. Get Your Custom Essay on
Waterways (Chapter 27)
Just from $13/Page
Order Essay

This year, Waterways is considering buying five new backhoes to replace the backhoes it now has. The new backhoes are faster, cost less to run, provide for more accurate trench digging, have comfort features for the operators, and have 1-year maintenance agreements to go with them. The old backhoes are working just fine, but they do require considerable maintenance. The backhoe operators are very familiar with the old backhoes and would need to learn some new skills to use the new backhoes.

The following information is available to use in deciding whether to purchase the new backhoes.

Information :

                                                                                        Old Backhoe.       New Backhoe

Purchase cost when new                                              $90,000                 $200,000

Salvage value now.                                                       $42,000

Investment in major overhaul needed in next year           $55,000

Salvage value in 8 years                                                $15,000                 $90,000

Remaining life                                                                 8 years                   8 years

Net cash flow generated each year                            $30,425                  $43,900

Instructions:

  • In the following methods, evaluate whether to purchase the new equipment or to overhaul the old equipment. (Hint: For the old machine, the initial investment is the cost of the overhaul. For the new machine, subtract the salvage value of the old machine to determine the initial cost of the investment.)
  • Are there any intangible benefits or negatives that would influence this decision?
  • What decision would you make, and why?

Calculate your order
Pages (275 words)
Standard price: $0.00
Client Reviews
4.9
Sitejabber
4.6
Trustpilot
4.8
Our Guarantees
100% Confidentiality
Information about customers is confidential and never disclosed to third parties.
Original Writing
We complete all papers from scratch. You can get a plagiarism report.
Timely Delivery
No missed deadlines – 97% of assignments are completed in time.
Money Back
If you're confident that a writer didn't follow your order details, ask for a refund.

Calculate the price of your order

You will get a personal manager and a discount.
We'll send you the first draft for approval by at
Total price:
$0.00
Power up Your Academic Success with the
Team of Professionals. We’ve Got Your Back.
Power up Your Study Success with Experts We’ve Got Your Back.
error: Content is protected !!
Live Chat+1(978) 822-0999EmailWhatsApp

Order your essay today and save 20% with the discount code GOODESSAY