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Social Science Clinic => Accounting => Topic started by: acwiles on Feb 5, 2023

Title: Rayburn Industries is evaluating the investment of $140,000 in a new packing machine that should ...
Post by: acwiles on Feb 5, 2023

Rayburn Industries is evaluating the investment of $140,000 in a new packing machine that should provide annual cash operating inflows of $30,000 for 6 years. At the end of 6 years, the packing machine will be sold for $5,000. Rayburn's required rate of return is 8%.

Required:

a.	What is the machine's net present value?

b.	Based on net present value, should Rayburn purchase the new packing machine?

Why or Why not?

c.	List two qualitative items that Rayburn should consider in the decision to purchase

the new machine.

Title: Rayburn Industries is evaluating the investment of $140,000 in a new packing machine that should ...
Post by: Spike8502 on Feb 5, 2023

a.

Present value of an annuity

$30,000 × 4.6229

$138,687

Present value of $1

5,000 × 0.6302

3,151

Present value of initial investment

(140,000)

Net present value

$    1,838

b. Rayburn should purchase the new packing machine because the net present value is positive.

c. (Answers will vary) One qualitative consideration might be the impact on the employees. If the new packing machine will result in the layoff of employees, morale of the other employees may be negatively affected. Other considerations might be the impact on the environment, the economy due to fewer jobs available, and safety features of the new machine.

Title: Re: Rayburn Industries is evaluating the investment of $140,000 in a new packing machine that should
Post by: Mr Meme on Apr 28, 2024

Thank you

Title: Re: Rayburn Industries is evaluating the investment of $140,000 in a new packing machine that should
Post by: Mr Meme on May 7, 2024

thank you